Yahoo Finance CRA Money: How to Get a Bigger Tax Refund in 2024
Written by Andrew Button at The Motley Fool Canada
Do you want to get a bigger tax refund in 2024? If so you have to check your paperwork carefully. To get a bigger refund than your pay stubs indicate you should get requires that you comb over all your receipts and claim every deduction and credit you’re entitled to.
That’s easier said than done. Many credits and deductions are not well publicized; others are difficult to calculate. Truthfully, you have to hire a chartered public accountant (CPA) if you want to absolutely maximize your tax refund. You’ll have to weigh the possible tax savings against the accountant’s fees. In this article, I will explore some basic deductions and credits you can claim on your taxes to get a bigger refund in 2024.
Claim your RRSP contributions
As you probably know, your Registered Retirement Savings Plan (RRSP) contributions are a major source of tax deductions. For most Canadians, they are probably the biggest single source of deductions they have. You probably already know that you can claim these and get a bigger tax refund by claiming them. What you might not know is that the RRSP contribution records your bank or broker sends to the Canada Revenue Agency (CRA) aren’t always accurate. Sometimes, they lowball the amount you contributed. You need to go over your records and make sure that every single RRSP contribution makes its way into your final tax refund.
Employment and education-related deductions
There are many employment and education deductions you may be eligible to claim:
Self-employed deductions. If you’re self-employed, you can claim almost every expense you have that pertains to running your business. If you want to find all of these, you should hire an accountant. Sometimes, you’ll be surprised to find just how much you can deduct. Even meals and entertainment can be claimed if they were bought for a client.
Union dues. These can be fully deducted.
Training expenses.
Accounting and legal fees incurred in filing your return.
Tuition fees (these are credits rather than deductions like others on this list).
Student loan interest.
Potentially dozens more.
Claim the dividend tax credit
One deduction you’ll definitely want to claim is the dividend tax credit.
Let’s imagine that you held Toronto-Dominion Bank (TSX:TD) stock at the start of 2023. TD paid $3.84 in dividends per share that year. If you’d invested $10,000 into the stock, you’d have earned $444 in dividends, as the table below shows.
COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
TD Bank | $86.37 (the price at the start of 2023, not today). | 116 | $0.96 per quarter ($3.84 per year). | $111 per quarter ($444 per year). | Quarterly |
How much tax would you pay on these dividends? Potentially, not very much at all! You see, eligible dividends in Canada are increased in value by 38% (“grossed up”), and then a 15% tax credit is applied to the grossed-up amount. In the scenario above, we have $444 in dividends being paid on your $10,000 TD Bank position. If you bought TD stock today, your expected dividends for the next 12 months would be closer to $500, but the stock price at the start of 2023 was higher than the price today.
How big of a tax credit would you get on those $444 in dividends? Approximately $92. All of TD’s dividends are eligible, so they are grossed up to $612.72. The 15% credit is applied to that amount rather than $444, so you get a $92 tax credit. That’s 20.7% of your actual dividends received, making this a rare case where a tax credit can be worth more than 15%.
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So, claim the dividend tax credit. It could save you big money.
The post CRA Money: How to Get a Bigger Tax Refund in 2024 appeared first on The Motley Fool Canada.
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Fool contributor Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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