The Upside: 2026 tax season – Simplified

[00:00:00.000]

Subtitles are AI-Generated.

 

[00:00:06.106]

Welcome to The Upside. I'm Jordan Chevalier.

 

[00:00:08.942]

With tax season now in full swing Canadians may be wondering how best

 

[00:00:12.879]

to approach the filing process.

 

[00:00:15.315]

Joining me today to share her top tax tips and which common mistakes you

 

[00:00:19.285]

can avoid is Fidelity Director of Tax and Retirement Research,

 

[00:00:23.323]

Michelle Munro. Michelle, it's great to have you.

 

[00:00:25.458]

Great to be here, Jordan. Thanks for having me.

 

[00:00:27.927]

Let's start with the big burning question, when are personal taxes due this

 

[00:00:31.898]

year?

 

[00:00:31.931]

Okay, quick hit.

 

[00:00:34.167]

Thursday, April 30th, taxes are due.

 

[00:00:37.170]

Thursday, so you're going to get it done before the weekend.

 

[00:00:40.774]

Now, if you are self-employed, or married to a self- employed individual,

 

[00:00:45.011]

have a self-unemployed spouse, you have until June 15th to get those

 

[00:00:49.115]

taxes done but you still have to pay your taxes if you have any owing

 

[00:00:53.386]

by April 30.

 

[00:00:55.755]

All that is you really want to have it pretty much done by the end of April.

 

[00:00:59.759]

End of day on April 30th, that's a good deadline to circle on the calendar.

 

[00:01:03.063]

Gotta get 'em done. Or sooner. You don't want to leave it to the last minute

 

[00:01:07.033]

because it is stressful for some people.

 

[00:01:09.402]

That's a good note. I have a question here, people generally think of taxes and

 

[00:01:13.506]

they say, I got a big tax return, look at all this money I got.

 

[00:01:17.110]

Why should people be reframing that, is there another way to think about it?

 

[00:01:20.346]

You're thinking, yay, I got a tax refund, yeah.

 

[00:01:24.451]

But you actually, I don't want to damper anyone's excitement,

 

[00:01:29.456]

you actually gave an interest-free loan to the government.

 

[00:01:35.361]

Maybe you may not want to do that.

 

[00:01:38.832]

On the flip side, if you owe taxes, well, that's

 

[00:01:43.036]

you received an interest-free loan from the government.

 

[00:01:45.738]

There are different ways of looking at it.

 

[00:01:49.409]

Now, what usually causes a big refund?

 

[00:01:51.744]

If someone says, well, I get a big refund every year, and Michelle is telling

 

[00:01:55.048]

me that big refund might not necessarily be the best, how do we

 

[00:01:59.052]

get that refund down closer to zero.

 

[00:02:02.055]

Most Canadians are employees, they have T4

 

[00:02:06.192]

income, withholdings at source, going to the government to cover

 

[00:02:10.163]

off their estimated taxes.

 

[00:02:12.832]

How they would get their taxes below that, typically is because they

 

[00:02:16.903]

have some sort of deduction or tax credit.

 

[00:02:20.073]

Some of the common deductions are Registered Retirement Savings Plan

 

[00:02:24.310]

contribution, getting a deduction for that.

 

[00:02:26.846]

Maybe a First Home Savings Account, getting a deduction for that,

 

[00:02:31.784]

What else do we have, RRSP, maybe

 

[00:02:35.855]

we have over withholding by our employer.

 

[00:02:39.425]

We might have childcare cost deductions for

 

[00:02:44.130]

credits, maybe medical expense credit, student

 

[00:02:48.234]

tuition credits.

 

[00:02:50.036]

What else, donation credits as well.

 

[00:02:53.173]

There's quite a long list.

 

[00:02:54.607]

So there are things that people can do to look at it if they always get a big

 

[00:02:57.710]

credit to kind of move through and get that.

 

[00:02:59.812]

I would actually suggest going through the tax return line by line and

 

[00:03:03.550]

thinking, hey, does that apply to me?

 

[00:03:06.452]

I think most software is pretty good now asking these questions, did

 

[00:03:10.757]

you make any donation contributions?

 

[00:03:15.061]

That covers if someone gets a very big refund.

 

[00:03:17.497]

What if someone owes? The other side of the coin.

 

[00:03:19.866]

If somebody owes to the government, maybe they don't have the cash right away,

 

[00:03:23.136]

they weren't expecting to owe, what should they do?

 

[00:03:25.738]

It can be a bit of a panic but what should they do?

 

[00:03:27.240]

It is. That's why I always want to encourage people to

 

[00:03:31.344]

at least start their taxes sooner rather than later so you

 

[00:03:35.515]

have that peace of mind. Well, you're getting a refund, now you're going to

 

[00:03:39.118]

speed it up and get your tax return in as quickly as possible.

 

[00:03:42.655]

But if you owe money, well, file by the deadline

 

[00:03:47.260]

because if you are late filing and owe money

 

[00:03:51.397]

there's interest and penalties for late filing.

 

[00:03:54.167]

The second part of that through our hypothetical scenario,

 

[00:03:58.137]

well, we're filing and we owe money but we don't have

 

[00:04:02.108]

that cash. Well, should we turtle and like go, ah?

 

[00:04:05.511]

No. File on time because

 

[00:04:09.482]

then you're not late and then call the CRA and say, well, this is

 

[00:04:13.453]

how I plan to attack it.

 

[00:04:16.422]

They have collections agents who will help you come up with a plan.

 

[00:04:19.993]

That's interesting because some people, you know, maybe myself included, can

 

[00:04:22.862]

think of the CRA as a little bit hard to reach and maybe there's there's no

 

[00:04:26.065]

point in calling. But you're saying there are people there that can help you.

 

[00:04:29.168]

There are sort of a payment plan process that you can go through over at the

 

[00:04:32.138]

CRA.

Yeah, and just explain the situation and how you want to rectify it.

 

[00:04:35.508]

Okay, that's very helpful.

 

[00:04:37.277]

How can people also reduce future taxes?

 

[00:04:40.079]

Let's say that this tax year has come and gone, people are looking ahead to

 

[00:04:43.383]

next year, what are some of the reduction strategies people can

 

[00:04:47.620]

employ?

Where we see it most common is that the employee situation,

 

[00:04:52.325]

there's withholding, meanwhile, I'm making an RRSP contribution.

 

[00:04:57.263]

It kind of feels good. At the end of the year I file my tax return, I

 

[00:05:01.200]

get a big tax refund because of that RRSP contribution but

 

[00:05:05.204]

it might have been better if I could reduce the withholding from my

 

[00:05:09.409]

employer so then I would have more money in my

 

[00:05:13.446]

pocket all year round. I could invest that.

 

[00:05:15.915]

I could increase my lifestyle, what have you.

 

[00:05:18.618]

To get that reduced withholding at source,

 

[00:05:22.588]

employer source, we need to file a form.

 

[00:05:25.091]

It's called a T21, sorry T1213.

 

[00:05:30.330]

I had to peek. You

 

[00:05:34.667]

complete that and you submit that to your employer and that gives

 

[00:05:38.638]

them the certification to reduce withholding.

 

[00:05:42.275]

That's very, very helpful. The three sort of major personal tax vehicles that

 

[00:05:45.845]

people can put money into, you think of the FHSA, the TFSA

 

[00:05:49.982]

and the RRSP, those are the three big ones that people can open.

 

[00:05:53.886]

What are the differences there and when might someone want to prioritize one

 

[00:05:57.957]

over the other. It's a big question.

 

[00:05:58.958]

The reason I'm laughing is because we throw around all these acronyms

 

[00:06:02.895]

in the industry so let's just simplify it a little bit.

 

[00:06:06.332]

Let's start with Registered Retirement Savings Plan,

 

[00:06:10.903]

RRSP, intended for retirement.

 

[00:06:15.108]

It's also the one that's been around the longest.

 

[00:06:17.443]

Make a contribution. You get a deduction for that contribution, so we

 

[00:06:21.948]

say it's made with pre-tax dollars.

 

[00:06:25.485]

Now, inside our RRSP we can invest, inside our RRSP, mutual

 

[00:06:29.722]

funds, exchange traded funds, stocks, bonds, what have

 

[00:06:33.793]

you. The earnings on those investments inside the

 

[00:06:37.997]

RRSP are tax-deferred.

 

[00:06:41.100]

Typically, when you're making a withdrawal in retirement,

 

[00:06:45.371]

we make that withdrawal, then it's taxable.

 

[00:06:50.243]

Tax deduction, deferred earnings, taxable

 

[00:06:54.447]

withdrawal, RRSP.

 

[00:06:57.283]

Tax Free Savings Account, second most popular one, it

 

[00:07:01.387]

came in about 2009 so quite a while ago

 

[00:07:05.324]

but still relatively new.

 

[00:07:08.761]

We make a contribution to our TFSA, we don't get

 

[00:07:13.166]

a tax deduction for that.

 

[00:07:16.302]

But then inside our TFSA we can invest in all

 

[00:07:20.473]

the same investments.

 

[00:07:22.475]

All the earnings inside the TFSA are tax-free.

 

[00:07:26.412]

We can make a withdrawal from our TFSA, it's tax-free as well.

 

[00:07:30.983]

It's also more flexible.

 

[00:07:32.752]

Let's say I need to take $1,000 out of my TFSA in 2026,

 

[00:07:37.356]

I could re-contribute that in 2027, in a later year.

 

[00:07:42.128]

There's a lot more flexibility with that.

 

[00:07:44.897]

You need to be 18 to be able to open an account and there's limits.

 

[00:07:48.601]

The last one is the First Home Savings Account, FHSA.

 

[00:07:54.841]

The FHSA is intended for first-time home buyers.

 

[00:07:58.544]

You have to meet certain criteria.

 

[00:08:01.514]

Make a contribution to that, get a deduction for the

 

[00:08:05.618]

contribution. Now, inside the account, same thing,

 

[00:08:09.689]

mutual funds, ETFs, stocks and bonds.

 

[00:08:11.791]

They will grow on a tax-free basis.

 

[00:08:15.661]

When it comes time to buy a home, that first home, again,

 

[00:08:19.732]

we have to meet certain criteria, that withdrawal is tax-free.

 

[00:08:24.437]

The first Home Savings Account really combines the best

 

[00:08:28.574]

of the RRSP, we're getting a deduction for our contribution,

 

[00:08:32.645]

and we get a tax-free withdrawal for

 

[00:08:36.949]

a qualified withdrawal from our First Home-Savings Account, the best

 

[00:08:41.087]

of both. That was a long explanation.

 

[00:08:44.590]

Your real question is, well, which is best?

 

[00:08:47.560]

I'm here, I've got a couple dollars to throw in.

 

[00:08:50.530]

What do I do?

 

[00:08:52.665]

Well, it depends.

 

[00:08:54.734]

If you already own a home you're probably not going to qualify for

 

[00:08:58.738]

that First Home Savings Account so now you're down to a TFSA or an

 

[00:09:02.708]

RRSP. Then I'm going to want to know are you

 

[00:09:06.812]

saving for the future, for your retirement, or is this

 

[00:09:10.850]

something like I'm saving for a rainy day, maybe vacation,

 

[00:09:15.054]

two years down the road, something like that, so you want the TFSA, the

 

[00:09:19.158]

flexibility that comes with that.

 

[00:09:21.527]

I think most young investors who have not purchased a home

 

[00:09:25.598]

yet, who are just getting started, would benefit from the First Home

 

[00:09:29.535]

Savings Account because they're going to get that deduction,

 

[00:09:34.040]

grow on a tax-deferred basis, make a withdrawal tax-free.

 

[00:09:39.779]

I should also point out, talking about the deduction sometimes for young

 

[00:09:43.082]

investors, maybe they're in a lower tax bracket today.

 

[00:09:47.286]

They can make the contribution, let's say in 2026, but they don't have

 

[00:09:51.324]

to make that deduction in 2026.

 

[00:09:53.426]

They could claim that deduction in a later year.

 

[00:09:55.728]

When we would do this is when we're in a higher tax bracket, so

 

[00:10:00.232]

get a better tax benefit for that tax deduction.

 

[00:10:03.869]

Michelle, is there any advantage if someone is saying, listen, I'm not thinking

 

[00:10:06.872]

about buying a home this year or maybe in the next year but is there an

 

[00:10:10.309]

advantage to opening up an FHSA or a TFSA and just letting it

 

[00:10:14.413]

sit maybe with some minor sort of investments here and there?

 

[00:10:17.583]

Great question. There's a nuance.

 

[00:10:20.586]

Taxes are sometimes complicated.

 

[00:10:25.391]

Ask questions. Listen to a podcast or a videocast like this.

 

[00:10:31.297]

Let's start with the Tax Free Savings Account.

 

[00:10:34.033]

As soon as you turn 18, so you turn 18 in

 

[00:10:37.970]

2026, $7,000 of contribution room.

 

[00:10:42.408]

If you don't open it, if you don't contribute to that, well, it will

 

[00:10:46.812]

continue to grow. Let's say next year you can get caught

 

[00:10:51.017]

up, $7,000 for this year plus whatever the new contribution

 

[00:10:55.354]

is for 2027.

 

[00:10:58.457]

There's flexibility there.

 

[00:11:00.192]

First Home Savings Account, I'm sorry, don't shoot the messenger.

 

[00:11:04.397]

It's a little more complicated.

 

[00:11:06.198]

Here it is, you have to actually open the account and

 

[00:11:10.236]

if you meet all the criteria, basically a first time homebuyer, a Canadian

 

[00:11:14.774]

resident, et cetera, over age 18, as soon

 

[00:11:18.711]

as you open the account, you have to open it at the financial institution,

 

[00:11:23.616]

then you have $8,000 contribution room

 

[00:11:28.988]

per year. In 2026 you open it, you don't have the cash

 

[00:11:33.793]

to make the contribution but you do in 2027, you can get caught

 

[00:11:37.863]

up in 2027.

 

[00:11:40.866]

FHSA, you have to open the account even if you can't

 

[00:11:45.337]

contribute to it.

 

[00:11:46.205]

Very helpful nuance. There's some flexibility in sort of both areas there

 

[00:11:50.476]

between the two tax vehicles.

 

[00:11:52.878]

What if you are a student, let's say you're a student you're filing for the

 

[00:11:56.182]

first time and you look at your annual income and it's only a

 

[00:12:00.419]

couple thousand. Let's say you made maybe 7,000 or 8,000 on the year and you

 

[00:12:04.023]

think, well, that's not worth it to file taxes.

 

[00:12:05.858]

What should you do?

 

[00:12:08.127]

You know you're below the basic personal credit, you know

 

[00:12:12.298]

you're not going to owe taxes, plus you have tuition credits that you might be

 

[00:12:15.968]

able to claim, maybe there's student loan interest you can claim against that,

 

[00:12:19.405]

the list goes on.

 

[00:12:22.274]

The question you're asking is, well, I know I'm not going to owe any taxes,

 

[00:12:25.311]

should I file my tax return?

 

[00:12:27.980]

The short answer is yes because RRSP

 

[00:12:32.118]

contribution room is based on earned income.

 

[00:12:35.955]

In our example we had $7,000, $8,000 of employment income, even

 

[00:12:41.227]

though you may not be contributing to your RRSP you're going

 

[00:12:45.331]

to be earning that contribution room which later on, future

 

[00:12:49.401]

you is going to thank you for.

 

[00:12:51.904]

As well, there's credits that are available.

 

[00:12:55.074]

The biggest one I'm thinking of is the GST credit but there's other ones as

 

[00:12:58.978]

well. I know when you're a student especially it's nice to be getting

 

[00:13:03.182]

that quarterly cheque.

 

[00:13:05.184]

Makes going out to the pub a little bit more fun.

 

[00:13:08.788]

It sounds like the sort of overarching theme here is to get what you can do

 

[00:13:12.758]

and do it early and sort of do it often and just get these kind of mechanisms

 

[00:13:16.295]

running. Even if you're not taking full advantage it's still important to

 

[00:13:20.266]

open them up and have them there for the future.

 

[00:13:23.536]

Opening up our First Home Savings Account, if you have some

 

[00:13:27.506]

funds, thinking about First Home Savings Account, TFSA, as well

 

[00:13:31.577]

you want to be organized. Start those tax returns, we can get

 

[00:13:35.648]

into the system, start accruing that RRSP contribution room,

 

[00:13:39.752]

as well we might qualify for some credits as well.

 

[00:13:42.154]

That's amazing. Michelle, before we wrap things up let's go through one final

 

[00:13:45.991]

checklist here, things that people can be looking at.

 

[00:13:48.160]

They're getting ready to do their tax return, they've watched the webcast, they

 

[00:13:51.797]

feel informed, what do you want to leave the audience with?

 

[00:13:54.333]

First of all, let's accumulate all those tax slips.

 

[00:13:57.536]

Do you have a T4 slip, co you have any investment slips, a T3, a T5

 

[00:14:02.107]

slip, investment income, so looking at all the income.

 

[00:14:05.377]

Then we want to look for our deductions and credits.

 

[00:14:08.914]

The common deductions are RRSP, First Home Savings Account,

 

[00:14:13.786]

maybe childcare deductions.

 

[00:14:15.888]

Maybe we have credits, medical, donations, tuition credits

 

[00:14:19.825]

for students, accumulate it all.

 

[00:14:23.262]

Go through the tax returns line by line.

 

[00:14:25.998]

It will take 15 minutes maybe.

 

[00:14:29.335]

Also you have a sense of, well, have I really captured everything?

 

[00:14:33.239]

Compare it to last year's return as well.

 

[00:14:35.975]

As well, most software asks lots of probing good questions to

 

[00:14:40.212]

help you complete it.

 

[00:14:43.449]

Now sort of March, April timeframe, this isn't really

 

[00:14:47.720]

the tax planning time.

 

[00:14:49.622]

This is where we just want to complete our return, get it done, get it into

 

[00:14:53.726]

the system, get our refunds or make a payment where

 

[00:14:57.763]

we're able if we have to.

 

[00:15:00.566]

Tax planning, thinking about these things, we've touched on a

 

[00:15:05.037]

fair bit, this is really a year-round activity.

 

[00:15:09.575]

So you have to have me back, Jordan.

 

[00:15:10.709]

That's right. We'll have you back, we can go into tax planning so that everyone

 

[00:15:14.079]

is well prepared to go into filing season in the

 

[00:15:18.217]

March and April period. Michelle, it was very nice to hear from you and thanks

 

[00:15:21.153]

again for coming on the show.

 

[00:15:22.154]

Great to be here. Thanks for having me.

 

[00:15:24.356]

Just a reminder that The Upside webcasts do air daily so keep an eye on your

 

[00:15:28.427]

inbox so you don't miss your invitation to the next show.

 

[00:15:31.397]

If you haven't done so already, sign up for The Upside newsletter, again, so

 

[00:15:35.401]

you don't miss out. Video podcasts are released frequently, both The Upside

 

[00:15:39.605]

and Fidelity Connects. Just search Fidelity Canada on YouTube, Spotify and

 

[00:15:44.043]

Apple podcasts. Thanks again for watching.

 

[00:15:46.245]

I hope you'll join us next time on the Upside.

 

[00:15:48.347]

I'm Jordan Chevalier.

 

[00:16:06.465]

Thanks for listening to, or watching, Fidelity Canada's The Upside podcast.

 

[00:16:10.869]

Subscribe on your podcast platform of choice so you don't miss an episode.

 

[00:16:14.807]

If you like what you're hearing please leave a review or a five-star rating.

 

[00:16:18.510]

Fidelity mutual funds and ETFs are available by working with a financial

 

[00:16:21.780]

advisor or through an online brokerage account.

 

[00:16:24.683]

Visit fidelity.ca/howtobuy for more information.

 

[00:16:28.287]

While on fidelity.ca you can also find more information on future live

 

[00:16:31.724]

webcasts. Don't forget to follow Fidelity Canada on LinkedIn, YouTube,

 

[00:16:35.661]

Instagram, or X. We'll wrap things up today with a quick disclaimer.

 

[00:16:39.898]

The views and opinions expressed on this podcast are those of the participants

 

[00:16:43.202]

and do not necessarily reflect those of Fidelity Investments Canada ULC or

 

[00:16:47.539]

its affiliates. This podcast is for informational purposes only and should

 

[00:16:51.577]

not be construed as investment, tax or legal advice.

 

[00:16:54.680]

It is not an offer to sell or buy or an endorsement, recommendation or

 

[00:16:58.117]

sponsorship of any entity or security cited.

 

[00:17:01.120]

Read a fund's prospectus before investing.

 

[00:17:02.821]

Funds are not guaranteed.

 

[00:17:04.690]

Their values change frequently and past performance may not be repeated.

 

[00:17:08.260]

Fees, expenses and commissions are all associated with fund investments.

 

[00:17:12.464]

Thanks for tuning in. We'll see you next time.