16-04-2025
Taxes 2025: The tax credits experts say Canadians may miss (or misunderstand)
The constellation of credits and deductions available to Canadians on their tax returns in 2025 is not infinite, but still more than a non-tax professional would be expected to master.
The odds of a Canadian getting everything right and maximizing their return without using software are 'moderate to low,' says Ameer Abdulla, a tax partner at EY Canada based in Waterloo, Ont.
Fortunately, Abdulla says, the various low-cost or even free software options available 'are quite good,' and would help most people get the credits and deductions to which they are entitled, provided they do a bit of work. Abdulla has his clients go through a checklist for the taxation year, whereas tax programs require you to complete a questionnaire.
'It can sometimes be a bit painful or feel like pulling teeth, but if you go through that list, you can at least identify all the deductions and credits that any potential client is eligible for,' he said.
Figuring out your profile — everything from employment status to investments to your broader family situation — 'has to be step one' to determine what credits and deductions are in play, agrees Stefanie Ricchio, a chartered professional accountant and spokesperson for TurboTax.
Both tax credits and tax deductions can reduce the amount of tax you owe, but in different ways. In the simplest terms, a tax deduction reduces your taxable income — which could move you to a lower tax bracket — while a tax credit applies to the taxes you owe based upon that taxable income.
'So typically, people who are at lower or moderate income levels have more material benefit in a tax credit — versus higher-income individuals, who receive more benefits out of a tax deduction,' Abdulla said.
The Canada Revenue Agency's (CRA) comprehensive list of dozens of benefits and deductions has clickable links that offer details on each item. One that many Canadians may not take full advantage of is the credit for medical expenses, says Ricchio.
'It's one where we generally don't have the best housekeeping, whether it's for prescriptions or for portions of things like glasses' that aren't completely covered by an employee insurance plan, she says. Add to those any out-of-pocket dental expenses, medical equipment and machinery and dozens of other items for you or for eligible dependents listed by the CRA. "Over the course of a 12-month rolling period, you know, we can easily lose sight of those,' Ricchio noted.
Tannis Dawson, a vice-president and high-net-worth planner at TD Wealth, says tax credits for disability and caregivers are often overlooked, as well as the fact that those credits can be transferred in some contexts.
EY's Abdulla notes that tax credits for home accessibility, moving expenses and childcare expenses are also often 'misunderstood or missed.' Moving expenses, for example, only qualify if you moved for work or to go to school and your new home is at least 40 kilometres closer to your new place of work or education.
For childcare, Abdulla recommends taking an inventory of expenses for babysitting, day care and day camps, 'then once you do, you can get up to about $8,000 per child under the age of seven, and then $5,000 per child between seven and 16.'
It doesn't cost the charity anything when you use your tax credit. So if you don't do that, you're leaving free money on the Bromley, CEO of Charitable Impact
Some people don't claim the tax credits on charitable donations, perhaps due to a misguided philanthropic instinct, says John Bromley, founder and CEO of Charitable Impact, an organization that allows individuals to consolidate their charitable giving via a donor-advised fund.
'It doesn't cost the charity anything when you use your tax credit,' Bromley noted. 'So when you give to a charity, you get a federal tax receipt, and the way to monetize that is by claiming it against taxes that you're going to pay. So if you don't do that, you're leaving free money on the table."
Many pandemic-era options are no longer in play, Abdulla says, which still leads to confusion. 'There were certain things that were permitted under a temporary basis during COVID, whereas now we're sort of back to normal, back to the old rules.'
Simplified flat-rate calculations have ended, but people who work primarily from home can still claim certain expenses related to, for example, their home office space.
The possibilities may widen if you're in the gig economy or run your own business. The CRA naturally expects you to report that income, Ricchio says. "But don't forget that there are a slew of deductions that are available to apply against that business income,' she added.
These deductions include professional fees for things like accounting, legal and other business advice, software or software subscriptions, and a portion of home expenses pro-rated for the business. The CRA website offers details on the various deductions, but Ricchio notes that modern-day tax software is designed to handle most situations.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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