Top tax credits for Canadians

With 2012 well behind us, it will soon be time to file our income taxes. If you don't use a tax expert to prepare your return be aware of all the deductions you may qualify for.

Other than taking advantage of RRSP deductions below is a list of some of the top tax credits for Canadians. Tax credits reduce the tax payable.

  1. Family caregiver tax credit – for caregivers of dependant relatives including sick spouses, common-law partners and minor children.
  2. Medical expenses tax credit – the $10,000 limit has been removed
  3. First time homebuyers tax credit – costs such as legal fees, disbursement a and land transfer taxes are eligible. The total credit amount is $5000.
  4. Children's fitness tax credit – this is a great credit as it encourages parents to enroll their children in an eligible fitness program. You can claim up to $500 per child under 16 years of age.
  5. Children's arts tax credit – new credit for children that participate in artistic, cultural,recreational and developmental programs, claim up to $500 per child under 16. There are guidelines on ten CRA website as to what qualifies.
  6. Hiring credit for small business – tax relief up to $1000 on the employers portion of EI Premiums.
  7. Apprenticeship job creation tax credit – for employers is equal to 10% of eligible salaries with a maximum of $2000 per year. Details mare on the CRA Website.
  8. Trades persons tool deduction – if you require the tools to perform your trade you may be able to deduct the cost, check the guidelines.
  9. Textbook tax credit – in addition to tuition and education the cost of textbooks is now eligible, one textbook for each month that you qualify for the full-time or the part-time education amounts.
  10. Universal child care tax credit – this credit includes the cost of daycare, nursery school , eligible home day cares, day camps, day sports schools, educational institutions such as a private school, boarding school and overnight sports schools and camps.
  11. TFSA savings – increased limit to $5500 per year as of 2013, these accounts grow tax free on the investment income. They are very flexible and a very good savings tool for Canadians. See your financial advisor to discuss if you should be directing money into one.
  12. Registered disability savings plan – these plans are to help save for a person that is eligible for the disability tax credit.
  13. Canada employment credit – available on the first $1000 of income earned (indexed for inflation so for 2012 $1095 and $1117 for 2013. There are some calculations invoked on the tax form.
  14. Publics transit tax credit -only passes that were purchased to cover multiple trips the details are available on the government website. So if you use buses, streetcars, subways, commuter trains or a local ferry be sure to save your passes.
  15. Volunteer firefighters tax credit – you can claim up to $3000 if you completed at least 200 volunteer hours in the year.

We should all have to contribute something to our tax system. After all, it does provide many of the lifestyle benefits we enjoy here in Canada. However many of us over contribute for the income we have and it is to our best advantage to use these top tax credits our government has provided us. Depending on the province you reside in your overall tax rate can be quite high.  It's also important to understand the difference between marginal tax and average tax.

Related article: Marginal Tax vs Average Tax

Reducing taxes can mean more money to pay down debts or save for retirement. Your tax professional can give you the best advice on how to structure your investments and deductions and tax credits to make the most of the tax system for you.

Written by Cathy Leahy

Cathy Leahy is the author of Keystone Diaries – Money Keys a financial literacy book for children. She has been working in the Financial Services Industry since April 2000 and volunteers her time with Junior Achievement and The Rotary Club working with high school students.

2 Responses to Top tax credits for Canadians

  1. Can you explain to me the details of the 2012 Tax rate Card for BC residents? First, Earnings? Is that interest income? What is classified and eligible and non-eligible dividends. As you might guess I’m a newly arrived citizen of Canada and much of this has changed since I filed a tax return 24 years ago. Thanks

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