Are you a newcomer or do you know some other newcomers? The first year of being a new immigrant is undoubtedly the hardest as you adapt to a new environment and learn various aspects of life. This blog can be a strange concept for many, but don’t worry – we’re here to help.
Newcomers are required to file an income tax return, regardless of the time of year they arrived in Canada.
Read this blog to discover more about Canadian taxes, deductions, and credits for newcomers that are available to you.
Understanding Residency Status for Income Tax Purposes in Canada
As a Canadian resident, you are required to pay income taxes on your worldwide income. To become a resident of Canada for income tax purposes, you must establish significant residential ties in Canada. Typically, you can establish these ties on the day you arrive in Canada.
The following are considered significant residential ties:
- Owning or renting a home in Canada
- Having a spouse in Canada
- Dependents in Canada, such as children.
A Guide to Filing Your Canadian Tax Return
If you’re a resident of Canada, you are required to file a tax return if you:
- Owe taxes; or
- Want to claim a refund.
Even if you didn’t earn any income during the year, you must file a tax return to continue receiving your entitled benefits and credit payments. The deadline for personal tax returns is April 30th of the following year.
Here are three sections of your tax return that you must complete:
- Identification: Fill out the entire identification section on the first page of your tax return. This helps assess your tax return and calculate any benefits you may be eligible for, such as the GST/HST credit or the Canada Child Benefit.
- Date of entry in Canada: Enter the date you became a resident of Canada for income tax purposes in this section.
- Partner Information: If applicable, enter your partner’s net world income for the year.
Benefits Available to Canadian Families
As a Canadian resident, you may be eligible for several benefits to help you with the cost of raising your family. Here are two benefits that you can claim:
Canada Child Benefit:
If you have children under the age of 18, you can claim the Canada Child Benefit. This is a tax-free monthly benefit payment made to eligible families. Families with children under 6 years of age can receive up to $6,400 per child annually, while those with children between 6 and 17 years of age can receive up to $5,400 annually. Households with children and an annual income below $30,000 will receive the maximum payment. To apply for this benefit, fill out and send form RC66, Canada Child Benefits Application, to the Canada Revenue Agency (CRA).
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 don’t need to apply for this credit separately; the CRA will determine your eligibility when you file your next tax return. The credit amount is based on your family net income and the number of children registered for the Canada Child Tax Benefit or the GST/HST credit.
Tax Deductions Available to You
As a resident of Canada, you can claim certain deductions on your tax return to reduce your taxable income. Here are some common deductions:
- RRSP Contributions: Deduct contributions made to a registered retirement savings plan (RRSP) from your income.
- Pension Income Splitting: If you and your partner were residents of Canada on December 31, 2015, you can elect to split your pension income.
- Moving Expenses: If you came to Canada as a full-time student with a taxable Canadian scholarship, you may be eligible to deduct your moving expenses.
- Support Payments: Deduct spousal or child support payments, even if your former spouse or common-law partner does not live in Canada.
- Other Deductions: Deduct professional fees, employment expenses, and childcare expenses.
If you are a newcomer to Canada, it’s important to take advantage of the tax credits and deductions available to you. Consider the tips mentioned above to ensure you claim everything you are entitled to for youself and for other newcomers.