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Federal tax credits Canadians should take advantage of but probably aren't

Medical expenses, disability tax credit among the most underutilized credits, one expert says

Canadian Tax Return - Do you have a refund or balance owing?
Tax professionals weigh in on the federal tax credits many Canadians don't take full advantage of. (RobMattingley via Getty Images)

It can be tricky to keep up with new income tax changes and tweaks that the federal government rolls out yearly, but there are also some tax credit mainstays that experts say many Canadians might be eligible for but still don't take full advantage of.

Ryan Knipfel, a senior financial planner with a specialization in tax and estate planning at Richardson Wealth, says sometimes it comes down to a lack of awareness that certain tax credits exist or uncertainty whether the credit applies because the definition is vague.


Other times, tax-filing software can auto-apply tax credits or a user might not be prompted on certain credits because of how they answered questions on the platform, he says.

"I think the main ones for the average person, both in terms of they may not know they exist, or they may not know when and how to claim them or what qualifies, I think medical expenses is definitely one," Knipfel said in an interview with Yahoo Finance Canada.

"I think of ones that have come in recently … things like the interest paid on your student loans, which generates a tax credit, or the homebuyers amount, which generates a tax credit, those are relatively new. … Unless you're regularly reading them or working with a professional, you might not know you qualify for these newer credits."

The medical expense credit can cover a variety of out-of-pocket costs such as prescriptions, eyeglasses, private healthcare premiums, dental visits and medical devices, Knipfel says.

The rules for claiming medical expenses are also very unique, he adds, because it's based on any 12-month period ending within the taxation year, rather than the calendar year itself, and can include amounts paid for dependents.

Tax credits reduce the amount of money owed to the Canada Revenue Agency. Most tax credits are non-refundable, meaning they can lower your tax liability but can't boost your tax refund or be used to create a refund.

For Canadians who are caring for a parent or who have renovated their home to improve accessibility for a qualifying individual, they should keep the caregiver tax credit and home accessibility expense tax credit in mind, according to Brian Quinlan, a partner at accounting firm Allay LLP.

Those who have purchased their first home can take advantage of the first-time home buyers tax credit, which was increased to $10,000 for the 2022 tax year and can provide a credit of up to $1,500, Quinlan says.

Other credits that Canadians often forget are available to them are the digital news subscription credit, an adoption tax credit, and for investors, the foreign tax credit, he adds.

"Tax withheld on foreign company dividends (say Apple Inc.) can be claimed as a credit against your Canadian tax liability, so you don't end up paying tax to two countries on the same income," Quinlan said.

With mental health front and centre as the country emerges from the pandemic, the disability tax credit is another underutilized benefit because many think it's mainly for physical disabilities, Knipfel says.

"They are expanding the criteria. It's not what type of disability, it's more how that disability affects specific aspects of your daily living," he said.

Don't forget about tax deductions

While tax credits lower the amount of tax owed, tax deductions reduce the income of an individual who is subject to tax.

An often-forgotten tax deduction, Quinlan says, is the work-from-home deduction that was introduced during the pandemic for those working remotely.

Canadians who are still working remotely can take advantage of the simplified rule for home office expenses and claim a deduction of up to $500 for 2022.

Separately, legal fees paid for getting a severance or to receive spousal or child support payments could also be tax-deductible, Quinlan says.

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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