Despite coming around at the same time every year, tax season still remains a source of stress for most people, but there is a silver lining. All you need is early preparation and a little organization to make filing your taxes a smooth and manageable experience.
This guide will go over the essential steps you can take to prepare for tax season. Think of it as a step-by-step walkthrough of everything you need to stay informed, avoid common issues, and file with confidence in 2025.
Circle Key Dates
The first step in making your tax season easier is making note of the key dates. Filing on time is critical to avoiding penalties, which can add up rather quickly, given that the CRA imposes a 5% penalty on any outstanding taxes past the deadline.
On top of the missed deadline penalties, filing late can result in an additional 1% penalty for every month your return is late.
Remember:
Filing Period Begins: February 17, 2025
Filing Deadline: April 30, 2025
Organize Your Documents
With the key dates now marked on your calendar, it’s time to tackle the next step: organizing your documents. Start early and create a thorough checklist of everything you’ll need, from income slips to deduction receipts.
This includes:
- T4s and T5s
- RRSP contributions
- Medical expenses
- Childcare costs
- Charitable donations
You can also organize your paperwork with digital options like Google Drive or Dropbox or physical methods such as categorizing documents in folders and binders.
We recommend utilizing tax software or visiting a tax professional prior to filing your taxes to ensure nothing slips through the cracks. Our expert team is always willing to assist with anything you need.
Maximize Credits and Deductions
When filing your taxes, every dollar counts. It’s easy to overlook common deductions or not realize you can apply for eligible tax credits. Every deduction you claim plays a significant role in the outcome of your tax return.
- Any RRSP contributions made up to March 1, 2025, can be deducted from this year’s tax return. RRSPs not only reduce your taxable income but also build a retirement nest egg.
- Deduct any eligible childcare costs, including daycare or babysitting fees, after-school care, childcare or special needs services and transportation fees.
- If you work from home, take the opportunity to deduct home office expenses. You may be eligible to claim some of your home expenses, such as utilities, mortgage interest, property taxes, internet and office supplies.
- Students can claim a 10% provincial and a 15% federal tuition tax credit, reducing their tax liability.
We always recommend consulting with a tax professional, as they can help you uncover deductions or credits you didn’t realize were available.
Understand Tax Rule Changes
Staying informed on changes in tax rules will pay off in helping you plan effectively. This year, the federal government has increased the capital gains inclusion rate from 50% to 66.67% for gains realized on or after June 25. What does this mean for you?
If you sell an asset and realize a gain, you’ll now see a larger portion become taxable. For example, if your capital gains exceed an annual threshold of $250,000, the new rate will apply to the amount above that limit. If you’re filing on behalf of a corporation or trust, the updated rate applies to all capital gains from June 25 onward.
The Faber Advantage
Tax season may add a bit of added stress to your new year, but you’re not alone. Whether you’re navigating debt management or feeling overwhelmed about filing your taxes, you’ll find support from one of our professional licensed insolvency trustees (LIT). Contact us today, and you’ll speak directly with an LIT who will work with you to answer your questions.
