New Tax Credits 2024: Your Ultimate Guide to Saving Big

What are Tax Credits

Tax credits are a game changer to reduce your tax bill. Unlike tax deductions which lower your taxable income, tax credits actually reduce the amount of tax you owe. This is good for all taxpayers regardless of income.
 

The impact of tax credits can be huge. For example, a $1,000 credit reduces your tax bill by $1,000 no matter what tax bracket you’re in. A $1,000 deduction might only save you $150 if you’re in the 15% tax bracket.
 

There are two types of tax credits: refundable and nonrefundable.

Refundable tax credits are the better of the two as they can result in a refund even if you don’t owe any taxes. This means you could get money back from the government.
 

Nonrefundable credits only reduce your tax liability to zero. Any excess of the credit is lost. While still good, they don’t offer the same refund potential as refundable credits.
 

Make sure you understand the difference between these types of credits when planning your tax strategy. Refundable credits should be claimed first whenever possible.

 

Multigenerational Home Renovation Tax Credit (MHRTC)

A new refundable tax credit is the Multigenerational Home Renovation Tax Credit (MHRTC). It’s designed to encourage families to create multigenerational homes, to keep families closer and reduce the burden on long term care facilities.
 

To qualify for the MHRTC you must:

• Be a homeowner. This includes single family homes and multi-unit residences as long as you own the property.

• Renovate your home to accommodate a qualifying individual, such as a senior or person with a disability. This could be an accessible bathroom, stair lift, or separate living space.

• Spend $50,000 or more on renovations. This ensures you’re doing substantial work.

The maximum credit is $7,500 per qualifying renovation completed after December 31, 2022. This can be a big help for families doing major home mods.
 

Note: Renovations must be permanent changes to the home. Temporary modifications or removable equipment don’t qualify for this credit.
 

Keep records of all renovation expenses, including receipts and contracts. These will be needed when you claim the credit on your tax return.

 

Tax Credits for Families including Canada Workers Benefit

Many tax credits support families, recognizing the cost of raising kids. The Canada Child Benefit (CCB) is the foundation of this support system.
 

The CCB is a tax-free monthly payment to eligible families to help with child rearing costs. The amount received is based on several factors, including number of children, their ages and family net income.
 

Net income plays a big role in determining eligibility for the CCB and the amount families can receive. As income goes up, the benefit amount goes down. This means families with lower income get more support.
 

For the 2023-2024 benefit year the maximum annual benefit is $7,437 per child under 6 and $6,275 per child 6 to 17. These amounts may change in future years so be sure to check the current rates.
 

The Child Disability Benefit (CDB) is an additional payment to the CCB for families with children who have severe and prolonged physical or mental impairments. This extra support recognizes the extra costs of caring for children with disabilities.
 

The CDB is up to $2,985 per eligible child per year (2023-2024 benefit year). Like the CCB, this amount is income tested.

Both the CCB and CDB are monthly payments so the financial support is ongoing throughout the year. This regular income can be a big help for families.
 

The Canada Workers Benefit (CWB) is another credit for families and individuals. It’s a refundable tax credit that tops up the earnings of low income workers.
 

The CWB has two parts: a basic amount and a disability supplement. The basic amount is up to $1,428 for singles and $2,461 for families (2023 tax year). The disability supplement is up to an additional $737.
 

Advance payments of the CWB are based on eligibility from the previous year. These advance payments are now automatic for eligible recipients so you get the support throughout the year instead of a lump sum at tax time.

 

Tax Credits for Education and Training

Education is an investment in your future and several tax credits help offset the costs. The Tuition Tax Credit is one of the biggest benefits for students and their families.
 

The Tuition Tax Credit allows students to claim a portion of tuition fees paid to eligible Canadian institutions. Fees over $100 qualify for this credit. The credit is 15% of the eligible tuition at the federal level and additional credits at the provincial level.

One of the best features of the Tuition Tax Credit is its transferability. If the student doesn’t need the full amount of the credit to get their taxes to zero they can transfer up to $5,000 of the unused amount to a spouse, common-law partner or parent/grandparent.
 

The Student Loan Interest Deduction helps student loan borrowers. It allows a claim for a portion of the interest paid on qualifying student loans, including federal and provincial student loans.
 

This can be claimed for up to 5 years after the student has graduated. The amount claimed reduces taxable income so you may get a lower tax bill or larger refund.
 

In addition to these credits some provinces offer education specific credits. For example, Manitoba has a Tuition Fee Income Tax Rebate for graduates who live and work in the province after they graduate.
 

Students and their families should keep detailed records of all education related expenses. This includes tuition receipts, textbook costs and student loan interest statements.

 

Tax Credits for Homeowners and Businesses

Homeownership is a big milestone for many Canadians and several tax credits help with that. The Home Buyers’ Amount (HBA) is a non-refundable tax credit for first time homebuyers.
 

To qualify for the HBA you must not have lived in a home owned by you or your spouse/common-law partner in the current year or the four preceding calendar years. This “first time” definition resets after four years without home ownership.
 

The maximum credit amount was $10,000 in previous years but you need to check the current year’s amount as it may have changed. The credit is calculated at the lowest personal income tax rate which is 15% federally.
 

If you’re buying a home with a partner the HBA can be split between the two buyers but the total claim cannot exceed the maximum amount for one home.
 

Landlords can benefit from the GST/HST Residential Rental Property Rebate and claim a portion of the GST or HST paid on new or substantially renovated rental property purchases. This rebate helps reduce the sales tax burden for landlords.

To qualify for this rebate the property must be rented to tenants. The rebate amount varies depending on the purchase price of the property and if it’s in a province with HST or just GST.
 

For businesses, there are several tax credits to help with growth and innovation. The Scientific Research and Experimental Development (SR&ED) tax incentive program is one of the biggest.
 

The SR&ED program provides tax credits for businesses that conduct research and development in Canada. The credit can be up to 35% of qualifying expenditures for small Canadian-controlled private corporations.
 

Another credit for businesses is the Small Business Deduction (SBD). Canadian-controlled private corporations can pay a lower rate of tax on the first $500,000 of active business income.

 

Tax Credits for Health and Wellness, including Disability Tax Credit

Medical expenses add up fast but the medical expense tax credit helps. This credit allows claims for a wide range of health related expenses including:

• Payments to doctors, dentists and other medical practitioners

• Hospital services

• Prescription medications

• Medical devices and equipment

• Travel expenses for medical treatment (if treatment is not available within 40 kilometers of home)
   

To get the most out of this credit it’s often best to claim expenses for any 12 month period ending in the tax year rather than just the calendar year. This allows you to time medical procedures or purchases.
 

The Disability Tax Credit (DTC) is for individuals with disabilities. It helps offset extra living costs associated with disabilities and can result in big tax savings.
 

To qualify an individual must have a severe and prolonged impairment in physical or mental functions. This impairment must be certified by a qualified medical practitioner.
 

The DTC is a non-refundable credit but unused amounts can be transferred to a supporting family member. For 2023 the federal credit amount is $8,966 which can result in tax savings of up to $1,344.90 (15% of $8,966).
 

Besides the tax credit itself qualifying for the DTC can also make you eligible for other benefits such as the Registered Disability Savings Plan (RDSP) and enhanced Canada Workers Benefit.

 

How to Claim Tax Credits

To claim tax credits fill out your tax return using CRA guidelines and forms. This will involve filling out specific schedules or forms for each credit you’re claiming.

Gather all your documents before you start your tax return. This includes:

• T4 slips from employers

• Receipts for medical expenses, charitable donations and other deductible expenses

• Tuition tax certificates (T2202) from educational institutions

• Documentation to support business expenses or rental property costs

If you’re unsure about your eligibility for certain credits or how to claim them consult a tax professional. They can help you get the most out of your benefits and comply with all tax laws.
 

For some credits like the Canada Workers Benefit (CWB) advance payments are now automatic for eligible recipients. But you still need to file your tax return to get the correct benefit amounts and to claim any other credits you may be eligible for.

Many Canadians use tax preparation software to do their returns. These programs often have built in prompts to help you identify credits you may be eligible for based on the information you enter.
 

You have up to 10 years to adjust a tax return if you realize you missed a credit. But it’s best to be thorough when you first file to avoid the need to adjust.

 

Tax Refunds and Tax Credits

Tax credits affect refunds and can impact your overall tax situation. Refundable credits can increase your refund even if you don’t owe any taxes and can result in a payment from the government.
 

Non-refundable credits while they can’t increase your refund beyond eliminating your tax liability can still result in big savings. By reducing the amount of tax you owe they can turn what would have been a tax payment into a refund.
 

The timing of when you get the benefit of tax credits can vary. Some like the Canada Child Benefit are monthly throughout the year. Others like the Tuition Tax Credit are a larger refund (or smaller balance owing) when you file your tax return.

It’s worth noting that getting a big refund isn’t necessarily ideal from a financial planning perspective. It’s essentially an interest free loan to the government for the year.
 

If you get big refunds every year you might want to consider adjusting your tax withholdings or installment payments. This could put more money in your pocket throughout the year rather than waiting for a lump sum refund.

 

Final Thoughts

Claiming tax credits is key to getting the most out of your tax return and your overall financial situation. The Canadian tax system has many credits to support different aspects of life from raising children to education to health related expenses.

Review the eligibility criteria for each credit and gather all your documents. Keep track of everything throughout the year so you don’t miss out on any benefits.
 

Tax laws and credit amounts can change from year to year so stay informed. Check the Canada Revenue Agency website or consult a tax professional to make sure you’re up to date on any changes or new credits that apply to you.

Remember while tax credits can be big money they’re just one piece of the financial puzzle. Consider how they fit into your overall financial picture including budgeting, saving and investing.
 

By being proactive about tax credits you can save thousands of dollars a year. That can mean more money for other financial goals whether that’s paying down debt, saving for retirement or investing in your future.

So get the least tax and stay legal. Simple.󠁧󠁢󠁳󠁣󠁴󠁿