How To Maximize Tax Return Canada In 2024?

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    23 Nov 2023
    If this question is in your mind, you are either looking to be more disciplined in your financial management or planning tax filing for the first time.  Whichever is your case, chartered professional accountants at CJCPA have got you covered.  Do you know why people end up thinking that they are paying too much taxes? It could probably be because they’ve not claimed the right credits, or deductions, and have not kept track of receipts and other documentation. We’ve tried to address this issue in our latest blog. We’ve picked 8 best deductions you can use to Maximize Tax Return Canada this year. If you pay your taxes in Canada, this blog will help you revamp your finances in 2024. Thus, without further ado, let’s get started!

    How Can I Lower My Taxable Income In Canada?

    If you know how to save money on taxes in Canada, lowering taxable income will not be an issue, regardless of the province where you live. Here we’ve provided 8 strategies you can use to lower your tax bill. 

    Take Advantage Of Tax Credits And Deductions

    Advantage Of Tax Credits And Deductions   From medical to moving, childcare to union dues, and charitable donations to home office expenses… there are over 100 tax deductions available to Canadians.  However, a commoner who isn’t an expert in finances, or holds a degree in that matter, may find it difficult to apply them appropriately. Be 100% sure to research the deductions that apply to your expenses, and try to take full advantage of them while filing taxes. Need help with finding the right deductions? You can reach out to a CPA in Surrey Canada for a free 30-minute consultation now!  

    Contribute to a Registered Retirement Savings Plan (RRSP)

    Have you enrolled in Registered Retirement Savings Plans (RRSPs) yet? If not, you are missing out on a plethora of benefits. Here’s how they work –  If you contribute $5,000 to your RRSP and your marginal tax rate is 20%, you save $1,000 in taxes. The funds in your RRSP grow tax-free until withdrawal, allowing your savings to compound at a faster rate.  To maximize tax benefits, consider timing your contributions based on your anticipated tax bracket. Remember, the CRA sets annual contribution limits, and unused contribution rooms can be carried forward.  Seek professional guidance to optimize your RRSP contributions and ensure compliance with tax regulations.  

    Hire Your Family Members

    Tax Refund canada   Does your spouse stay at home? We are sure they will have some contribution to the success of your business. Thus, why not use that contribution to claim a tax refund Canada? Hire your spouse/ child as an employee in your business, it can maximize your tax return. Pay them a salary and claim deductions for their wages, which will reduce your overall taxable income. What are the perks? The first $12,069 of employment income is tax-free! It means that you can further bring down your taxable income to a few notches. For businesses with low-profit margins, this is one of the top tax tips for Canadians.  

    Separation of Business & Personal Finance

    Doesn’t matter if the scale of your business is small or large, or whether you have an in-house accountant or not. One has to make it a habit to always pay for business expenses with separate credit or debit cards. Or you could be the next big red flag for CRA because your books and records will be a mess.  We get it, there are gray-area expenses.  For example, you might be a home kitchen/ restaurant. In such cases, deduct the cost of kitchen equipment and utensils purchased specifically for business purposes. You can also look for professional bookkeeping for restaurant services to sort your business and personal expenses.  

    Split The Income

    Tax planning Canada in 2024 is incomplete without this strategy – Income splitting. In this tax strategy, we move income from a high-income earner to a lower-income earner so that it reduces the overall tax bill of the household.  Here are some ways of doing it:
    • Pay a lower-income spouse a salary
    • Transfer assets to a lower-income spouse
    • Set up a family trust
    • Invest in a spousal or partner RRSP
    • Utilize prescribed rate loans
    We strongly recommend you hire a chartered professional accountant BC for further consultation.  

    Stay Informed About Tax Law Updates

    The Canadian government introduces 13-15 tax law updates annually. Each year, they target different sectors of the economy.  To maximize tax return Canada, you have to keep an eye out, follow these updates, and track all the new deductions, credits, or exemptions made available to your line of business.  Many of these relief measures are announced in late February- early March. To catch all these benefits made available on time, subscribe to newsletters from taxation experts like CJCPA, and visit CRA’s website regularly.  Keep a proactive approach to leverage all available opportunities to reduce your tax liability and enhance your overall tax refund.  

    Maintain Accurate And Detailed Records

      Personal Finance The Canada Revenue Agency (CRA) estimates that Canadians miss out on billions of dollars in tax deductions each year because they don't keep adequate records.  There aren’t enough words to describe how crucial it is to keep detailed records to claim tax deductions in Canada.  Besides, unorganized last-minute tax filing may be an invitation for a CRA Audit, probably due to a lack of accuracy and adequate supporting evidence of your claims.  If you are new to this, we have some tips to get you started on your journey to organize your financial documents and claim eligible documents:
    • Collect all receipts and invoices
    • Scan and save electronic copies
    • Organize hard copies
    • Label and categorize
    • Retain records for six years
     

    Filing Taxes On Time

    Tax Deadline   Everything mentioned above is futile if you aren’t taking care of this basic condition! Thus, to avoid penalties and reduce tax liability Canada successfully pays your taxes on time.  If you are an individual taxpayer reading this article, you would already be aware that the deadline to submit taxes and pay any outstanding balance is April 30th.  However, are you aware that late payments incur penalties @ 5% of the unpaid balance + 1% p.m. for the first 6 months and an additional 0.5% for each subsequent month? For self-employed individuals, they have an extended deadline of June 15th to submit their taxes. But they are also subject to late filing with a penalty of 1% per month, capped at 10% of the unpaid balance, plus interest charges on the outstanding amount.  Thus, one must first look out for covering these kinds of mistakes, then move forward with finding all applicable tax credits Canada.  

    Wrapping Up!

    So, there you have it, the eight tax deductions and credits that can help you save money and improve your financial well-being in 2024. Remember, the key to maximizing these benefits is to be proactive about your finances. Start planning early, gather your documentation, file your taxes on time, and look out for all these benefits from the CRA.   You can also team up with CJCPA to maximize tax return Canada in 2024 and beyond. CJCPA is a Surrey-based taxation and compliance firm with a combined experience of 30+ years. It has helped several self-employed individuals and small business owners reduce their tax liabilities by up to 40%.  Check out our blog for more business and finance insights!
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