Wherever you’re starting your new life in Canada from, there are bound to be some adjustments you’ll need to make in order to feel comfortable, happy and settled there. Unfortunately, one of the less pleasant adjustments you’ll need to make, involve your taxes.
Working with a personal tax accountant is a great way of ensuring that you get it right when filing your taxes as a Canadian for the first time (and every time thereafter), and the following basic tips can give you a head start:
Knowing your tax residency status
Determining how much you should report to the CRA and if there are any benefits you might be eligible for, your tax residency status is an important first concept to get to grips with.
The CRA look at your residential ties to Canada to determine your tax status, some of which can include whether you have a home, a spouse, Canadian bank account or health coverage. Following your arrival in the country, if you can prove that you have significant ties residentially to Canada, then you’ll likely be classed as a Canadian tax resident. Once this happens, you’ll probably be required to report your income from the date in which you became a resident.
Gathering the right documents
As with any form of tax preparation, getting the necessary documents in order early, can save time and limit errors. Those who are employed usually receive a T4 slip from their employer, which shows annual income and deductions, while students might receive T2202 forms, and investors T5 slips.
It’s also important to keep a record of such things as the exact date you arrived in the country, immigration documents, medical expenses and employment records; consult with a tax specialist for the full list of required documents.
Understanding worldwide income reporting responsibilities
Canadian tax residents must report any income earned whether it was inside the country, outside of it, or both, including income from employment, rent, investments and pensions. It’s unlikely that you’ll have to pay your taxes twice if you report foreign income, as Canada has a number of tax treaties with countries that rule out double taxation.
Tax credits and benefits for new Canadians
Within Canada’s tax system, there are several credits and benefits to help new residents lower their tax burden and enhance their finances overall, which newcomers may be eligible for shortly after filing their initial tax return.
Even if you have no income, or a limited one, you must still file a tax return to be able to access any of the following benefits:
- Canada Child Benefit (CCB)
- GST/HST credit
- Disability tax credits
- Provincial tax credits
- Tuition-related credits for students
Common tax deductions you may be eligible for
You may be able to reduce your taxable income as a new resident of Canada with certain tax deductions that you may be eligible for, including the following:
- Deductions related to employment
- Business expenses for the self-employed
- Registered retirement savings plan contributions, or RRSP; we’ll look at this in a little more detail below
- Moving expenses
- Childcare expenses
Keeping proper records related to each of these deductions is essential to help support your claim when filing.
Reducing your taxes with RRSP contributions
The Registered Retirement Savings Plan is a highly effective tool for tax-planning in Canada, and can help residents lower their taxable income while they build their savings long-term.
Engage with professional tax services in Langley, BC to discover how incorporating RRSP into your overall tax strategy could be of benefit to you.
Many newcomers find the Canadian tax system a daunting process, and if going it alone, it can be. But with expert help from a tax professional who understands the in’s and outs of the system, you can reduce your tax burden legitimately, and file with confidence, year after year.