Tips For Employed and Self-Employed Canadians to Maximize Tax Refunds

We often think about tax savings when planning taxes, but rarely focus on tax refunds. Tax refunds help you collect surplus tax paid to the Canada Revenue Agency (CRA).

But why would you pay surplus tax?

It is because the CRA collects tax from you based on your previous year’s income and your tax bracket. But this year might be different. You may spend your money on certain things, like shifting or renovating your house, and that can earn you tax credits and deductions, thereby reducing your tax liability. But the CRA doesn’t know of these expenditures until you tell them by claiming these deductions on your income tax returns. The CRA will review the claim and refund the surplus tax collected.

How Tax Credits and Tax Refunds Work?

If you are an employee, your employer deducts the tax amount from your salary and gives it to the CRA on your behalf. Similar is the case with Registered Retirement Savings Account (RRSP) withdrawals and other income subject to withholding tax, where the payor deducts the tax at source and gives you the after-tax amount. If you are self-employed, you pay tax to the CRA directly every quarter as advance tax. These tax collections happen when the income is earned.

The CRA offers several benefits to taxpayers for spending on certain necessary expenses, including medical expenses, business expenses, donations, childcare, and home buying. Employees file their taxes before April 30 by listing their income, deductions, and credits in a form to arrive at the taxable income and calculate their final tax liability for the year. Surplus tax paid gets refunded, and a deficit raises a tax liability that should be paid by April 30 to avoid a late fee.

Two ways to get a refund are to pay more tax or reduce your tax liability. The first is not under your control, as withholding tax is paid by the client who gives you income. The second is. You can reduce your tax liability by applying for tax credits or reducing your taxable income by making eligible deductions. Both apply to specific expense categories.

To claim them, you must

• Check if your expense is eligible for the tax deduction/credit.
• Verify the claim limit for tax deduction/credit.
• Keep a detailed record of expenses, including supporting invoices and receipts.
• Claim the amount on your income tax returns.

Tax credits are refundable and non-refundable. Some common non-refundable tax credits include basic personal exemption, disability credits, medical credits, and Canada Pension Plan (CPP) contributions. They can reduce your tax liability to zero. If your tax liability is $500 and non-refundable credits is $700, your tax liability will be zero, and you can carry forward the remaining $200. But if this is a refundable credit, you will get a $200 refund.

How Can the Self-Employed Maximize Tax Refunds

If you are a self-employed Canadian working as a gig worker or sole proprietor, you can claim several types of business expenses that you incur to earn money. Expenses such as utility bills, salaries and wages paid to employees, rent, meals, and entertainment costs incurred for attending a business conference or client meeting, vehicle, and travel expenses for work-related travel can be deducted from taxable income.

Home Office Deductions: If you have converted a portion of your house into an office, for instance, 10%, you can deduct 10% of the expenses, like rent, property tax, and internet, as a business expense.

Keep detailed records of expenses, with explanations of how they contributed to the business. Do not mix personal and business expenses, as that could become a problem if you ever face CRA scrutiny and are unable to justify them as a business expense. For instance, air tickets to a ski resort during Christmas for yourself and your children. That has personal expense written all over it.

Tax Credits: The CRA gives small business owners several tax credits for incurring certain expenses.

• Scientific Research and Experimental Development (SR&ED) tax credit
• Investment tax credit
• Apprenticeship job-creating tax credit
• Input Tax Credit on the Goods and Services Tax you paid for business expenses.

How Can Employers Maximize Tax Refunds

Employees can also claim expenses they incur in performing their job that are not reimbursed by the company. For instance, mobile phones and laptops you use for work can be claimed as tax deductions if your employer does not reimburse you.

Tax Refunds for Both Employed and Self-Employed

Many tax benefits apply to both employed and self-employed:

• Charitable donations: Making donations to a registered charity is a non-refundable tax credit. The credit is the lowest federal tax rate for the first $200 and the highest tax rate (29% or 33%, depending on your tax bracket) for amounts above $200.
• Medical Expenses: You can deduct several eligible medical expenses incurred during the tax year up to 3% of your net income or the threshold set by the CRA ($2,834 for 2025), whichever is less. Eligible expenses include dental work, prescription medications, vision care like glasses, travel expenses for medical treatment, and more, for which you are not reimbursed. The expense could be for yourself, your spouse or common-law partner, or certain dependents.
• Education and Training Costs: Suppose you are a software developer pursuing a diploma, degree, or certificate from a designated educational institution to upskill and pursue better opportunities. You can deduct eligible expenses, such as tuition fees, textbooks, and supplies, from your taxable income.

There are special expense categories where the CRA allows tax deductions:

• The Home Buyers’ Amount is a non-refundable tax credit of $5,000 for first-time home buyers.
• Moving Expenses if you relocate for work or school: Your new home should be at least 40 kilometres closer to your workplace or educational institution.
• Childcare Expenses for low-income earners who go to work, attend school, run a business, or conduct research under a grant.

Apart from expenses, you can also reduce taxable income by making contributions to an RRSP and a First Home Savings Account (FHSA).

The CRA will review your returns and process your tax refund within two weeks for online filing, eight weeks for paper filing, and 16 weeks for people living outside Canada. If your returns are scrutinized, refunds may take longer.

Contact Black and Gill LLP in West Toronto to Help You File Your Taxes

The way you spend your income determines your actual tax liability. Talk to a professional accountant to help you file tax returns in a compliant manner and maximize tax returns by planning expenses with a tax focus. At Black and Gill LLP, our accountants and bookkeepers can help you claim tax deductions and credits you are eligible for in a compliant manner with proper documentation and calculation. To learn more about how Black and Gill LLP in Etobicoke can provide you with the best accounting and taxation services, contact us online or call us at 416-477-7681.