Many items that are creditable or deductible for tax purposes must be paid by the end of the year. These amounts include alimony and maintenance, childcare expenses, investment counsel fees, professional dues, charitable donations, medical expenses, and political contributions. To ensure that you will benefit from the tax deduction or credit in 2022, be sure that you pay these amounts by Dec. 31.
Consider donating securities
If you plan to donate money to a registered charity, you should consider donating publicly listed securities you own instead of cash. If there is an accrued gain on your securities, by donating the shares directly to the charity, you can save on capital gains taxes that you would otherwise incur. For more information on this tax planning strategy, read our How donating securities to charity saves you tax article.
Manage your medical expenses
In the case of medical expenses, only amounts in excess of $2,479 (limit may vary by province or territory) or 3% of net income (whichever is less) are eligible for a credit. In Quebec, eligible medical expenses must be reduced by 3% of family income.
If your medical expenses for the current year are already in excess of the threshold and you anticipate that you won't have medical expenses in excess of the threshold next year, consider paying now for additional expenses that will arise in the near future.
Although most medical expenses are only paid as the medical services or supplies are required, some can be paid in advance. Glasses and contact lenses are two common examples. If you're paying for a major expense such as braces on an instalment basis, consider paying the balance owing early to maximize your medical credit claim.
You may have no medical expenses that can be paid in advance. In that case, keep in mind that you can claim eligible medical expenses paid in any 12-month period ending in a given year. For example, consider this scenario:
- your medical expenses incurred in the 2022 calendar year don't exceed the threshold;
- you need major dental surgery;
- those dental procedures will run from October 2022 to March 2023;
- the total cost will be about $5,000, split evenly between 2022 and 2023; and
- your other eligible medical expenses will total about $1,000 in each of 2022 and 2023.
In this scenario, you wouldn't claim any medical expense in 2022, and you could choose the 12-month period ending on Sept. 30, 2023 as the period to claim medical expenses on your 2023 income tax return. You can then claim all of the dental expenses incurred over the annual threshold, plus the other $1,000 of regular medical expenses incurred in the 12-month period ending Sept. 30, 2023. Note also that medical expenses eligible for the tax credit evolve over time and you should check the CRA website for a list of common medical expenses that qualify for the credit.