8.3.8 Taxes in your life
- 8.3.1 Deductions from income
- 8.3.2 Registered retirement savings plans
- 8.3.3 Other registered savings plans
- 8.3.4 Video: Taxes and registered savings plans
- 8.3.5 Tax credits
- 8.3.6 Non-refundable and refundable tax credits
- 8.3.7 What you owe or get back
- 8.3.8 Taxes in your life
- 8.3.9 Summary of key messages
The taxes you pay and deductions you are eligible for will change throughout your life. For example, while students and their parents will be most interested in the tuition deduction, the age and pension income deductions will be relevant only for seniors. However, many deductions apply throughout your life, or can be transferred to another taxpayer, so check carefully to ensure that you are claiming all the deductions you are entitled to.
The examples that follow show some tax situations that are very common in Canada.
Laurie works for a bookkeeping business while she is taking a part-time college course to learn more about business management. As a part-time student, she can reduce her federal income tax by claiming the tuition tax credits on eligible tuition fees. To qualify, the fees she paid to attend her educational institution must be more than $100.
Keira runs a business as a commercial artist, and her husband, Darryl, works shifts as a maintenance worker in a local hotel. Keira frequently has to send artwork to clients, so she hires her husband to make deliveries whenever he is available. She pays him the same rate that she would pay her courier company. Keira and Darryl practice a form of income splitting that allows them to shift income from one partner to another, while keeping it in their family. By managing their income and business expenses, they may be able to share their income so that both of them stay in a lower income tax bracket and pay a lower rate of tax.
Mengsi looks after his parents who are aging and no longer able to take care of themselves. They depend on him for financial support, as well as for help in their home and buying groceries.
- Mengsi can claim a Disability Amount for his parents as a non-refundable tax credit to reduce the federal income tax he pays. The amount he can claim depends on his parents’ income.
- Mengsi can also claim his parents’ medical expenses as a tax credit because they are impaired and rely on him for support. The amount he can claim depends on his parents’ income and their total medical expenses.
- If his parents lived with him, he might also be able to claim a Caregiver Amount to further reduce his taxable income.
Jaspal and Adya
Jaspal and Adya both turned 65 and retired last year. Jaspal ran a successful business and made an income of over $90,000. Adya worked part-time for the business and made an income of $24,000 over the year.
- Since they are over the age of 65, they would both like to claim the Age Amount of $7,713 as non-refundable tax credits to reduce the income tax they pay.
- Adya can claim the full amount because her income is less than $38,893.
- However, the Age Amount is reduced for those whose income is above $38,893, and after the income reaches $90,313, the Age Amount no longer applies. Jaspal cannot claim the Age Amount.
These are some examples of common deductions and tax credits that can reduce the taxes Canadians pay. For more information, go to Canada Revenue Agency's General income tax and benefit package or get a copy of the guide at your local post office.
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