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Before making a major financial decision you
should consult a qualified professional.
The last trading date for 2014 for Canadian publicly traded stocks is December 24th, and for US publicly traded stocks is December 26th. The Canadian stock exchange closes early on the 24th, so don't leave things to the last minute!
A recent CRA document indicates that a plan for a sole
shareholder-sole employee would not likely qualify as a PHSP.
However, there are circumstances under which it would qualify.
Economic Action Plan 2014 Act, No. 2 received Royal
Assent December 16th. It includes the Small Business Job Credit,
changes for farming and fishing businesses, doubling of the Children's
Fitness Tax Credit, and many more provisions.
The TD1 forms for 2015 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.
Make sure you're aware of how long you must retain source
documents for your individual tax return, and source documents and other
information for your business.
A donation must be received by the charity on or before
December 31, 2014 in order for them to issue a charitable donation tax
receipt for the 2014 taxation year.
If you're planning to buy an asset in the near future,
consider buying it
before year end, so you get the full CCA write-off sooner, for assets that are
subject to the half-year rule.
The gross revenue requirement does not apply to qualified
farm property used by a partnership or family farm corporation. Otteson is
an interesting and educational Tax Court case on this topic.
The deadline for taxpayer relief requests related to 2004 is
December 31, 2014. This applies to income tax and GST/HST issues such as waiver
of penalties and interest, acceptance of late-filed, amended or revoked income
tax elections, and more.
Eligible couples with children under age 18 can
"notionally" split income, resulting in a tax reduction of up to
$2,000. The FTC is calculated in our detailed Canadian
Tax
and RRSP Savings Calculators. Find out if you're eligible.
The last trading date for 2014 for Canadian publicly traded stocks is December 24th, and for US publicly traded stocks is December 26th. The Canadian stock exchange closes early on the 24th, so don't leave things to the last minute!
The Investment Income Tax and Quebec Investment Income
Tax Calculators now include 2015. These are simple to use calculators that
show how Canadian dividends are much
more tax efficient than interest or other income, even if the dividends
increase the OAS clawback.
The detailed 2014 and 2015 Quebec Tax Calculator is now
available. QC indexation factor, thresholds and tax credits are
based on our calculations and have not yet been confirmed, so there may be
slight rounding differences once these factors are confirmed. The new
Family Tax Cut (FTC) is included in the calculator.
Using the age of a younger spouse can be an advantage in calculating RRIF minimum
withdrawals, but the election to do so must be made before receiving any
payments from the fund.
The maximum pensionable earnings amount has increased by 2.1%
for 2015, to $53,600 from $52,500 for 2014. The rate remains the same at 4.95%.
The maximum employee and employer contributions will be $2,479.95 each.
The maximum pensionable earnings amount has increased by 2.1%
for 2015, to $53,600 from $52,500 for 2014. The rate increases to 5.25% from
5.175%.The maximum employee and employer contributions will be $2,630.25 each.
The federal government announced a new Family Tax Cut
for 2014, for couples with children under 18. This will be a
non-refundable tax credit to a maximum of $2,000. The UCCB will be
increased for 2015 and will also be provided, in a lower amount, for
children ages 6 to 17. The Child Tax Credit will be eliminated for
2015, and the Child Care Expense Deduction limit will be increased.
Investing is a life-long pursuit that will help you
achieve financial independence. We
think that the best way to start investing is through buying ETFs.
An RDSP is a savings plan to help ensure future
financial security for a person eligible for the disability tax
credit. It can be set up for an adult, or for a minor child or
grandchild.
Compare taxes and marginal tax rates for both types of
Canadian dividends, capital gains, and other income, for all provinces and
territories, for 2010 to 2015.
The maximum insurable earnings for 2015 is $49,500, up
from $48,600 in 2014. The rate is frozen at 2013 levels, so the employee
maximum for 2015 is $930.60, up from $913.68. The Quebec maximum for
2015 is $762.30, up from $743.58 in 2014.
The Children's Fitness Tax Credit is being increased from
$500 to $1,000 for the 2014 and subsequent taxation years, and will be made
refundable for the 2015 and subsequent taxation years.
Capital purchase records must be kept for 6 years after tax
year in which the capital asset is disposed of. Some records must be kept until
6 years after the tax year in which the business ceases.
Now that children are back in school, even in BC, these articles which relate to students regarding income, deductions, tax credits and savings plans are worthy of a revisit!
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
2014 you should act fairly soon.
The OAS pension is clawed back if income exceeds a
certain level. Capital gains can trigger this clawback, even if they are
offset by losses carried forward. If you have losses carried
forward, you may want to consider some investment disposals in order to
trigger the capital gains prior to the year you will start
collecting your OAS.
Capital gains can be eliminated by donating capital property, such as securities, to charitable organizations which are qualified donees. This should be done by
the end of November (MUCH earlier for mutual funds) to avoid the busy season and ensure the transactions are completed before year end.
Financial hardship unlocking, one of the several
unlocking methods available, can be done 1x per year
unless maximum not withdrawn - then 2nd unlocking can be done but only
within 30 days of 1st unlocking.
On Aug 29th, the Department of Finance released draft
legislative proposals to implement tax measures from the 2014 Budget, as
well as some additional measures.
We've updated our tables which show how much can be
earned in Canadian eligible or non-eligible dividends without attracting
income tax, when the dividends are the only income earned.
We compare taxes paid on varying levels of employment income for all
provinces/territories, for a single person, and for a family with 2 children.
Alberta and BC are the lowest tax provinces for a single person earning $50,000. For a single income family with 2 kids and $50,000 employment income, Saskatchewan is the lowest tax province.
See the taxes paid at varying levels of eligible and non-eligible dividends
and interest for all provinces and territories. The lowest-tax provinces
for higher levels of eligible dividends are AB and SK. AB is the
lowest-tax province at $100,000 of non-eligible dividends.
We compare taxes paid in each province/territory by a senior with eligible
dividends vs other income (foreign dividends, interest, rent, etc) - see how the
taxes are significantly lower with eligible dividends even when the OAS is
clawed back.
The withholding tax rate depends on the amount withdrawn as well as other
factors. You may have to pay more tax or get a refund depending on your
total taxable income when your tax return is filed.
Use the Investment Income Tax Calculator to see the big difference
in taxes payable by receiving dividends instead of interest, even if your OAS is
being clawed back. Now updated for NL 2014 budget re dividend tax credits.
Basic Tax Calculator - See the tax results for several years and all
provinces and territories, with one calculation. Now updated for NL 2014
budget re dividend tax credits.
Use the detailed Canadian Tax and RRSP Savings Calculator to do your detailed 2014 tax
planning. Now updated for NL 2014 budget re dividend tax credits and
low-income tax reduction thresholds.
Donation tax credit rates - federal and for each province, including the first-time donor super-credit. How much income is needed to fully utilize the tax credit for your donation? Our tax calculators will let you know if your donations are not fully utilized.
Have you contributed too much to your RRSP? Best to
withdraw the excess as soon as possible to avoid the tax on the excess.
This can be done without having withholding tax deducted.
An employee can complete the election to stop paying CPP
contributions on the date that they turn 65. This election applies to both
employment and self-employment earnings. If the person only has
self-employment earnings the form is not needed - the election is done later, on
the tax return for that year. Both employed and self-employed? May be able to
back-date election for self-employed earnings (to date of 65th birthday).
The new QC budget eliminates pension splitting for those under
65. Tax credit for experienced workers is enhanced, and new tax credit for
some activities for seniors age 70+. Lower tax rate for manufacturing SMEs.
Tobacco tax increases. Alcohol tax changes.
Canada's new Anti-Spam legislation takes effect July 1st. If you use email in your business, you should familiarize yourself with the requirements. The new
fightspam.gc.ca website will allow you to report any spam received, after July 1, 2014.
If you have borrowed funds to
purchase real estate from which you will be earning income, the interest expense
is deductible, but with restrictions if the real estate is vacant land.
Does your business have an internet presence? If
you filed your 2013 tax return prior to April 4, 2014, then you can wait
until next year to start filing this form.
We had already published changes to the Ontario 2014 tax
rates based on the November 2013 Economic Outlook. However,
legislation has not yet been introduced for these changes, which may not
become a reality, depending on the June 12th election. Thus, we now
have a new table with the proposed changes included.
Without doing some checking, you may not realize that
you're paying tax on reinvested distributions. Your adjusted cost base
should be reduced by these amounts.
Canada Revenue Agency has finally confirmed in print in
a news release that the payment due date has been extended to May 5,
2014. Previous announcements were ambiguous.
The BC tax rate tables have been revised to reflect the
automatic reduction of the 2014 non-eligible dividend tax credit as a
result of the change in the gross-up rate.
The BC Income Tax Act is not being revised re the
reduction in the gross-up rate from 25% to 18% for 2014 for non-eligible
dividends, as we previously thought based on an incorrect rate on the BC
website. This means the tax credit is automatically changed to 2.59% of
the taxable dividend. It was 3.4% in 2013.
Our Basic Tax Calculator, Detailed Tax Calculator and
Investment Income Tax Calculator now include changes in non-eligible
dividend tax credit (DTC) rates for 2014 for any provinces which have
announced changes, except for Newfoundland &
Labrador. The Newfoundland & Labrador 2014 Budget proposed to
reduce the eligible and non-eligible DTC rates effective July 1,
2014. These changes will be included in the calculators after the
budget has been approved, which is expected to be in May.
In November 2013, the Ontario government announced
proposed changes to the surtax calculation, such that the surtax will be
calculated before deducting dividend tax credits. This
ensures that the dividend tax credits for high income taxpayers are not
increased by the surtax. Our income tax calculators include this
change. Draft legislation is not yet available, so further changes
may be required in the future.
The due date for filing of individual tax returns and
for payment of amounts owing has been extended by CRA to May 5, 2014, due
to the Heartbleed bug. The extension of the payment due date to May
5th also applies to self-employed individuals who have until June 15th to
file their returns.
Own a rental property or rent out a room in your
home? Many expenses can be deducted in calculating your net rental
income. Rental property in another country - don't forget the T1135
Foreign Income Verification Statement.
The HBP allows you to borrow funds from your RRSP to buy or build a
qualifying home. If you made an HBP repayment to your RRSP from Jan 1,
2013 to Mar 3, 2014, make sure you record it properly on Schedule 7 of
your 2013 tax return.
When foreign investment property (eg stocks, real estate)
costing more than $100,000 is owned at any time in the year,
form T1135 Foreign Income Verification Statement must be filed. The
penalties for not filing are high. Don't assume this form has been filed
for you by your tax preparer - make sure it has been filed.
BC's personal and spousal amounts were reduced in 2013 because of the
return to PST from HST, reversing the increase that was put in place when
HST was implemented.
Interest expense incurred to earn investment income can be deducted as
carrying charges on your tax return. This could include mortgage,
loan, or line of credit interest, margin interest, or interest on your CSB
payroll savings plan.
It's important to track the adjusted cost base (ACB) for each Canadian
mutual fund and exchange traded fund (ETF) you own, so you don't pay too
much tax when you sell. See our Mutual Fund and ETF articles to
learn more.
We haven't found an announcement, but the BC government
website indicates a change has been made to the 2014 non-eligible dividend
tax credit rate, re the gross-up reduction from 25% to 18%.
Alberta announced in December 2013 (we missed it) that
their non-eligible dividend tax credit rate would be revised re the
gross-up reduction from 25% to 18%.
Enhanced low-income tax reduction and low-income
seniors' benefit, reduced small business corporate income tax rate,
reduced dividend tax credit rates.
Use one of our RRIF Withdrawal Calculators to forecast
your RRIF withdrawals and see how long your RRIF will last, even if your
funds are still in an RRSP.
The caregiver amount tax credit may be available to you
if your parent or grandparent over 65 lives with you, even if they are not
your dependant. It may also be available if another relative lives
with you who is dependent on you due to a mental or physical infirmity.
MSP increases 4% for 2015, reduced thresholds for home
owner grant, Early Childhood Tax Benefit introduced April 1, 2015, Mining
Flow-Through Share Tax Credit and SRED Tax Credit extended.
The spousal amount tax credit may be available even if
your spouse doesn't live with you. A greater tax credit is available
if your spouse has a mental or physical disability.
Do you trade call or put options? The timing of
recording the tax effect of options sold can sometimes require an
adjustment to the prior year tax return.
Quebec will table their 2014 budget on February 20,
Alberta and Manitoba on March 6, Saskatchewan on March 19. The BC Budget is being
tabled today, February 18.
Changes to treatment of charitable donations made by
will, to registered plan beneficiaries, and by the estate; Adoption tax
credit increase; New volunteer search and rescue tax credit; Changes to
taxation of trusts and estates; Increased payroll remittance thresholds
for employers; Tax on split income changes; Consultation re changes to
eligible capital property regime and more.
So far we know the dates for 2014 budgets for 2
provinces. New Brunswick will table their budget on February 4, and
BC will table theirs on February 18.
Most 2013 personal income tax returns have a due date
of April 30, 2014. Self-employed individuals have until June
15th to file
their personal tax returns, but any amounts owing must still be paid by April
30th.
See our articles on filing your tax return and how this
can be done, as well as articles about different types of taxable income,
deductions and tax credits, and many other topics.
Both EFile and NetFile will be available February 10,
2014 to January 16, 2015 for filing 2013 tax returns. Most personal
tax returns are due on April 30, 2014.
Our calculator, updated with 2014 tax rates, may help
you decide whether to pay down your mortgage or contribute to an
RRSP. Tip: Unless your RRSP returns are going to be consistently higher than the rate on your mortgage, it is better to pay down your mortgage.
The WITB factors for 2014 are now available, but Quebec
factors cannot yet be confirmed. The 2013 factors for Quebec have
been revised based on new information.
If you have made a donation in 2013 under a gifting tax
shelter scheme, CRA will not assess your tax return until they have
audited the tax shelter, according to their January 10, 2014 announcement.
Our table of investment returns on stocks, bonds and
T-bills has been updated to include 2013. We've also added columns
for returns since 1984, to reflect the earliest data we have for the
S&P/TSX index. CPI for December is not yet available, so we've
estimated using the Nov 2013 annual increase, and will update on Jan 24th.
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