2024 is coming to a close, and you know what that means:
Tax-filing season is right around the corner!
Every spring, Canadians file their taxes for the preceding year. It pays to get your taxes in on time, both to avoid late filing penalties and to have the chore behind you. Also, filing your taxes properly takes considerable time. If you rush it, you might miss out on tax breaks that you are entitled to. Most likely, you already know the “big” categories of tax breaks you can claim (RRSP contributions, charitable donations), but there are others that you might miss. In this article I will share three of them.
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Canada training credit
The Canada training credit is a credit that you can claim on eligible tuition fees. You might be aware that students enrolled in university can claim their tuition. What you might not know is that you can claim this credit for other forms of education as well. For example, many certification programs are eligible for the Canada Training Credit. If you took any such courses, be sure to claim them on your taxes, as they can save you money.
First home savings account (FHSA) deduction
Another less-known CRA tax break you can claim is the First Home Savings Account (FHSA) deduction. This is similar to the RRSP contribution deduction. The FHSA is a special account you can open when saving for a home. You can contribute up to $8,000 to it in a year, and the full amount is tax-deductible.
To make the most of an FHSA, you have to invest the money. GICs are ideal here, because your principal is insured and your interest is fairly safe. You can also invest a smaller portion of your FHSA money in index funds. You shouldn’t put the majority of your FHSA in such funds, as you have a clear liquidity need (coming up with a downpayment on a house). However, a small portion of your FHSA money in an index fund wouldn’t hurt.
Consider the iShares S&P/TSX 60 Index ETF (TSX: XIU). It’s an index ETF built on the TSX 60, the 60 biggest Canadian companies by market cap. The ETF has a 2.9% dividend yield, so it can add some passive income to your portfolio. The fund has 60 stocks, which is an adequate amount of diversification. Finally, it has a small 0.16% management fee, which won’t eat into your returns in a major way. A small position in this fund could accelerate your FHSA savings beyond what GICs alone could do.
Age amount
Last but not least, we have the age amount. This is an amount that anybody aged 65 or older who earns less than $98,309 per year can claim. The amount you can claim is $8,790 for 2024. The savings from this can be up to $1,318, depending on your situation. If you are of sufficient age to claim the age amount, you’re probably retired and in need of every bit of tax savings you can get. So, the age amount is a tax break very much worth claiming!
