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Before making a major financial decision you
should consult a qualified professional.
The annual limit for contributing to a TFSA is indexed
for inflation. However, the indexed amount is rounded to the nearest
$500, and will remain at $5,000 for 2012. At the current rate of
inflation, the limit will increase to $5,500 in 2013.
The prescribed rates used to calculate the operating
cost benefit related to the personal use by employees of employer-owned
vehicles is increasing by 2 cents to $0.26 per km for 2012. The rate
for taxpayers employed principally in selling or leasing automobiles will
also increase by 2 cents, to $0.23 per km.
The limits on the deduction of tax-free allowances paid
by employers to their employees to reimburse the costs of using their
personal vehicle for business purposes have each been increased by 1 cent
for 2012. The limit for the first 5,000 kms driven is $0.53 per km, and
additional kms have a limit of $0.47 per km. The limits for Yukon,
Northwest Territories and Nunavut are $0.57 for the first 5,000 kms, and
$0.51 for each additional km.
The expense limits for passenger vehicles acquired or
leased in 2012 remain the same as the 2011 limits. The ceiling on
the capital cost remains at $30,000. The leasing cost deduction
limit remains at $800 per month, and the limit on the allowable interest
deduction remains at $300 per month.
Where the death of an annuitant of an RRSP, RRIF or RPP occurred after 2007 and before 2011, special
transitional rules allow a contribution to be made to the RDSP of a financially dependent infirm child or grandchild. In order to be eligible, the contribution must be made to the RDSP
before 2012.
We have published the table of sales tax rates (GST,
HST and provincial retail sales taxes) for 2012. Quebec's QST rate
increases from 8.5% to 9.5% on January 1, 2012.
December 2011 wages, if not paid until January
2012, will be reported on a T4 for 2012, not 2011. There are some
cases in which it is not necessary to prepare a T4 for an employee.
Learn about filing T4 slips online - this can be done for up to 50 T4s
using Canada Revenue Agency's Web Forms, without any software required.
The tax credit for experienced workers is new for 2012,
and the available credit will increase each year until it is fully
implemented in 2016. The calculation of this credit is included in
the 2011/2012 Quebec Tax Calculator.
This is the most important issue facing Canada and
Canadians right now. The most important thing you can do is to
reduce your debt as quickly as possible, especially debt on which the
interest is not tax-deductible. You can also lobby your government
representatives to eliminate the deficit, reduce debt, and to be better
managers of your money. You can also sign petitions on the Canadian
Taxpayers Federation website.
Our article on alternative minimum tax has been updated
to show the maximum amounts of eligible and non-eligible Canadian
dividends that can be earned in 2012 before any taxes are payable, when
there is no income other than the dividends.
The 2011/2012 Income Tax Calculator for all provinces
and territories except Quebec is now available for those of you who are
ready to start their tax planning for 2012.
This non-refundable tax credit
is available to individuals who are,
at the end of the taxation year, aged 65 or older. However, it is reduced
when income exceeds a threshold amount. Each province except Quebec has an age amount tax credit
which is calculated in the same manner. The Quebec tax credit
calculation is similar, but combines the credits for taxpayer and spouse in
the same calculation, and uses family income in the calculation.
The Federal government is inviting input from all
Canadians prior to the preparation of the 2012 budget. If you are
concerned about the deficit, the debt (which is at an all-time high), or
have other concerns, this is your opportunity to provide input.
We have revised our table of the Canadian Federal Debt,
to report the total government gross debt instead of the accumulated
deficit. The total government gross debt (including all levels of
government) as a % of GDP is used as an
indicator of the financial stability of a country, so we feel it is more
relevant that the Federal Debt, which is a much lower amount.
We have compiled a table which shows the total
government and personal gross debt for 11 different countries, including
debt as a % of GDP, sorted by
the total debt per person.
The end of the year is coming up, and employers must
soon calculate auto taxable benefit amounts for 2011 for their employees
who have company-owned automobiles available to them. These amounts
are included in employment income reported on T4s. Canada Revenue
Agency provides an online calculator for employers to do these
calculations.
There is no deadline for contributions to a TFSA, as
the unused contribution room is carried forward into the next year.
However, a withdrawal in any year increases the TFSA room in
the following calendar year. Thus, if you are thinking of making a
withdrawal soon, make sure it is done by December 31st, in
order to have your TFSA room increased by the withdrawal amount on January
1, 2012.
The TD1 forms for 2012 are now available from Canada
Revenue Agency. If there have been changes which will affect your
tax exemptions (see our article), you should ensure that you complete
these forms so that your employer (or other payer) will deduct the
appropriate amount of income tax from your employment income or pension
income. New employees should always complete these forms. For
those working only part time, if your total income for the year will not
exceed your exemptions, you should tick the appropriate box on the back of
the form, so that your employer will not deduct any income tax from your
pay cheques.
Ontario has proposed a new refundable tax credit which,
if passed, will be available to senior homeowners and tenants, and
individuals who share a home with a senior relative, for qualifying
expenditures made on or after October 1, 2011. The tax credit will
be claimed on the personal tax return, with 2011 expenditures being
included on the 2012 tax return.
Starting January 1, 2012, employees who are already
collecting their CPP retirement pension will have to start contributing to
the CPP again, if they are earning pensionable earnings. Those who
have reached 65 years of age can elect to stop making further
contributions, by completing an election form to be provided to their
employer and Canada Revenue Agency.
On December 7, 2011, CRA is presenting a free webinar
on the new Canada Pension Plan rules which come into effect on January 1,
2012. Those interested can register online.
The last trading date in 2011 for Canadian publicly
traded stocks is Friday December 23rd, because the Canadian stock markets
are closed on December 26th and 27th. Canadian stocks purchased or
sold after this date will settle in 2012, so any capital gains or losses
on sale will apply to the 2012 tax year. The last trading date in
2011 for US publicly traded stocks is Tuesday December 27th.
The
2012 indexation factors have been verified to Canada Revenue Agency (CRA) and
Revenu Quebec factors. We have made $1 adjustments to some amounts
for AB, BC, NT, ON and PE, and one ON surtax bracket level was adjusted by
$9. CRA payroll deduction information is now correct for the basic personal
amount for NB, and we have made a $1 adjustment to this amount.
This calculator has been changed to allow the input of
various rates of return. It provides a simple table showing the
annual income your investments will provide at different rates of return.
The 2012 indexation factor for Quebec is 1.0266.
We estimated it at 1.0263, so there has been a slight adjustment in the
tax bracket levels and personal amount.
The maximum insurable earnings for 2012 will be
$45,900, up from $44,200 in 2011. The employee and self-employed
rate for 2012 is 1.83%, up from 1.78% in 2011, while employers will pay
2.562%. This results in a maximum annual payment for 2012 of $839.97 for
employees or self-employed, and $1,175.96 for employers. This is an
increase of 6.8% over 2011. The 2012 Quebec rate for
employees is 1.47%, and for employers is 2.06%, resulting in maximum
annual payments of $674.73 for employees and $944.62 for employers, up 8.3% from
2011.
Haven't filed your 2001 tax return yet? Taxpayers are running out of time to file requests under the taxpayer relief provisions for the 2001 tax year and any reporting period that ended in the 2001 calendar year.
However, as a result of a recent Federal Court of Appeal Case, Bozzer v
Canada, the taxpayer relief provisions (fairness provisions) can apply to
reduce interest and penalties which have accumulated in the 10 taxation
years preceding the request for leniency, even if the tax debt causing the
interest arose prior to that period. So, if a tax debt arose from
the 1999 tax year, penalties and interest that have accumulated from 2001
to 2010 could still be reduced as a result of a 2011 request for leniency.
Not only did the population of the world reach a record 7
billion people on October 31, 2011, but the Canadian Federal Debt also reached
an all-time high. Based on economic forecasts, the Federal Debt
(accumulated deficit) reached $568 billion on October 31st. The total Federal interest-bearing debt at March 31,
2011 was $801.8 billion. Financial and non-financial
assets are deducted from total debt to arrive at the accumulated deficit
total. Our new table reports the federal debt, debt to GDP ratio,
and debt per person up to 2011, and also shows the projected debt up to
2016.
Federal, provincial and territorial governments are
working to implement PRPPs as soon as possible. The objective of
PRPPs is to provide low-cost defined contribution pension plans that would
be available to both employees and the self-employed.
The rates for Money Purchase, RRSP, DPSP and Defined
Benefits limits have been announced by Canada Revenue Agency. The
RRSP contribution limit for 2013 is 18% of "earned income" for
2012, to a maximum of $23,820.
The 2012 maximum pensionable earnings for the Canada
Pension Plan is increasing from $48,300 to $50,100. The CPP
contribution rate remains the same, but the QPP rate is increasing each
year from 2012 to 2017.
Tables of marginal personal tax rates are now available
for 2012 for all provinces and territories. The indexation factors
to calculate 2012 tax brackets are not yet available from Canada Revenue
Agency (CRA) and Revenu Quebec, so we have calculated the factors.
When the factors are available late in November, these tables may need
minor adjustments.
Individuals and groups are invited to share their views
on important topics that are crucial to the success of the RDSP. The
closing date for comments is December 16, 2011.
Capital gains can be eliminated by donating capital property, such as securities, to charitable organizations which are qualified donees. This should be done by November or very early December to avoid the busy season and ensure the transactions are completed before year end.
The superficial loss rules provide a method for capital losses to be transferred to a spouse. The spouse must hold the shares for more than 30 days for this to work, so to do this for 2011 you should act fairly soon.
Are you 65 or older at the end of 2011? If you don’t already have pension income which is eligible for the federal and provincial pension income tax credits, you can generate some eligible income by transferring a portion of your RRSPs to a
RRIF, and making a withdrawal this year.
You can also use the pension splitting rules to shift up to 50% of the RRIF income to your spouse’s tax return. If your spouse is also over 65, this will generate a pension tax credit for him/her.
On September 30, 2011 Canada and Quebec signed a
Memorandum of Agreement (MOA) regarding the harmonization of the Quebec
Sales Tax (QST) with the Goods and Services Tax (GST).
Up to 100% of a taxpayer's net income
can be claimed as donations in
the year of death and the year preceding death, for purposes of calculating
the donations tax credit. When a donation, or gift, is bequeathed in the will, it is
deemed to have been made immediately
before the individual died. An individual can name a qualified donee as the beneficiary
of an RRSP, RRIF or TFSA, or of a life insurance policy. In some
circumstances, donations in
the year of death can be claimed by the surviving spouse instead of the
deceased taxpayer.
The input of British Columbians is being sought on next
year's provincial budget, by the all-party Select Standing Committee on
Finance and Government Services. The Committee will be holding
province-wide consultations in September and October based on the Ministry
of Finance's Budget 2012 Consultation Paper. The deadline for
submissions is Friday, October 14, 2011.
Do you qualify for the Disability Tax Credit? See
our article, which explains the requirements to qualify for this tax
credit. We have just added a link to very detailed information on
the Canada Revenue website, which describes qualifying impairments, in
text and video format. If you have qualified for this credit for a
number of years but have not claimed it, adjustments to your tax returns
can be filed to claim it for up to 10 years.
When non-residents of Canada receive certain types of
income from payers in Canada, withholding tax is deducted. As a
non-resident, you may be able to file an elective Canadian tax return in order
to recover some of the withholding tax.
If you receive a letter or TFSA return from Canada
Revenue Agency (CRA) asking for further information regarding an apparent
over-contribution to your TFSA in 2010, it does not necessarily mean you
will have to pay tax on the over-contribution. It is important to
respond to CRA within 60 days.
The Federal 2011 budget proposed a new non-refundable tax
credit, beginning in 2011, which would be available to individuals for registration and membership costs of up to $500 per
child, for prescribed programs of artistic, cultural, recreational or
developmental activity for their children.
On August 18, 2011, the government announced the launch of
Employment Insurance (EI) premium rate-setting consultations. A
web-based consultation process, closing on November 30, 2011, invites written
recommendations.
On August 16th the Department of Finance released draft
legislative proposals to implement measures from Budget 2011. The
measures in the legislation include the Family Caregiver Tax Credit,
Children's Arts Tax Credit, Volunteer Firefighters Tax Credit, and many other
provisions.
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Cantax recommends that users of their products do not
use Internet Explorer 9, as it is not compatible, and may cause loss of
data.
Bruce Hurst, FCGA, Chair of the Certified General Accountants
Association of British Columbia, explained in a news article "Why
I am voting in favour of the HST". One of his points was "In
my view, the consumer either pays the tax directly via a value-added tax
like the HST or indirectly through a tax embedded in the cost of the
product. Either way the consumer pays the tax."
Medical expenses can be claimed for any continuous 12
month period ending in the tax year. However, on the Quebec tax
return, the premiums payable for the prescription drug insurance plan can
be claimed on the current year tax return, even though the premiums are
not payable until the following year.
The premium rates for the Quebec prescription drug
insurance plan have been reduced by 6.1% effective July 1, 2011, from a
maximum of $600 per year to a maximum of $563 per year.
Now
that summer's here, make sure you keep the receipts for day camps and
other summer activities for your children that could qualify as child care
expenses.
The new 2011 tax comparison tables show the total income
taxes payable or refundable at various levels of employment income for
each province and territory, for a single person, and for a single-income
family with 2 children.
The 2011 Federal Budget was reintroduced on June 6,
2011 with few changes from the March version. Bill C-3, which
implements many of the budget provisions, received Royal Assent in
Parliament on June 26th.
For most capital additions in the year, capital cost
allowance can only be claimed on one-half of your net additions in the year.
However, some additions are not subject to the half-year rule, including
most Class 12 additions.
In December 2010 a US bill was passed which provides
that for the years 2010 to 2012, no estate tax is payable when the total worldwide estate is $5
million or less. The top tax rate on estates was reduced from 55% to
35%. However, deceased Canadians with US-situated assets, including
shares in US publicly traded corporations, may have to file a US estate
tax return even if no estate tax is payable.
Although today's announcement regarding HST rate
reductions (1% on July 1, 2012 and 1% on July 1, 2014) and one-time
payments to families with children will probably convince HST haters to
vote NO to reinstating the PST, we still wanted to present our opinions on
why the HST is a good thing for BC.
We have finally taken the step of creating a Facebook
page. New content will be posted there as well as here on the What's
New page of our site. When you're on Facebook, search for TaxTips.ca
to find our page.
The 30% NA!TC tax credit was announced in the Manitoba
2011 Budget. It is available to corporations in Manitoba
that participate with an eligible charity to establish a social
enterprise.
BC voters will be making a choice, probably next month,
as to whether to go back to the old PST/GST system. Please visit the
HST in BC website to
learn the facts so that you can make an informed decision. There are
more telephone town halls coming up - please check the schedule on the HST
in BC website, so that you can be available to participate in your
region. We believe that keeping the HST is the best choice for
British Columbians, and encourage you to say NO to extinguishing the HST
and reinstating the PST/GST.
It's very important to have a will and keep it up to
date. We've added some new information to our Wills and Estates
articles, including information on when an estate must register as an
employer with Canada Revenue Agency, and how multiple wills (probate and
non-probate) may be able to reduce probate fees.
The NL Budget announced a new Residential Energy Rebate
of 8% equal to the provincial portion of the HST, effective October 1,
2011, as well as two new non-refundable tax credits - one for child care
expenses currently deductible from income, and one for Volunteer
Firefighters.
Manitoba's budget announced increases to the basic
personal amount, spousal amount, and eligible dependent amount, beginning
in 2011. A new Children's Arts and Cultural Activities Tax Credit
was introduced, and increases were announced for the Primary Caregiver Tax
Credit and the Education Property Tax Credit. Changes were also
announced for several corporate tax credits, and a new corporate tax
credit, the 30% Neighbourhoods Alive! Tax Credit, was introduced.
This is a refundable tax credit of up to $50, or up to
$100 for disabled children, new for the 2010 tax year. Eligible
activities include the activities eligible for the Federal Child Fitness
Credit, as well as instructional activities such as music, gardening,
chess, and many others.
The basic personal amount and several other personal
tax credits have been increased for the 2011 tax year. The corporate
tax rate for small businesses will be reduced to 4% effective January 1,
2012.
For most taxpayers, the gain or loss on the sale of
securities will be considered capital gains or losses. For some
taxpayers, such as day traders, the gains and losses will be considered
income gains or losses (100% taxable). However, an
election can be made so that the gains or losses on all Canadian
securities are considered capital gains and losses.
This article has been updated to include references for Quebec taxation.
All tables have been updated with current rates,
including comparisons of taxes payable on Canadian dividends versus
other income. We have also added a tax comparison for seniors at a
particular income level, comparing the taxes payable on Canadian eligible
dividends versus other income.
Ontario plans to combine 3 refundable tax credits into
the Ontario Trillium Benefit (OTB), which would make monthly payments to
eligible recipients beginning in July 2012. There were no changes
announced to tax brackets or rates. Previously planned corporate tax
reductions will reduce the general corporate tax rate to 10% in 2013.
Saskatchewan's budget increases basic tax credit
amounts, reduces the corporate income tax rate for small business, and
reduces the dividend tax credit rate for non-eligible dividends from small
businesses.
The 14.3% rate on the highest tax bracket in 2010 is to
be retained for 2011 instead of the previously planned reduction to
12.7%. In 2012, the tax rates for all tax brackets will remain at
their 2011 levels, delaying the previously planned tax rate
reductions. The planned reduction of the general corporate tax rate
to 8% will not happen, but the small business corporate income tax rate is
being reduced to 4.5% effective January 1, 2012.
There are quite a few personal income tax measures in
the 2011 budget, including a new family caregiver tax credit, new
volunteer firefighter tax credit, removal of the cap on medical expenses
for other eligible dependents, new children's arts tax credit, expansion
of the kiddie tax to capital gains, and changes to the capital gains
exemption on donation of flow-through shares. There is also a
proposal to enhance the Guaranteed Income Supplement (GIS), and a proposal
to eliminate portions of student debt to attract health care workers to
rural communities.
The calculations for the tradesperson's tools deduction
and the apprentice mechanic's tools deduction are far from simple, so
we've published a calculator for them. It also calculates the
adjusted cost of the tools purchased in the year, which will be needed if
the tools are sold at some point in the future.
We have revamped our information on deductible
employment expenses, and added articles on the employed tradesperson's
tools deduction and the apprentice mechanic's tools deduction.
Quebec is making changes to the Quebec Pension Plan
to encourage later retirement, and a private voluntary retirement savings
plan is being introduced, which will be available to Quebec residents,
including self-employed workers. A tax credit will be introduced in
2012 to reduce Quebec income tax on work income of workers aged 65 or
older. See the budget page for more information.
If you are a Canadian resident and have had 30% tax
withheld from lottery or gambling winnings in the US, it may be possible in
some circumstances to get a refund of part or all of this tax.
Updated rates have been published for the 2011 Money
Purchase limit, DPSP limit, Defined Benefit limit, and 2012 RRSP
limit. The 2012 RRSP limit will be $22,970, up from the 2011 limit
of $22,450.
This new calculator will show you how much Canada Pension Plan (CPP) retirement pension you will
collect, depending on the age at which you decide to start collecting.
You can compare results using 3 different starting dates.
Our article on the revised rules for the CPP has been updated to add
more detail regarding the factors that are used to increase or decrease
the retirement benefit, depending on the age at which the pension is
started. Information has also been added regarding the
post-retirement benefit (PRB) and how it is calculated.
Regulations are being developed that will allow the
Province of Nova Scotia to implement a credit for seniors who are GIS recipients
and
Nova Scotia residents, so that any provincial taxes payable will be
refunded to them by the province.
Alberta presented its budget on February 24th. No
tax changes were announced. Revenue from personal and corporate
income tax is forecast to increase by $1.4 billion to $12.3 billion in
2011-12, as a result of an improved economy.
The Yukon Budget was presented on February 3rd.
It was announced that their Income Tax Act was amended last fall to increase
the small business deduction limit from $400,000 to $500,000 for 2011.
The Yukon Income Tax Act was amended late in 2010 to
revise the calculation of the dividend tax credit for both eligible and
non-eligible dividends, beginning in 2011.
The BC Budget did not announce any personal or
corporate tax changes, but did announce a 6% increase to the Medical
Services Plan premiums, which will take effect January 1, 2012.
We have updated the RRSP Sheltering Excel worksheet for
2011. The Input sheet has been revised so that users can change
formatting if desired, including changing column widths. Although we
have been publishing this worksheet since 2007, we have had very little
feedback on it. If you use it, please let us know if you had any
problems with it, or if you have any comments or suggestions.
We have published the table of WITB factors for
2011. The WITB is a federal refundable tax
credit which is available for low-income individuals or
families with working income over $3,000 for most provinces and
territories. The Quebec 2010 WITB table has some factors revised by
small amounts. The previous factors were estimated based on the QC
indexation factor for 2010. The 2010 factors for other provinces and
territories have been adjusted for rounding differences from the previous
estimates.
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