Are you a newcomer or know someone who is? Read this blog to learn more about Canadian taxes and the deductions and credits that are available to you.
As a resident of Canada you are liable for Canadian income taxes on your worldwide income. You become a resident of Canada for income tax purposes when you establish significant residential ties in Canada. You can usually establish these ties on the date you arrive to Canada.
Significant ties include:
- A home in Canada either rented or owned
- A spouse in Canada
- Dependents in Canada (such as children)
File a Tax Return
As a resident of Canada you must file a tax return if you:
- Have to pay tax; or
- Want to claim a refund
Even if you have not received income in the year, you have to file a tax return to continue receiving the benefits and credit payments that you are entitled to. The filing due date for personal tax returns is April 30 of the following year.
Complete Your Tax Return
There are three areas on your tax return that must be completed during preparation.
Identification: Complete the entire identification area on page 1 of your tax return. This is used to assess your tax return and calculate your GST/ HST credit, plus any benefits you may be entitled to under the Canada child benefit.
Date of entry in Canada: When completing this area on your return, enter the date you became a resident of Canada for income tax purposes.
Partner Information: Enter your partner’s net world income for the year.
Benefits You Can Claim
Canada Child Benefit:
If you have kids, claim the Canada Child Benefit. This is a tax-free monthly benefit payment made to eligible families to help them with the cost of raising children under 18 year of age. Families with children under age 6 will receive an annual tax-free benefit of up to $6,400 per child. Those with children between the ages of 6 and 17 will receive up to $5,400 annually. Households with children with annual income below $30,000 will receive the maximum payment.
To apply for the Canada Child Benefit , fill out and send form RC66, Canada Child Benefits Application to the Canada Revenue Agency (CRA).
GST/ HST Credit:
The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low-income offset all or part of the GST/HST that they pay. You no longer have to apply for this credit, the CRA will automatically determine if you are eligible for the credit when you file your next tax return. The credit is determined by the number of children that you have registered for the Canada Child Tax Benefit or the GST/HST credit; and your family net income.
Deductions You Can Claim
You can deduct contributions made to a Canadian registered retirement savings plan. The maximum deduction limit is the lesser of:
- 18% of your prior year’s income
- $25,370 (2016)
Pension Income Splitting:
If you and your partner were residents of Canada on December 31, 2015, you can elect to split your pension income. To make this election, you and your spouse or common-law partner must complete and attach Form T1032.
Generally, you cannot deduct moving expenses. However, if you entered Canada to attend courses as a full-time student enrolled in a program at an educational institution, and received a taxable Canadian scholarship, you may be eligible to deduct your moving expenses.
If you make spousal or child support payments, you may be able to deduct the amounts you paid, even if your former spouse or common-law partner does not live in Canada.
Make sure you consider these tips if you are a newcomer to Canada, and claim all the tax credits and deductions that are available to you.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.