2023 Tax Filing Guide: 25 Essential Tips for Canadians

Before the tax filing deadline on April 30, 2024, take time to identify all opportunities that could reduce your tax bill. Review potential deductions, rebates and tax credits so you don’t miss out on money you’re entitled to. Use our income tax guide to prepare your return for last year.

1. Get your T4, T4A and T4E forms together

Collect all relevant slips—T4, T4A and T4E—before you start filing. These official documents report employment and other income and are essential for calculating your tax owing or refund. Your T4A will also show any contributions you made to a registered retirement savings plan (RRSP), which affect your deductions.

“The T4, or Statement of Remuneration Paid, is a tax slip that employers issue to employees after each calendar year. It includes your earnings, deductions and tax paid so far. The T4A is another tax slip, issued by payers of other amounts related to employment (pension payments, annuities, self-employed commissions, retiring allowances, scholarships, bursaries, research grants, etc.).”

More on these slips: What are T4, T4A, and T4E forms?

2. Investing as a tax-savings strategy

Deciding between a tax-free savings account (TFSA) and an RRSP depends on your income, timeline and financial goals. A TFSA shelters future earnings from tax, while an RRSP gives you an immediate tax deduction but is taxable when you withdraw.

“With a TFSA, you pay tax on money you’ve earned before you make a contribution; and with an RRSP you get a tax refund now on money you contribute, but will have to pay tax later, on money you withdraw from the plan. This difference, along with your income, your investment timeline, and other factors will all contribute to making the right decision for your investment dollars. You may find that you can use both vehicles simultaneously.”

Compare the two: TFSA vs RRSP: How to decide between the two

3. When are TFSAs and RRSPs actually taxable?

Tax treatment affects how you structure investments in registered accounts. Income earned inside a TFSA is tax-free, even when withdrawn—interest, dividends and capital gains are not taxable. RRSP contributions reduce taxable income now, but withdrawals are taxed according to your income bracket.

“The tax treatment of RRSP and TFSA withdrawals should motivate investors to choose their asset allocation wisely between not only types of stocks, but also stocks and bonds. It may be beneficial to hold more fixed income in an RRSP and more stocks in a TFSA. That way, growth could occur primarily in a tax-free TFSA, instead of a tax-deferred RRSP that will someday be taxable.”

Further reading: When are TFSAs and RRSPs actually taxable?

4. Avoid RRSP overcontributions

Your RRSP contribution room is based on prior-year information and an annual limit. Overcontributing can trigger penalties and interest, so check your Notice of Assessment to confirm:

“This is the time of year that people tend to find out about inadvertent overcontributions to their registered retirement savings plans (RRSPs). If you want to know where you stand, an income tax notice of assessment will show your:

1. RRSP deduction limit for the year
2. Unused RRSP contributions previously reported and available to deduct this year
3. Available RRSP contribution room (#1 minus #2)

If your unused RRSP contributions carried forward from past years exceed your RRSP deduction limit for the current year, that means you have an RRSP overcontribution.”

What to do next: What to do if you overcontributed to your RRSP

5. Interest payments: When to claim a tax deduction for your investments

Interest on money borrowed for income-producing investments is often deductible, but there are limits. You can generally deduct interest on loans used to buy rental property or investments in non-registered accounts, provided the borrowed funds are used to earn investment income.

“According to the Canada Revenue Agency (CRA), ‘most interest you pay on money you borrow for investment purposes [can be deducted] but generally only if you use it to try to earn investment income. … If the only earnings your investment can produce are capital gains, you cannot claim the interest you paid.’ … An example of when interest may not be tax deductible is when you buy land that does not produce rental income and can only produce capital gains. Buying a stock that has no history of paying dividends (or the class of shares does not allow dividends) is another potential example.”

More detail: Are interest payments tax deductible?

6. Working from home? Know what you can claim

If you worked from home, you may be able to claim a portion of household expenses such as electricity, water and internet. For the 2023 tax year the simplified flat-rate method used during the pandemic is no longer available; you must use the detailed method if you qualify.

“The Canada Revenue Agency (CRA) introduced a temporary flat-rate home-office expense deduction for the 2020, 2021 and 2022 tax years. [For 2022], a taxpayer could claim $2 per day worked from home, up to a maximum of $500, as a deduction. This simplified method is no longer available for 2023. The detailed method for claiming home-office expenses now applies for all eligible employees, so you can still claim a deduction if you qualify.”

How to claim: Work-from-home tax credit: What Canadians can claim for 2023

7. Self-employed? Set aside money for taxes

Self-employed individuals need to plan for taxes because nothing is withheld at source. Make saving for taxes a habit so you avoid a shortfall at filing time.

“Unlike salaried workers, gig workers don’t have taxes withheld from a paycheque. That may seem like a good thing—more money in your pocket!—but in fact it’s another thing to be wary of, because you might not have enough funds available at tax time. Make sure you’re setting aside some of your income for tax, preferably at the time you earn it.

Typically, setting aside 15% to 25% of the income you earn from driving or other gig work will be enough. Don’t touch it until tax time. The more you save, the safer you’ll be, but it’s not necessary to go above 25%.”

Filing tips: How are Uber drivers and other gig workers taxed in Canada? and Self-employed? Here’s how to file taxes for a side hustle

8. Tax deductions for small business owners

Many ordinary business costs can be deducted if you own a business. Maintain clear records of operating expenses to support claims and simplify bookkeeping.

“A sole proprietorship or your share of a partnership is reported on your personal tax return—generally on form T2125 Statement of Business or Professional Activities. The statement itself gives a good sense of the types of expenses that are eligible for business expenses, but CRA also provides a good summary.”

Expense tracking advice: Audit-proof your side hustle

9. How are you taxed when you sell a small business?

Selling a business can trigger several tax types—income tax, GST/HST, payroll-related taxes and potentially others—depending on whether the operation was a sole proprietorship or a corporation. Get tailored advice to understand your specific obligations.

“Selling a business has tax and legal implications. The tax implications can include GST/HST sales tax, payroll tax and other taxes. … The tax treatment will vary depending upon whether your business was a sole proprietorship or a corporation.”

Read more: How are you taxed when you sell a small business?

10. Recently divorced? Dividing investments and capital gains

Dividing assets after a separation can be costly, but transfers between spouses as part of a separation aren’t subject to spousal attribution. That means capital gains arising after a transfer due to separation or divorce are not automatically attributed back to the original spouse.

“Normally, when assets are transferred between spouses, a capital gain resulting from a subsequent sale would be attributed back to the original spouse on sale. This is called spousal attribution. Attribution does not apply if the asset was transferred as a result of a separation or divorce, whether you are common-law or legally married.”

Guidance: Separation and divorce: How do we split up our investments?

11. Joint investments with kids: Tax considerations

Joint ownership with a child is possible, but it brings tax and estate consequences. Attribution rules differ between minor and adult children and apply especially when money is loaned at low or no interest.

“Attribution does not apply between a parent and an adult child, unless the funds are loaned to the adult child at a low interest rate or at no interest rate. In the case of a low- or no-interest loan, where it seems the intention is not to truly gift the money, but to reduce tax payable on the income for a period of time, there is attribution. As with a minor child, it applies to interest and dividends, but not capital gains.”

Explore implications: Can you save on taxes by owning an investment account with your child?

12. What you need to know about bare trusts

In March 2024 the CRA announced bare trusts are exempt from certain reporting requirements for 2023, but rules can change and owners who share assets should understand the implications. A bare trust often arises informally when legal title differs from beneficial ownership.

“Essentially, a bare trust may exist when someone holds legal title to an asset, but some or all of the asset technically belongs—meaning it beneficially belongs—to someone else. Unlike formal trusts that are generally established with a lawyer, a bare trust is informal and can result simply from adding someone’s name to an account or to the ownership of a real estate property.

Some common examples of bare trusts are:

• a parent co-signing a mortgage for their child and going on the title
• a parent or grandparent who has an account for a minor child or grandchild
• an adult child with joint ownership of their parent’s bank account, investments or real estate for estate planning purposes

Stay current: What new bare trust tax filing rules mean for Canadians

13. Child support payments cannot be claimed

Child support payments are not tax-deductible for the payer, and the recipient does not include the amount as taxable income. Payments designated as spousal support are treated differently under older agreements, but post-May 1997 child support is tax-free to the recipient.

“Child support payments cannot be deducted on the tax return of the person paying them. This is the case for all agreements or court orders negotiated after May 1997. The good news for the recipient, however, is that child support is not taxable (in other words, the parent who receives child support does not have to pay tax on that money). Further, any support payments stipulated in an agreement or court order are deemed to be child support if they are not specifically identified as spousal support.”

Tips for separated parents: Tax basics for newly separated parents

14. Tax implications of transfers between registered accounts

Transfers between registered plans—RRSPs, RRIFs, LIFs, LIRAs, RESPs and TFSAs—are generally tax-deferred or tax-free depending on the account type, and do not usually trigger immediate tax consequences.

“Generally, transfers between registered accounts like RRSPs, locked-in retirement accounts (LIRAs), registered retirement income funds (RRIFs), life income funds (LIFs), registered education savings plans (RESPs) and tax-free savings accounts (TFSAs) do not have tax implications. The funds transfer over on a tax-free (for TFSAs) or tax-deferred (for other accounts) basis.

When accessing locked-in funds or moving money between plans, be aware of specific rules: Tax implications of making transfers between registered accounts

15. Working abroad: What taxes do you owe?

Canadian tax obligations are based on residency, not citizenship. Residents must report worldwide income, and foreign taxes paid are generally eligible for a foreign tax credit to reduce double taxation.

“Canada levies federal and provincial income tax based on residency, not citizenship. So, while residing in Canada, both citizens and non-citizens alike have to report and pay tax on their worldwide income. When income is subject to tax in another country as well, Canada generally allows a foreign tax credit to be claimed to avoid double taxation.”

Learn more: The tax implications of working abroad for residents and non-residents of Canada

16. Plan ahead if you expect to retire abroad

Moving abroad in retirement can create tax consequences. Non-residency can trigger a deemed disposition of non-registered assets, potentially creating capital gains, and pensions or other payments may face withholding taxes once you leave Canada.

“If you sell or rent out your home in Canada … you will likely become a non-resident of Canada. There may be tax implications for assets you own when you leave. Assets like non-registered investments will be subject to a deemed disposition (sale) and this may trigger capital gains tax. Other assets, like pensions and investments, will be subject to withholding tax after you leave.”

More information: Where do we pay income tax if we retire abroad?

17. Stop contributing to CPP if you’re retired and still working

If you’ve started receiving Canada Pension Plan (CPP) and continue to work, you may be able to stop CPP contributions once you reach a certain age by filing the appropriate form.

“You can start CPP as early as age 60; if you’re still working at that point, you need to keep contributing to CPP. If you’re 65 or older, and plan to continue working, you can choose not to contribute to CPP by completing Form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election.”

Details: Can Canadian seniors collect government benefits while still working?

18. Prep your U.S. investments, too

Investing in U.S. real estate or securities carries specific tax rules, including withholding on certain transactions. Canadians with substantial foreign assets must file form T1135 to report holdings over $100,000 (CAD).

“A Canadian is generally subject to 15% withholding tax on the gross proceeds of U.S. real estate, unless they file for a withholding certificate prior to closing to reduce the tax based on the estimated capital gain. U.S. capital gains tax paid is eligible to claim in Canada as a foreign tax credit. If a Canadian taxpayer has more than $100,000 in foreign assets, including U.S. stocks, ETFs, rental real estate, or other investments, they need to file the T1135 Foreign Income Verification Statement form with their Canadian tax return. The $100,000 limit relates to the cost, in Canadian dollars, for the investments.”

Read more: Tax planning for Canadians who invest in the U.S.

19. Adjust your income tax withholding

Rather than receiving a large refund, consider reducing how much tax is withheld so you keep more of your money throughout the year. Review your paystub and speak with your employer to adjust deductions if necessary.

“Look at how much income tax is being withheld from your paycheques. If it’s more than necessary, you can arrange for your employer to deduct less.”

More strategies: 8 year-long tax strategies to build wealth faster

20. Do not lie on your tax return

Always report income accurately. The CRA has access to records from financial institutions and will match reported income, contributions and transactions against their data. Misreporting can lead to penalties and audits.

“To spot undeclared, taxable interest, dividend and capital gains income, the CRA has access to info from all Canadian financial institutions. They can also determine if you’ve exceeded your TFSA and RRSP contributions and penalize you accordingly.”

How the CRA tracks returns: 7 ways the tax man is watching you

21. Have an income property? Know what you can claim

Keep thorough records of rental expenses. You can generally deduct costs like mortgage interest, utilities, property tax and repairs, though some expenses are capital in nature and are claimed over time. If you or a family member lives in the property, deductions may be limited.

“Expenses such as interest costs, utilities, property tax, repairs and renovations can be deducted, according to the CRA. Some expenses, called current expenses, are only deductible in the year you incur them. And others, known as capital expenses, are deductible in future years.”

Details: What expenses can you deduct for a second property in Canada?

22. You can reduce your capital gains amount

A capital gain arises when you sell an asset for more than you paid. While you can’t eliminate capital gains tax entirely, planning—such as timing sales and using available exemptions—can minimize the tax impact.

“Capital gains are taxed as part of your income on your personal tax return. Use the federal tax brackets, which can give you an idea of how much tax you may owe for the year. You will need to figure out the provincial tax bracket rate for your province or territory, too. Since Canada has a tiered tax system, you will have to do a bit of math to estimate your annual income tax, breaking down your total tax into the brackets, and the amount owed for each bracket.”

More on capital gains: How it works: Capital gains tax on the sale of a property

23. Check if home renovations are tax-deductible

Some home improvements—especially energy-efficient or “green” renovations—may qualify for rebates or tax credits depending on your province. Keep receipts and documentation for any eligible work.

“Depending on where you live, there may be a program that provides incentives or grants for green home renovations. Some renovations can be claimed on your tax return as well.”

Find out more: Are home renovations tax-deductible in Canada?

24. Keep a file of your tax return documents

Retain tax records for at least six years (longer if you own business property). Organized receipts and documentation make it far easier to respond quickly if the CRA requests verification or initiates an audit.

“The more organized you can be with receipts and other documentation relating to your return, the better off you’ll be if you are selected for an audit. Be prepared to produce them quickly when CRA asks to see them, and keep in mind that members of your family may be asked to offer up their own documentation as well.”

Audit-proof tips: 6 ways to make your tax return audit-proof
Filing multiple years: Filing multiple years of taxes together in Canada

25. Last tax return after death

When someone dies, several tax returns and deadlines may apply. Estate and final returns can be complex, and it’s important to understand which returns must be filed and when.

“When a person passes away, there are several tax returns to know about. And tax returns can be a complicated process on the best of days. For example, when someone passes away, navigating their taxes becomes an even more perplexing process as the taxpayer essentially files their taxes two times.”

More information: The final tax return after death: How it gets done in Canada

Read more on taxes:

• How to change a past tax return
• How GIC returns are taxed in Canada
• What you should know about cryptocurrency tax in Canada
• When your investment partners don’t play by the CRA’s rules