Deductions for Employees

4 Common Tax-Saving Deductions That Employees In Canada May Consider.

RRSP (Registered Retirement Savings Plan):

Contributing to an RRSP allows employees to deduct contributions from their income, reducing their taxable income for the year. Contributions grow tax-deferred until withdrawal, usually during retirement when individuals are in a lower tax bracket. The annual contribution limit is a percentage of earned income, up to a specified maximum. It’s an effective way to save for retirement while enjoying tax advantages.

FHSA (First-Time Home Savings Account):

Contributing to an FHSA allows employees to deduct contributions from their income, reducing their taxable income for the year. Contributions grow tax-deferred until withdrawal, it’s a great account if you are planning to buy your first house in Canada. Withdrawals can be made tax-free for the first home. The annual contribution limit is a fixed dollar amount which is $8000/year and lifetime maximum $40,000 per person. It’s an effective way to save for first home while enjoying tax advantages.

Employment Expenses:

Employment expenses can include a range of costs related to earning employment income. For example, if an employee is required to use their vehicle for work purposes, they may be able to deduct a portion of vehicle expenses. With the shift to remote work, employees may also be eligible for the Work from Home Deduction for home office expenses.

Work From Home Deduction:

If you are working from home, Eligible expenses may include a portion of rent, utilities, and maintenance costs. The deduction can be calculated using either the detailed method, which requires more documentation, or the simplified method, which provides a flat-rate deduction.