The tax deadline is right around the corner, and you know what that means.
It’s time to start adding up your tax credits and claiming any benefits you’re entitled to. Although some benefits are calculated for you automatically by the Canada Revenue Agency (CRA), others require that you manually document your eligibility and specifically claim the benefits. In this article, I will explore three CRA benefits you should claim on your 2023 tax return.
Dividend and capital gains tax credits
Dividend and capital gains tax credits should always be claimed. There are major tax breaks on both types of investment income, meaning that they are taxed less than employment income. If you have a low tax rate, dividend income can even reduce your taxes! Not claiming such income is leaving money on the table.
Let’s imagine that you held $10,000 worth of Brookfield Asset Management (TSX:BAM) stock at the start of 2023.
The stock rose 28% by year’s end while paying $1.72 per share in dividends. If you’d held $10,000 worth of BAM stock at the beginning of the year and sold all of it right at the end, you’d have $2,800 in capital gains and $429 in dividends. Here’s how the math on that works:
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Brookfield Asset Management | $56.74 (though the payout described in this table assumes you bought 250 shares at $40.06 at the start of 2023 for $10,000). | 250 | $0.43 quarterly ($1.72/year). | $107.33 | Quarterly (for an annual total of $429). |
As you can see, you get a $2,800 capital gain and $429 in annual dividends. Only half of the capital gain is taxed, so if your marginal tax rate — your tax rate on an additional dollar of income — is 50%, you pay just 25%. As for the dividend, that is grossed up by 38% to $592, then a 15% tax credit is subtracted from your taxes owing. The credit works out to $88 (15% of 592), yet you are only taxed on the not-grossed-up amount ($429). So, the tax credit is effectively more like 21%.
Canada Child Benefit
The Canada Child Benefit is a tax-free payment you can collect if you raise children under the age of 18. This benefit can pay up to $7,437 per year, or $619 per month. You pay no taxes on this benefit, unlike the Canada Pension Plan, Old Age Security, and most other CRA benefits you can claim. So, if you have children, be sure to claim the Canada Child Benefit. You can claim it up to income levels as high as $75,537!
Canada Carbon Rebate
The Canada Carbon Rebate (CCR) is a tax refund of sorts. It’s to offset the money you spent on carbon taxes. You have to live in a CCR-eligible province to collect this benefit. Quebec and British Columbia don’t participate.
The base amounts vary from $95 (New Brunswick) to $225 (Alberta). You get a top-up if you live in a rural area, as you are expected to commute more if you live in one. The CRA determines your eligibility for the CCR automatically when you file your taxes, but you need to take steps to inform them that you live in a rural area to get the top-up. This is a perfect example of why being thorough when you file your taxes is worth it.
