Let's get fiscal: 9 legal ways to pay less tax to the CRA

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The average tax refund amount for the 2022 tax year was $2,159, according to the latest Canada Revenue Agency (CRA) report.

Are you struggling with your tax bill? Was your tax refund lower than you expected?

If you’re looking for ways to pay less in taxes in Canada and maximize your refund, then you’re in the right place. Today, we’ll share some of the easiest ways to reduce your tax liability by taking advantage of our country’s tax code provisions.

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While it’s common to hear stories about celebrities who’ve faced hefty fines and jail time for tax evasion, you don’t have to break the law or lie to reduce your tax liability.

In fact, Canadians are encouraged to apply for any legal tax credits and deductions they’re eligible for with the CRA.

Canada’s tax code is over 3,000 pages long—many of the pages detail taxes that people and businesses must pay. But the tax code also shares all the tax credits and deductions we can claim to reduce our taxes.

Are you ready to start saving more money on your taxes? Here are nine tips to help save you some money:

Maximize your RRSP contributions

A Registered Retirement Savings Plan (RRSP) is a pension plan that allows Canadians to set aside money for retirement. Although annual contribution limits exist, every dollar put into your RRSP is tax-deductible.

If you’re enrolled in an employer-sponsored RRSP, the contribution will be taken out of your cheque before income taxes are applied, which immediately reduces your taxes.

If you’re self-employed or have a self-directed RRSP that you regularly contribute to, you can claim the contributions on your income tax return, which could lower your taxes or result in a higher refund.

Deduct uncovered medical expenses

Our country’s tax-funded universal healthcare system covers many everyday medical expenses. It doesn’t cover everything, though.

The good news is that many out-of-pocket medical expenses are tax deductible and can be claimed on your tax returns. Some of the most common include:

Specialized care
Dental care
Insulin
Glasses and contact lenses
Hearing aids
Prosthetics

You can even claim some of your vitamins and supplements as long as your doctor recommends them. Just ensure that you keep records of receipts and prescriptions in case you need to verify your claims to the CRA.

Donate to charity

Charity organizations are a force for good in the world and are dedicated to helping the less fortunate. They can also help taxpayers lower their taxes.

All donations to eligible charities can be deducted from your taxes if you have a donation receipt (which can be requested any time you donate).

This dedication is non-refundable, though, which means it won’t contribute to a higher tax refund. However, it’s a great way to reduce any taxes that you owe. You’re also allowed to claim donations from up to five years back.

Transfer tax credits to a spouse.

If your spouse or common-law partner is eligible for tax credits but doesn’t have a high tax liability, they can transfer the credits to their partner, who may owe more taxes. This is a great way to take advantage of tax deductions that may otherwise go unused for the year.

The tax credits that can be transferred to a spouse include:

Canada caregiver amount
Disability amount for self
Pension income amount
Age amount (for taxpayers 65 or older)
Tuition, education and textbook amounts

Claim the home office tax credit

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During the pandemic’s peak, 37% of Canadians worked from home. Several years later, many still opt for remote work.

As a remote employee, you can deduct many of your home office stationary expenses and a portion of your rent and utilities based on the square footage of your home office compared to your total space.

Claim the Canada Workers’ Benefit (CWB)

Lower-income individuals and families may be able to claim the CWB to reduce their taxes or increase their refund. The total amount of your CWB depends on your income.

Those with a disability can also claim the CWB disability supplement to reduce their taxes further.

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Revisit old tax returns on My

Did you know you can amend tax returns from previous years using your CRA account? If you believe you may have been eligible for unclaimed credits and tax deductions, you can revisit your old returns and claim any eligible deductions and credits.

Depending on the circumstance, you may be able to request an immediate payout or reduction of your tax debt from the CRA. Otherwise, you may be able to apply the credit to your next tax return.

Claim childcare expenses

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In addition to the Canada Child Benefit issued to parents, taxpayers with dependent children can claim up to $8,000 in eligible childcare expenses (for children under seven) or $5,000 (for children between seven and 16).

Research provincial tax breaks

From green energy incentives to age-related credits, each province and territory offers its respective tax breaks and credits for which its residents can apply. You usually have to be a full-time resident of the province to be eligible for these.

In conclusion: Don’t wait until tax time to prepare

To save the most on your taxes, you should begin preparing today. If you wait until the last minute, you could easily overlook credits and deductions you would otherwise be eligible for.

Start researching provincial tax credits that may benefit you, organize your receipts, and categorize your expenses. This will make it far more straightforward to file your taxes, find deductions, and pay less taxes.

Written for Daily Hive by Christopher Liew, a CFA Charterholder, former financial advisor, and the creator of Wealth Awesome.