BANKING & FINANCE
Do newcomers need to file an income tax return?
by | Oct 15, 2024
It’s smart to file an income tax return in Canada if you arrived in 2023. If you became a permanent resident and lived in Canada, even for a short period, filing your first income tax return with the Canada Revenue Agency (CRA) can provide financial benefits. If you didn’t earn income in Canada in 2023, filing a return allows you to apply for important benefits. Also, the government can’t pay the Goods and Services Tax (GST), Harmonized Sales Tax (HST), or Canada Child Benefit (CCB) you may be eligible for without you filing a tax return. In other words, you will have to file an income tax return if you:
- Want to get benefits and credit payments
- Want to claim a refund
- Have to pay taxes in Canada.
While filing taxes in Canada for the first time may seem overwhelming, there are resources to help you (see the section below: Government of Canada Income Tax Resources). Many settlement agencies can help you complete your taxes for the first time. This is just one of many important services that settlement agencies provide.
As we approach the “tax season” in Canada and the deadline to file your income tax return, this information will help you get started.
Understanding Canada's tax system
Navigating the Canadian tax system will make your life here much easier. If you’re already employed, you know that a good portion of your earnings goes to taxes, maybe more than what you were used to in your native country.
The taxes you pay come back to you through helpful public services and many gratuities making Canada one of the most sought-after destinations for immigrants. In addition, you can recover part of your taxes and access tax credits when you file an income tax return each year.
What are tax credits?
Tax credits are sums that are deducted from the total taxes you owe. You may be eligible for one or more tax credits. When you claim deductions, you may receive a larger refund or reduce the taxes that you owe. Here are some examples of tax credits and deductions that you could be eligible for:
- Canada Carbon Rebate is available to residents of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Saskatchewan to offset the cost of federal pollution pricing. Currently, this credit is unavailable in British Columbia, Northwest Territories, Nunavut, Quebec, or Yukon.
When you claim certain tax credits, you must support your claim with receipts.
What benefits can I receive?
When you file your income tax return, you can apply for benefits. These benefits are payments for specific expenses that can help make living in Canada more affordable. Some examples of benefits include:
- Goods and Service Tax (GST) and Harmonized Sales Tax (HST) credit: helps individuals and families with low or modest incomes to offset sales tax.
- Canada child tax benefit: a tax-free payment that helps families with the cost of raising children under 18.
- Provincial & territorial benefits & credits.
Here are some benefits you may be eligible for:
| BENEFIT | MARRIED OR COMMON-LAW WITH CHILDREN |
MARRIED OR COMMON-LAW WITH NO CHILDREN |
SINGLE WITH CHILDREN | SINGLE AND 19 OR OLDER WITH NO CHILDREN |
|---|---|---|---|---|
| Canada Child Benefit | Yes | No | Yes | No |
| GST/HST Benefit | Yes | Yes | Yes | Yes |
| Provincial & Territorial Benefits & Credits | Yes | Yes | Yes | Yes |
Are you eligible for benefits & credits? Source: Canada Revenue Agency (CRA)
First Home Savings Account (FHSA)
Buying a home in Canada is a common goal for many newcomers. However, saving money for a down payment is challenging given the rising housing costs. A First Home Savings Account is a registered plan that helps you save to buy your first home. The FHSA allows your contributions to grow tax-free and helps you prepare to buy your first home. Your FHSA contributions are tax deductible. And the contributions are non-taxable as long as you withdraw the money to buy your first home.
The TFSA allows first-time homebuyers to save up to $8,000 per year with a lifetime limit of $40,000.
If you opened a TFSA in 2023, you can claim up to $8,000 in contributions made by December 31, 2023, as a deduction on your 2023 income tax and benefit return.
What is the deadline to file an Income Tax Return for 2023?
The deadline to file your 2023 income tax return in Canada is on or before Tuesday, April 30, 2024. If you owe taxes, you have to pay the full amount on or before April 30, 2024. If you are self-employed, the deadline to file your income tax return is June 17, 2024. But if you owe taxes, you still have to pay by April 30, 2024.
If you owe money and do not pay by April 30, 2024, you will have to pay daily interest on the amount that you owe. And penalties and interest can become expensive. It’s best to pay the full amount to avoid paying interest and late fees.
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How to file your Income Tax Return?
You can file your income tax return for 2023 online in two ways:
| EFILE | NETFILE |
|---|---|
| – EFILE is a secure CRA service that lets authorized service providers complete and file your return electronically. | – This electronic tax-filing service lets you do your personal income tax and benefit return online using certified tax preparation software and submit it directly to the CRA. |
You can also complete your income tax and benefit return by paper. Click here to get a 2023 T1 (personal) income tax package. Be sure to order the package for the province that you reside in because the tax system can vary by province.
Use free certified online tax software to simply the process:
Here are some free tax software products that you can use. These are great if you have a simple tax return to file:
| Wealthsimple Tax | TurboTax | CloudTax |
|---|---|---|
| – Free autofill tax software allows you to complete a simple tax return
– Provides a helpful guide to claiming deductions – Offers paid plans for different tax needs. |
– Offers free & paid tax returns
– Free tax return service applies to simple tax returns but does not include income, credits, and deductions such as: – Employment expenses (meals, lodging, etc) – Donations -Medical expenses – Investment income and expenses – Rental property income and expenses – Self-employed income and expenses. |
– Free and paid services
– Offers free ‘how-to’ videos and a step-by-step guided application. |
For more listings, check out this list of free tax software products here.
Find free tax clinics:
You may be eligible to use the Community Volunteer Income Tax Program if you have a modest income and a simple tax situation.
Avoid fraud and income tax scams
Unfortunately, scammers try to get Canadians to pay debts they do not owe. And tax season is a prime time for scammers. Newcomers can be vulnerable to these scams, especially when it comes to receiving a call or letter from a government agency demanding money for payment. However, you can protect yourself if you know when and how the CRA may contact you.
Click here to learn about scam protection and the CRA to protect yourself from fraud. This information will help you to respond if you get an email, phone call, letter, or text from the CRA that seems suspicious.
Government of Canada income tax resources
| RESOURCES | DESCRIPTION |
|---|---|
| Newcomers to Canada | Did you leave another country to settle in Canada in 2023? This information will help you understand the Canadian tax system and what you require to complete your first income tax and benefit return as a resident of Canada. |
| Newcomers to Canada (immigrants & returning residents) | This site will help you to complete your first income tax and benefit return as a resident of Canada. The information is only for the first tax year that you became a new resident of Canada. |
| Get Ready to Do Your Taxes | Get a quick overview of the documents you need to file your income tax return. |
| Don’t Get Scammed! | Learn when and how the CRA may contact you to avoid being a victim of fraud. |
| Common Tax Terms | Glossary of terms to learn about your taxes. |
Learn how to file your income tax return
Learn about your taxes: This course can help you learn about personal income taxes in Canada. It includes seven online learning modules:
- One: Starting to work (why you need a social insurance number, what’s on your pay stub and T4 slip)
- Two: Preparing to do your taxes (what to know before you do your taxes, different ways to do them)
- Three: Completing a basic tax return (an introduction to a basic income tax and benefit return)
- Four: After completing a tax return (understanding a notice of assessment, paying off a balance, working with the CRA)
- Five: Using My Account (how to use CRAs online portal)
- Six: Purpose of taxes
- Seven: Accessing your benefits and credits.
Important tax changes for 2024
Income tax and benefit amounts will change to offset some of the rising living costs. Again, these are important changes that put additional money in your pocket. Some of the important tax changes for 2024 include:
- The dollar limit for the Registered Retirement Savings Plan (RRSP) will increase from $30,780 to 31,560 (with a limit of 18% of your 2023 earned income).
- The dollar limit for the Tax-free Savings Account (TFSA) will increase from $6,500 to $7,000 (it’s important to use a TFSA as an investment and not as a savings account).
- An increase to the Basic Personal Amount (BPA) you can earn without paying any federal tax will increase to $15,000.
- Tax bracket changes: all five federal income tax brackets have been adjusted by 4.7% to help Canadians maintain buying power as the cost of goods increases:
| FEDERAL TAX RATE FOR 2024 | TAXABLE INCOME THRESHOLD |
|---|---|
| 15% on the portion of taxable income that is: | Less than $55,867 or less, plus |
| 20.5% on the portion of taxable income that is: | Over $55,867 up to $111,733, plus |
| 26% on the portion of taxable income that is: | Over $111,733 up to $173,205, plus |
| 29% on the portion of taxable income that is: | Over $173,205 up to $246,752 plus |
| 33% on the portion taxable income that is: | Over $246,752. |
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