At a Glance
Using the CRA-approved deductions, you can reduce your personal income taxes. The CRA allows you to use certain expenses and credits to reduce your taxes. These range from child care to education deductions to employment expenses to provincial and territorial tax credits plus several other deductions.
The deductions to be claimed must be guided by the CRA’s requirements. For example, deductions have a maximum limit that can be claimed beyond which you’re required to pay taxes.
Here’s the 2020/2021 updated guide for tax deductions and credits for BC residents.
A Simple Example
Consider a BC medical doctor who earned an income of $300,000 in 2020. He also incurred expenses such as personal training and development ($10,000), transport to work (100,000), personal cell phone bill ($8,000). What deductions can the doctor claim?
Training and Development $10,000
Transport to work $100,000
Personal cell phone bill $8,000
The doctor will only be able to claim expenses that were incurred during work - as a result, personal expenses such as personal cell phone bills will not be claimed.
The doctor may claim from $300,000: (10,000 + 100,000) = $110,000 ONLY subject to the CRA maximum limits.
Just like with businesses, individuals can only claim specific deductions and credits against their incomes.
How claims impact individual income taxes
The truth is that you’ll hardly get penalties for not claiming certain deductions or tax credits. Your taxes, nonetheless, are hugely impacted by such claims. This is why understanding what can be claimed is vital if you’re to make the most of all the legal tax loopholes in BC.
Since almost everyone wishes to minimize their taxes as much as possible, you need to talk to a qualified accountant to evaluate all the claims available to you.
There could be a few standard deductions but generally, lawyers and doctors will have some differences in what can be claimed; similarly, real estate professionals and other entrepreneurs might have a different set of claims.