Do you want to save on taxes when you file next year?
If so, it helps to claim all the tax breaks you can get.
Most Canadians are aware of the more widely publicized tax breaks, such as charitable donations and Registered Retirement Savings Plan (RRSP) contributions. Many Canadians claim these credits and deductions on their tax returns each year. What most don’t know is that there are many other tax breaks Canadians can claim — dozens of them, in fact. In this article, I will explore three “lesser-known” tax breaks you may be eligible to claim when you file in 2025.
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Medical expense tax credit
The medical expense tax credit is a non-refundable tax credit you can claim for the 2024 tax year. It gives you a tax break equal to 15% of the costs you incur paying for medical care. Examples of eligible expenses include the following:
- Air conditioners
- Hearing aids
- Computer peripherals
- Ambulance services
- Medical cannabis
- Pacemakers
- And more
Basically, if a procedure is medical rather than cosmetic and is not covered by your province’s insurance, you can claim it for the medical expense credit. The maximum amount that you can claim is 3% of your net income or $2,759, whichever is lower. So, this credit can potentially save you hundreds of dollars.
Home accessibility tax credit
The home accessibility tax credit is a tax credit you can claim for making your home more accessible. Examples of upgrades eligible for the home accessibility tax credit include ramps, rails, walk-in bathtubs, non-slip floors, etc. You can claim up to $20,000 worth of such costs in a given year, resulting in savings of up to $3,000.
FHSA contributions
Last but not least, we have First-Home Savings Account (FHSA) contributions. FHSA contributions are sums that you contribute to an FHSA, a special account used for saving up to buy your first home. You can hold any investment you’d hold in an RRSP or Tax-Free Savings Account in a self-directed FHSA. Examples include Guaranteed Investment Certificates (GICs), bonds, stocks, and funds. Because saving up for a home is an expense that comes with a deadline, you are well advised to put most of your FHSA money in GICs rather than stocks. However, a little money in stock exchange-traded funds in an FHSA wouldn’t hurt.
Consider BMO Canadian Dividend ETF (TSX: ZDV), for example. It’s a Canadian fund consisting of high yield stocks. It has a 3.75% distribution yield and a 0.39% management expense ratio. You can add considerable passive income to your portfolio by investing in a fund like this one.
ZDF ETF consists of mostly stable Canadian blue chip stocks. It has a lot of quality holdings under the hood. By buying ZDV, you could add considerable passive income to your FHSA portfolio. Plus, you get a nice tax deduction (up to $8,000) by contributing to your FHSA in the first place. Talk about a win-win.
Foolish takeaway
Minimizing your tax burden is easier than you think. You incur dozens of expenses in the run of a year that could be tax deductible under certain circumstances. Medical expenses, home accessibility renovations, and FHSA contributions are just a few costs that could turn into tax savings when you file next year.
