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When it comes to filing your taxes in Canada, there are lots of steps, documents, and information to remember. You need to declare all income you received for the year, save money to cover a potential tax bill, and keep track of all eligible expenses and deductions to maximize your refund. Then, there’s also keeping up with the Canada Revenue Agency’s changing tax rules in Canada. Luckily, there are many ways to increase your tax refund, like tax credits and deductions. 

What Is An Income Tax Refund?

An income tax refund is when the CRA collects too much income tax from you throughout the year and then refunds the overpayment. Refunds typically occur if your employer collected too much tax from your paycheques each month. Or, if any tax credits or deductions reduce the amount you owe and therefore increase your refund. 

What Is A Tax Credit In Canada?

There are two types of tax credits that you can get in Canada:

Non-Refundable Tax Credits 

These tax credits are applied directly to the amount of taxes you owe. These credits are only beneficial to people who owe money. For example, if you owe $300 in taxes and receive a non-refundable tax credit of $100, you now only owe $200. 

Refundable Tax Credits 

These will give you a credit regardless of whether or not you owe taxes this year. One example of a refundable tax credit is the GST/HST credit

What Is A Tax Deduction In Canada?

A tax deduction reduces your total taxable income. This means that for every tax deduction you’re eligible to claim your income that can be taxed decreases. Common tax deductions in Canada are RRSP contributions, CPP contributions, child care expenses, employment insurance premiums, etc.

Maximum Tax Refund You Can Get In Canada

There is no real “maximum” tax refund that you can get in Canada. Your refund depends on your income, deductions, and how much you’ve paid in taxes. 

If you’re an employee, your employer will collect the tax you owe the government from your paycheque. This makes things easier at tax time since employed individuals will receive a T4 with all the information they need. 

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How To Calculate Your Tax Refund

Accountants and other tax professionals can calculate your tax refund for you. However, you can calculate it yourself with an online tax calculator, or by doing the math yourself. Remember, if your tax situation is complicated, it may take you a bit longer to calculate your refund.

A basic formula:

Taxable Income = Total Income – Total Deductions

Total Taxes Owed = Taxable Income X Tax rate bracket you fall under

Total Taxes Paid – Total Taxes Owed= Tax Refund*

Note* This amount will vary based on other deductions and credits you may qualify for. 

How To Maximize Your Tax Refund

There are many ways to increase the amount of money you receive on your yearly tax refund.

1. Contribute To Your RRSP

Registered Retirement Savings Plans, or RRSPs, are a great way to maximize your tax refund. Used primarily to save for retirement, RRSPs also provide tax relief since you’re able to deduct your contributions from your taxable income. The limit for yearly RRSP contributions is 18% of your earned income. If you have a low income, however, a Tax-Free Savings Account might be a better fit for you than an RRSP. 

2. Apply To The Canada Workers Benefit

The Canada Workers Benefit is a refundable tax credit for Canadians with low income. The CWB has two components – a basic amount, and a disability supplement. 

To be eligible, you must be 19 years of age or older. If younger than 19, you must live with your spouse, common-law partner or child, be a resident of Canada, and earn a working income. 

The maximum credit amount is $1,381 for single individuals with a net income below $24,573, and $2,379 for families with a net income below $37,173. 

3. Deduct Childcare Expenses 

If you have children, you can claim the following expenses for each child under 18 years old, to a maximum of $2,273:

  • Child care services from caregivers
  • Daycare services
  • Child care services from educational institutions
  • Day camps and Day sports schools 
  • Boarding schools, overnight camps

4. Deduct Home Office Expenses

If you work at home, you can claim expenses for your home office, such as internet bills, stationery, computers, and more. With the COVID-19 pandemic, the CRA changed the rules for deducting home office expenses. If you worked at home more than 50% of the time throughout 2020, for a minimum of four weeks, you can claim 2$ per day or $400 per year. 

5. Deduct Moving Expenses

You can deduct moving expenses if you meet the following criteria:

  • You moved to work, run a business, or attend university, college or another educational institution
  • You moved at least 40 KM closer to your new job or school 

Eligible, deductible moving expenses include vehicle expenses, accommodation, costs for utility hookups and disconnection, and title transfer costs

6. Apply For Province-Specific Tax Credits

There are many province-specific tax credits available, depending on the province in which you reside. For example, Ontario offers tax deductions for adoption expenses and apprenticeship training, as well as credits for property tax and energy costs, depending on your income. 

7. Use Capital Loss

If you’ve lost money on investments in the stock market, make sure you record your capital loss. If you experience capital gains in a future year, your record of capital loss can offset the gains. 

8. Claim The Disability Tax Credit

Canadians living with a disability can claim the Disability Tax Credit (DTC) to help reduce any income tax they may owe the government. This tax credit is meant to support those living with a disability or anyone who cares for them. Canadians with eligible disabilities can claim up to $8,576 per year. 

9. Claim Credits For Seniors

If you’re a senior (over the age of 65), you can claim up to $7,637 per year. If you receive a pension, you can claim $2,000. For senior couples, pension income-splitting allows you to minimize the amount owed by you and your partner at tax time. 

Tax Refund FAQs

When will I receive my tax refund? 

This depends on which method you choose to file your tax return. If you file it online, it usually takes 2 weeks for the CRA to send you your tax refund. If you file it by paper, it can take around 8 weeks before you get a cheque in the mail. 

What line can I find my tax refund amount? 

If you’re eligible for a tax refund it will appear on line 48400 of your tax return. 

Where can I check my income tax refund status?

 You can check your refund status online through your CRA MyAccount or by calling the CRA. If you call, you’ll need to provide your name, address, date of birth, Social Insurance Number and the number on line 150 of your lastest NOA.

Can I transfer my tax refund to my spouse? 

No, you cannot transfer your tax refund to your spouse or common-in law partner in Canada., However, if you live in Quebec, you can have your Revenue Quebec refunds transferred to your spouse.   

Final Thoughts

Tax time can be stressful for many Canadians. With so many records and information to keep track of, it can be intimidating. However, by following the steps above and being more aware of eligible expenses, you can look forward to a generous tax refund each year.

Chrissy Kapralos avatar on Loans Canada
Chrissy Kapralos

Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

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