Looking to save some money on your 2023 taxes?
If so, you need to claim all the tax credits you’re entitled to. CRA benefits can save you money and pay you money, in the form of a larger tax return. Tax rates in many provinces are quite high, but if you claim all the credits you’re entitled to, you can reduce your tax burden. In this article, I will explore three CRA tax breaks you should claim before you file your taxes for 2023.
Image source: Getty Images
The dividend tax credit
The dividend tax credit is a credit you claim on eligible dividend income. Unlike most tax credits, this one is worth more than 15%. The reason is that it involves “grossing up” (increasing by 38%) the amount of dividends you received. By doing this, the credit jumps from 15% to closer to 20%.
To illustrate how the dividend tax credit works, let’s imagine you held $100,000 worth of Brookfield Asset Management (TSX:BAM) stock in a taxable account. BAM is a dividend stock with a 3.75% yield. A $100,000 position in BAM produces $3,750 in dividend income per year. Were you to claim the dividend tax credit on those dividends, the amount would be grossed up to $5,175. Then, a 15% credit would be assessed on the higher grossed up amount. This produces a $776 tax credit.
Now, remember that the “grossed up amount” is fictitious; you are only taxed on $3,750 worth of BAM dividends. So, the dividend tax credit combined with the gross up gives you a 20% tax credit, rather than a 15% one! Note that if your tax rate is 20% or lower, you might be better off leaving your dividend stocks in a taxable account rather than putting them in a TFSA, as you won’t pay taxes on them anyway. Leave the TFSA for bonds, which are taxed at steep rates.
Home accessibility tax credit
The home accessibility tax credit is a tax credit you can get for making your home more accessible to people with disabilities. This benefit is very intriguing because it covers upgrades that might make your home more valuable. You can spend up to $20,000 on home upgrades and have that amount completely covered by the home accessibility tax credit.
Accessibility features are desirable, so you may actually be getting a tax break to perform renovations that increase your home’s value. You do need an eligible dependent who the upgrades are meant to accommodate, though. So you can’t just use the home accessibility tax credit to save money on renovating your house.
Canada training credit
The Canada Training Credit is a tax credit on amounts of money you spent training for your job. If you took a course to boost your skills, you can claim its price as part of the Canada training credit. For example, if you paid to take the Canadian Securities Course in order to increase your employability in financial services, you can claim the amount as part of the Canada training credit. You can claim up to $5,000 over your lifetime under this credit, so be sure to claim all you can.
