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Before making a major financial decision you
should consult a qualified professional.
The 2019 reinvested distribution amounts for
iShares are now available on the BlackRock website. These distributions
are not actually paid to you but are reinvested, requiring an increase to your adjusted cost base
(ACB) . This will reduce your capital gain when you eventually
dispose of the investment.
If you made RRSP contributions from March
1, 2018 to March 1, 2019, this should have been included on Schedule 7 which
was filed with your 2018 tax return. Check our article to find out what
to do if the contribution wasn't recorded.
This month's video discusses:
- Climate Action Incentive (CAI);
- Enhanced basic personal amount;
- Contribution to employee's crowdfunding campaign - employment benefit?;
- Gross negligence penalties - magnitude of unreported income;
- New process for authorizing representatives CRA access;
- TOSI: Excluded business - holidays, vacation and sick days.
Employment income is included on a T4 for the year in which
it is received, not earned. If a payment is made in
January 2020 for wages earned in December 2019, this amount will be reported on the
2020 T4, not on the 2019 T4 (see exception re employee trusts).
The rates for 2020 maximum withdrawals from
federally-regulated LIFs and LRIFs are now available on the website of the
Office of the Superintendent of Financial Institutions.
Patrie
v. The Queen was heard in November 2019 and was a win for the taxpayer, even
though unsafe stairs were replaced with safe stairs PLUS a deck, increasing the
cost significantly. The judge made it very clear that CRA can only use the
applicable provisions of the Income Tax Act to determine eligibility for the tax
credit.
This very simple tax-planning calculator which shows taxes
payable and marginal
tax rates for all provinces and territories now includes the additional federal
personal tax credit for 2020.
Legislation has been proposed that would extend the
maturation period of amateur athletic trusts by one year. These trusts
maturing in 2019 would now mature in 2020.
The per-kilometre
amounts that
may be paid
tax-free to employees or officers as reimbursement for
motor vehicle expenses incurred while travelling for
business purposes using their personal vehicle will increase by 1 cent, to 59 cents per km for the first 5,000 km and
53 cents per km for each
additional km. For the Territories, the rates are also increased by 1
cent, to 63 cents per km for the first 5,000 km and 57 cents per km for each
additional km.
The prescribed rate used
to determine the operating cost taxable benefit to an employee for an
employer-owned vehicle remains the same, at 28 cents per
kilometre. The standby charge taxable benefit factors for automobiles also
remain unchanged.
The
prescribed rate used to determine the operating cost taxable benefit to an
automobile sales person for an employer-owned vehicle remains the same, at 25 cents per kilometre. The standby charge taxable benefit
factors for automobiles also remain unchanged.
The 2020 expense
limitations for passenger vehicles for interest expense, monthly lease costs,
and capital cost allowance (CCA) for zero-emission and non-zero-emission
vehicles will remain unchanged from 2019.
On Dec 9th, the federal government presented
legislative proposals that
would increase the basic personal amount (BPA) for 2020 and later
years, increasing to $15,000 by 2023. The spousal and eligible dependant amounts
will also be increased.
Do you have a severe and prolonged physical or mental
disability which makes you unable to work at any job on a regular basis? If you
are under 65 and have contributed enough to the CPP you may be eligible for a
disability benefit.
CPP benefits can be cancelled for up to 6 months after
starting the pension, but all the benefits received must be repaid. CPP
and OAS benefits must be cancelled after the death of a CPP or OAS recipient.
March 2, 2020 is the deadline for making your RRSP contributions for the 2019 taxation year. RRSPs are one of the best tax-saving tools available to Canadians, but if you're currently low income, TFSAs would likely be better for you.
This month's video discusses:
- Investment management fees re TFSA paid via non-registered account -
advantage tax;
- Rental property losses/source of income?;
- Penalty re repeated failure to report income;
- Agency relationship re GST/HST;
- Represent a Client updates re deceased taxpayers;
- Corporate ownership reporting changes.
If you turned 71 this year, your RRSP must be converted to a RRIF, or used to purchase an annuity, by December 31st, but if you haven't done
this already your financial institution will probably be automatically converting it soon. If you turned 65 this year, you may want to convert some of your RRSP to a RRIF before December 31st, to take advantage of the pension income tax credit, and perhaps pension splitting with your spouse.
The last trading date in 2019 for Canadian and US publicly
traded stocks is Friday, December 27th. Stocks purchased or
sold after this date will settle in 2020, so any capital gains or losses
on sale will apply to the 2020 tax year.
Haven't filed your 2009 tax return yet? Taxpayers are running out of time to file requests under the taxpayer relief provisions for the
2009 tax year and any reporting period that ended in the 2009 calendar year.
If a tax debt arose from a
tax year prior to 2009, penalties and interest that have accumulated from
2009
to 2019 could still be reduced as a result of a 2019 request for leniency.
This very simple tax calculator had a major glitch which has
been corrected. See taxes for all provinces for 2020 and earlier, and marginal
tax rates for dividends, capital gains and other income.
The capital gains exemption increases to $883,384 in 2020,
for eligible small business corporation shares. The exemption is still $1
million for qualified farming or fishing property.
Employed tradespeople can claim a maximum $500 deduction
for tools purchased in the year. Apprentice mechanics can get a much larger deduction. Both can be calculated using our Employee Tools Deduction Calculator.
The maximum pensionable earnings for 2020 will be $58,700,
and the rate is increased to 5.7%, including the 0.30% additional contribution. The
additional contribution is deductible from income.
Legislation was tabled to reduce the small business corporate
income tax rate to 3.2% and the non-eligible dividend tax credit rate to 2.9863%
effective January 1, 2020.
The maximum pensionable earnings for 2020 will be $58,700,
and the rate will be increased to 5.25%, including the 0.30% additional
contribution for enhanced CPP. The additional contributions are deductible from income.
If you have capital losses carried forward and unrealized
capital gains, and are not going to be collecting your OAS pension for a
year or so yet, you may be able to do something now to avoid or reduce an
OAS clawback in the future. Are you a high income earning earner
about to apply next year for your OAS, with a reduced income? Plan
ahead!
This month: Mobile Home/RV Park/Campground - not always
Specified Investment Business; Shareholder-employees - employment
expenses; Payroll audits; Online only charity registration; TOSI &
meaning of excluded business re large dividends; IRS new relief procedures
for Expats.
This simple calculator compares taxes on both types of Canadian dividends, capital
gains, and other income, for every province
and territory for 2015 to 2020. Also shows marginal tax rates for
different types of income for the year selected, for every province and
territory.
The table of personal tax rates for Alberta has been revised to reflect
the pausing of the indexation of the personal tax system effective for the
2020 tax year.
Tax measures include: Pause indexation of personal income tax
system; Eliminate education and tuition tax credits; Increase tobacco tax;
New Child and Family Benefit.
We've updated the table of non-eligible dividend tax credit rates to
include 2020. The only change thus far for 2020 is Quebec.
Rates could still change when 2020 budgets are tabled.
We've updated the table of eligible dividend tax credit rates to
include 2020. The only change thus far for 2020 is Quebec.
This could change when 2020 budgets are tabled.
We've published the tables of non-refundable tax credits for 2020 for
Canada and all provinces and territories except Quebec, including Alberta
2019 budget changes. The
indexation factors and tax credit amounts have not yet been confirmed to Canada Revenue Agency amounts.
When a withdrawal is made from a TFSA, the withdrawal amount
is added back to your contribution room in the following year. If
you're considering a withdrawal in the next few months, do it before Dec
31st so it increases your contribution room in January 2020.
The tables show the combined
federal and provincial/territorial tax rates for capital gains, both types of
Canadian dividends, and other income. Things could change with the Oct 24 Alberta Budget,
or when 2020 budgets are tabled, and federal is probably guaranteed to
change after the election. Nothing has been
confirmed to CRA or to Revenue Quebec.
If income-producing property, or money to purchase
income-producing property, is transferred or loaned to a spouse or related
minor child, attribution rules will apply to tax the income in the hands
of the transferor. This will not apply to loans which are
considered "genuine" loans.
There is no time limit specified for the federal rebates for
fuel-efficient vehicles and charging stations, but the BC and Quebec rebates
have end dates specified. The rebates could end earlier than the specified
dates if available funds are exhausted.
Proposed legislation will retroactively change the
definition of a shared-custody parent, to a parent who resides with the qualified dependant at
least 40% of the time. See 2019 CCB and CDB payment and threshold amounts.
When the debt of all levels of government is included, every
man, woman and child in Canada owes $52,859. We need to pressure all levels of government to reduce
our debt!
This month's topics include: EI benefits denied to
employee fired due to misconduct; Property flipping - income or capital; Deduction
denied for employee travel/vehicle expenses; Shared-custody parents and
CCB.
The provisions for the inclusion of cannabis as an
eligible medical expense changed when cannabis was legalized effective
October 17, 2018. If you want to claim it as a medical expense, make
sure you have your medical document, and buy from a holder of a licence
for sale of cannabis products!
The 2020 employee EI rate is reduced to 1.58% from the
2018 rate of 1.62%. The employer rate is 2.212%, down from 2.268%. The maximum insurable earnings
(MIE) is increased to $54,200
from the 2019 rate of $53,100. The resulting maximum annual contribution
per employee for 2020 is decreased to $856.36 from the 2019 maximum of
$860.22, a decrease of 0.2%.
Capital gains can be eliminated by donating certain types of capital property to qualified
donees.
If you were planning to make a donation of cash but could donate property
instead, you can save some tax money. Best to do this by the end of
November for shares, or possibly months earlier for mutual funds.
Capital losses can be transferred to a spouse by utilizing
the superficial loss rules. Your spouse must hold the shares for more than 30 days
after your disposition before selling the shares.
In most cases, a campground owned by a corporation would be considered to be earning
property income, and would not be eligible for the small business deduction
unless it employed more than 5 full-time employees.
The Canada Workers Benefit amounts for 2019 are now available
including Alberta and Nunavut, which are different from the other
provinces/territories. Quebec is also different, but is in a separate
table.
We have a wealth of information that may help you cut costs,
save money, and build your wealth! For instance, how much would you have
to deposit today to have $1 million in the future? Info on unclaimed bank
balances, calculating your loan interest rate, and much more.
We've expanded our article "Can the Government of Canada
Print Money and Spend it?" to include information on how the Bank of Canada
works, and the Canadian Money Supply.
It's been reported to us that Qtrade is showing reinvested
capital gains distributions on the T3 not only in box 21, but also as a negative
amount in box 42. This is technically correct, but might be confusing, as
you won't be able to enter the negative amount into tax software.
You should be thinking about this now, even if you are just
starting out in your career. This will be different for everyone, but we
provide some guidance to help you figure things out. We advise you to plan
to live off your dividends once you retire, instead of drawing down your
investments, if at all possible.
Links to information on benefits and services provided by the federal and
provincial/territorial governments, for seniors, persons with
disabilities, low-income,
children, families, students and
others.
This month's topics include: Director's personal
liability in a Workers' Compensation case; TFSA overcontributions;
Overdrawn shareholder loan to a non-arm's length person; Transfer of life
insurance from a corporation; Represent a Client changes; and IRS
compliance campaign re former participants in Offshore Voluntary
Disclosure Program.
If you have made your 2019 RRSP contributions already, you
can complete a CRA form to get permission for your employer to deduct less
income tax from you. If you are self-employed, you may be able to reduce
your instalments.
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. When multiple lump-sum
withdrawals are made, the withholding tax rate may be based on the total of
those withdrawals in the year.
There are many tax issues for students and/or their
parents, such as eligibility for tuition, education and student loan
interest tax credits (some of which have been eliminated), private school tuition fees, deducting moving
expenses, and child care expenses.
See how much can be
earned in Canadian dividends without attracting
income tax, when the dividends are the only income earned.
Alternative minimum tax (AMT) kicks in when eligible dividends exceed
$52,070. Over $100,000 in eligible dividends can be earned in
several provinces before attracting regular provincial income tax, but of
course federal income tax and federal/provincial AMT will be
payable.
This month's topics include: Parking taxable benefit:
Employee stock option tax changes; Condo sale - income or capital?;
First-Time Home Buyer Incentive; and T1135 taxpayer relief.
Under this Incentive, Canada Mortgage and Housing
Corporation ( CMHC) will fund up to 10% of a first-time
home buyer's purchase via a shared-equity mortgage (SEM). The Incentive amount
is up to $40,000 (10%) for a
new home or $20,000 (5%) for an existing home.
Capital cost allowance (CCA) is the depreciation that
is allowed to be expensed for tax purposes for fixed assets, except
land. Get information on rates, half-year rule, short fiscal year
and tax incentives for clean energy equipment.
The RRSP vs Mortgage
(or other loans) calculator, which has been updated for 2019 tax changes,
helps you to decide whether to increase your
monthly loan payment or contribute the extra
monthly amount to an RRSP. When in doubt, pay down your debt!
GIS is available to low-income Old Age Security (OAS)
recipients. It is usually based on the prior year income, but if an
OAS pensioner has a reduction in income, Service Canada may base GIS on
estimated current-year earnings. If you and your spouse are
separated for reasons beyond your control, payments may be adjusted.
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 in 2019 are Alberta and BC.
We compare taxes paid in each province/territory by a senior with eligible
dividends vs other income (foreign dividends, interest, etc.) - see how the
taxes (including OAS clawback) are significantly lower with eligible dividends.
Alberta passed legislation in June to reduce the general corporate
income tax rate to 11% effective July 1, 2019, with subsequent reductions each
January 1st until the rate is 8% for 2022.
If you are working part time or in a temporary job and know
that your total income will be less than your total personal tax credits on the
TD1 form, check the box on page 2 of the form and your employer will not deduct
income tax. Under 18 - no CPP deductions. Almost always - EI deductions.
On June 17, the government released proposed legislation to
limit the tax benefits of employee stock options. Interested parties are
invited to submit comments by September 16, 2019.
Make
sure you keep the receipts for day camps and other summer activities for your
children that could qualify as child care expenses. Child care costs are
entered on a separate line in the Detailed Canadian Income Tax Calculator, but
are not checked to see if limits are exceeded.
We've been contacted several times by people who either aren't aware
of the enhanced CPP, or who aren't
familiar with how the contributions are being treated on the tax
return, and think that our Detailed Canadian Income Tax Calculator is
incorrect. Although for 2019 the total CPP rate is 5.1%, only 4.95% is used for the
non-refundable tax credit. The remaining 0.15% is allowed as a deduction
from income.
Nunavut's Bill 26, passed in May 2019, increases the basic
personal and spousal amounts and cost of living tax credits for 2019, and
reduces the small business corporate income tax rate effective July 1, 2019.
Topics this month: Taxability of virtual currency; Fee
restrictions disability tax credit; Interest deductibility; Construction
industry info request by CRA re contractor purchases; New housing
rebate/primary residence; CRA service standards.
Tax changes effective Jan 1, 2020: the basic personal
amount will increase to $10,000 with proportionate increases in the
spousal/equivalent-to-spouse amounts; the threshold for the low-income tax
reduction will increase; the small business corporate tax rate will be
reduced to 3.0%.
Many elderly pensioners/veterans do not realize that full MSP
premiums are being deducted from their monthly cheques. If you know of someone
that may be in this position, alert them to the fact that a refund is available
if they are low income.
When a spouse is in a hospital, nursing home or long term
care, and fees are being paid for this care, their income is not included
in the income calculation for premium assistance. However, this income
exclusion does not apply in a couple of situations.
You can eliminate some major decisions by setting long
term goals regarding your financial future. It's not as difficult as it sounds, because
you don't have to plan your whole financial life at once. At the
start, you have to set out your major goals. The fewer the decisions you have to
make, the happier you will be.
Each individual taxpayer is responsible - not
their accountant or financial planner - to ensure that they don't overcontribute. There is a 1% per month tax on excess contributions. A
recent court case upheld tax, penalties and interest on overcontributions.
The rate of tax varies depending on the amount of the
withdrawal. The tax must be deducted from the payment coming out of
the registered account - it cannot be paid from a non-registered account after
the withdrawal.
These calculators for all provinces show the big
difference in taxes payable on different types of investment income.
Even when the age credit and OAS are clawed back, Canadian
dividends/capital gains result in the least taxes payable when
compared to other types of income such as foreign dividends and
interest.
Proposed
regulations were published in the Canada Gazette on June 1st, setting a maximum
fee of $100 for submitting a DTC application. Interested parties may make
representations concerning the proposed Regulations within 30 days after the
publication in the Gazette.
How much will you be able to withdraw from your investments
each year until they are reduced to zero? Enter your investment balance
and varying rates of return.
Topics in the June video: Zero-emission vehicles; CRA
cautions re Health Spending Accounts; Employee clothing taxable benefit;
and Donation of credit card loyalty rebates.
On May 27, 2019, Draft Legislation Supporting Conversion of Health and Welfare Trusts into Employee Life and Health Trusts
was released. Comments may be provided until July 31, 2019.
If you have been investing for many years, are
an experienced investor, and have considered borrowing to invest, try our
calculator and make sure you read our article on borrowing to invest. This
is not recommended for novice investors!
This tax credit is renamed, expanded, and enhanced for
2019. The amount of the credit depends upon the maximum eligible
amount of work income. This is the amount by which the eligible work
income of the individual exceeds the base amount of $5,000.
BC, Ontario, and Alberta are again the lowest tax provinces for a single person earning $50,000.
See also comparisons for a single income family with 2 kids
aged between 6 and 17. Taxes include CPP contributions and EI premiums, ON Health Premium, and QC prescription drug premiums.
BC, Ontario, and Alberta were again the lowest tax provinces for a single person earning $50,000.
See also comparisons for a single income family with 2 kids
aged between 6 and 17.
Taxes include CPP contributions and EI premiums, BC MSP premiums, ON Health Premium, and QC prescription drug premiums.
Probate fees can be reduced when assets are held in
joint ownership, but there can be some drawbacks to this. Be
careful to document the intent of the joint ownership. Know the difference between beneficial and legal ownership.
A business may deduct PHSP or HSA payments made on behalf of employees and their
dependants. These payments are not
taxable to the employees, and there are no CPP or EI premiums charged on these
payments.
Do you know your rights and responsibilities as an
employee or employer? Learn about labour laws, including minimum
wages rates, vacation and statutory holiday entitlement.
You should plan ahead so that you are prepared to file your 2019 tax return next year without too much difficulty. One of the most important things to do during the year is to store all tax-related documents in one place. If your tax situation is getting more complicated, find a tax professional now, not next tax season!
Make sure you're aware of how long you must retain source
documents (receipts, invoices, tax slips, investment trade confirmations, etc)
and other records for your
personal tax return, and for your business.
The CARE credit will provide families with a refund of up to 75% of their eligible
child care expenses, starting with the 2019 taxation year. The credit will
be claimed on the tax return.
Unfortunately, there is no way you can avoid tax when
withdrawing money from RRSPs or RRIFs. But, with some tax planning, you
can reduce the taxes payable by borrowing to invest in Canadian stocks in a
non-registered account while you're withdrawing funds from your registered
account. We do not recommend this strategy
unless you are an experienced investor!
In April 2019 the BC Provincial Sales Tax Act definition of
small seller was modified to include a provision that the seller must not
knowingly have sold goods at a sale other than retail in the previous 12 months.
Doing anything with Bitcoin? You may be targeted by CRA. Find
out if your online information was compromised; Taxpayer relief - financial
hardship; Reassessments for statute-barred periods.
The federal 2019 budget announced that incentives of up
to $5,000 will be available for zero-emission vehicles, in a program that
will take effect May 1, 2019. BC and Quebec have their own incentive
programs for fuel-efficient vehicles.
Discovered a missed tax slip? Missed
expenses? It's not difficult to change your tax return, and
can be done with the tax software you used to NetFile your return.
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.
HSAs and PHSPs are a way of providing tax-free medical
benefits to employees. CRA indicates that some businesses have improperly
claimed these deductions. The rules for sole proprietors and sole shareholders
are more restrictive - make sure you know the rules.
A charitable donation
that was initially reported on one spouse or common-law partner's return can be
transferred to the other spouse or common-law partner in a subsequent year.
Don't miss out claiming medical expenses. Private travel
medical insurance may qualify if nothing but eligible medical expenses are
covered by the plan. Home renovations may qualify if they enable a
disabled person to be more mobile within the dwelling.
The Community Volunteer Income Tax Program will prepare tax
returns at no charge for modest income individuals with simple tax returns.
Modest income for 2018 tax returns is about $35,000 for an individual, $45,000
for a couple, plus $2,500 for each additional dependant.
There aren't many tax measures in the 2019 budget, but a
significant one is a new Childcare Access and Relief from Expenses (CARE)
refundable tax credit for 2019. Estate Administration Tax will be
eliminated effective Jan 1, 2020 for estates of $50,000 or less, lowered for
those over $50,000.
Attendant care costs
can be claimed for persons who are eligible for the disability amount, and in some situations for persons who do
not qualify for the disability amount. The limit on Federal and Ontario attendant care
expenses
only applies if the taxpayer claimed the disability amount.
If you have purchased an investment in a non-registered
account, it is your responsibility to keep records which will allow you to
calculate the adjusted cost base (ACB) of that
investment, in Canadian dollars, even for investments held in
US$. Your brokerage statements will not provide the Cdn$ ACB for
investments held in US$.
If you have employment or self-employment income exceeding
$3,566 in 2018, have claimed a disability supports deduction or medical expenses
and have family net income less than $51,484, you may be able to claim a
refundable amount of up to $1,222.
Our directory of accounting, bookkeeping and
financial planning firms now includes links to the directories of Chartered
Professional Accountants (CPAs) members/firms by province.
For taxpayers who record gains and losses from call and
put options as capital gains or losses (this isn't the case for everyone),
the timing is a little trickier for options which have been sold, as
opposed to options which have been purchased. See our table which
explains how to do things.
Topics in this month's 10-minute video:
"Nominal" consideration on gift of capital property could cause tax
problems; current expense
vs capital expenditure; Federal 2019 Budget - zero-emission
vehicles, housing measures, shared equity mortgages, Canada training credit.
If you rent out one or more rooms in your home, or if you own a rental
property, there are many expenses that can be deducted in calculating your net
rental income. Claiming capital cost allowance (CCA) on the home may result in the loss of the principal residence exemption when you eventually sell your home.
The age amount tax credit is a non-refundable credit, and is
reduced when income exceeds a certain threshold, both federally and
provincially. Capital gains can cause income to exceed the threshold, and
offsetting capital losses carried forward won't help with this.
Whether you own foreign or Canadian ETFs, you should know the
tax consequences of the income from them, and how to calculate your adjusted
cost base (ACB). With Canadian ETFs, you need to know about reinvested
distributions and how they increase your ACB, thus reducing your capital gain
when the ETF is sold.
Learn about scholarships, who can still claim tuition and
education tax credits, student loan interest, how eligible Canadian dividends
may affect student tax credits.
The experienced worker tax credit is enhanced and renamed the
Tax Credit for Career Extension; New refundable tax credit for SMBs to encourage
them to hire or retain workers age 60+; Changes re refundable tax credit for
reporting of tips; Digital accommodation platform operators must register for
and collect the tax on lodging.
The budget includes: an increase to the RRSP Home Buyers'
Plan withdrawal limit; new personal tax credit for certain digital
subscriptions; changes re RDSP termination requirements; new Canada Training
Credit for work earnings for those age 25 to 64; 100% CCA for certain
zero-emission vehicles; and other measures.
No tax increases in the NB budget. The current rules for the
NB Small Business Corporate Income Tax Rate will be maintained rather than implementing the federal passive income tax measure.
Under normal conditions, a person files a tax return for the province in which they are residing on
December 31 of the taxation year. A person will be determined to be
resident in the province in which they have the most significant residential
ties, which may not be the province in which they are employed.
When individuals receive dividends from Canadian public
corporations, 138% of the dividend is included in taxable income. The additional 38% is called the
"gross-up". However, after applying the enhanced dividend tax
credit, the tax on these dividends is much less than it would be on employment
income, interest, or foreign dividends.
Our table of sales tax rates has 2 changes so far for
2019: Manitoba's retail sales tax rate will go down to 7% on July 1st, and
in BC, electricity will be fully exempt from PST on April 1st. Residential electricity
has always been exempt, so this only affects businesses.
If you sold or had a deemed disposal of an investment in
2018, it is your responsibility to ensure that it is properly reported on your
2018 income tax return, even if you use a professional tax preparer. It's
quite possible that not all dispositions will be on the T5008 provided by your
brokerage - they still must be reported.
If your 2018 OAS was reduced by a "recovery tax",
this tax is treated like an income tax instalment. On your 2018 tax
return, your clawback will be recalculated based on 2018 income. Any taxes
owing, including the clawback, will be reduced by the recovery tax paid during
2018.
If you received an eligible retiring allowance that was
directly transferred to an RRSP in Jan 1 to Mar 1 2019 it must be recorded on
the 2018 Schedule 7. However, since the T4 will be for 2019, not 2018, the
reporting is different from the usual, and must be done properly in order to
avoid future problems.
Manitoba is reducing the retail sales tax from 8% to 7%
effective July 1, 2019. There were no personal or corporate income tax
rate changes, but several business tax credits were extended.
Generally, the tax credit for the first $200 of donations is
at the lowest tax rate, and the remainder at the highest tax rate, but
there are many provincial exceptions to this. If you're carrying forward donations
this is fairly easily done using tax software, but using printed forms you'll
have to track things from year to year yourself.
Our tax tables do not include low income tax reductions, health or other premiums,
or the NL deficit reduction levy which can add 10% to the marginal tax rate at
various levels of taxable income. You can use our Tax
Calculator to determine your actual marginal tax rate
- see the note at the bottom of the calculator.
A couple will usually get a higher medical expense tax credit if all
expenses are combined on the tax return of one spouse - usually the lowest
income spouse.
On Schedule 3 Line 179, you must indicate if you lived in
your home for all the time that you owned it. If yes, no need to enter
proceeds or ACB on Schedule 3.
This month's 10-minute video covers the Climate Action
Incentive Payment re carbon tax; Allowances vs expense reimbursements for
employees; Reassessment re estate valuation 5 years after filing; OAS deferral -
time limit; Tax service providers dedicated CRA telephone service; and GST/HST
New Housing Rebates.
Capital losses can normally only be used to reduce or
eliminate capital gains. However, they can be carried back to any of the 3
preceding taxation years, or carried forward indefinitely.
Every person age 18 or older should file a tax return to
establish their eligibility for the GST/HST credit, which is a non-taxable
quarterly payment. A single person with net income of up to $44,000 is
eligible for the credit. Thresholds and credit amounts increase as numbers of
dependants increase.
There may be circumstances which require you to file a tax
return, including the sale of your principal residence. You should file a tax return even if you have little or no income, to
receive
refundable tax credits, GST/HST credit, and to establish eligibility for other
government programs and services.
RRSPs can be a great tax-saving vehicle, because the
contributions are deducted from income. Although TFSA contributions are
not tax-deductible, they can sometimes be better for you to use than RRSPs, such
as when you are in the lowest tax bracket.
This calculator includes most tax credits and deductions,
includes taxpayer and spouse, can help you determine the best RRSP
contribution or pension splitting amount, and tells you if all your donations are
not all being utilized. It can't file your tax return but can certainly help in
tax planning.
There were no personal or corporate income tax rate changes
in the budget. Student loan interest is eliminated. The BC Early Childhood Tax Benefit will be replaced by a more
generous BC Child Opportunity Benefit on October 1, 2020. The Climate Action Tax
Credit will be increased each July 1st until 2021. Several other tax credits are
enhanced or extended.
New Brunswick's pre-budget consultations are open until
February 28th. Manitoba and Newfoundland also still have pre-budget
consultations open, but with no indication of when they close.
Contributions made Jan-Mar 2019 must be reported on your 2018
tax return, even if they are not being deducted for the 2018 tax year. If you made contributions in Jan-Mar
2018 and didn't
report them in
your 2017 return, read this article.
You can borrow from your RRSP to buy or build a home, or to
finance full-time training or education. Make sure you
complete Schedule 7 if you have made repayments to the HBP or LLP, otherwise you lose RRSP deduction room.
The tuition and education tax credits have been eliminated
now in NB, ON and SK. However, it is only ON that no longer allows the
carry-forward of unused credits from another province when a taxpayer moves to
Ontario.
If you previously requested voluntary tax deductions from
your OAS or CPP in order to avoid having to make income tax instalments, you can
request a change through your My Service Canada Account, or by completing and
submitting a form.
If your income circumstances have changed such that you think
the clawback of your OAS should be reduced or eliminated, you can request a
change by completing form T1213OAS and submitting it to Canada Revenue Agency.
Some types of income are not taxable, such as inheritances,
gifts and most lottery winnings, and some must be
included in the tax return even if they are not taxable, such as GIS and
workers' compensation benefits. The latter affect income-tested benefits even
though they are not included in taxable income.
Due to the 2019 final reduction in the gross-up rate for
non-eligible, or "regular" dividends, the dividend tax credit rates
for 2019 are automatically revised for most provinces and territories.
The tables of dividend tax credit rates for eligible
dividends includes rates for 2019. The only changes thus far are for BC
and Quebec. This could change when 2019 budgets are tabled.
The Federal small business corporate income tax rate is reduced to
9% effective January 1, 2019. The Quebec and PEI small business rates are
also reduced for 2019, and Manitoba's small business limit is increased.
Use our RRSP/RRIF
calculator to calculate your 2019 minimum annual withdrawal, and to estimate
your earnings and withdrawals from your
RRIF for the next 40 years. If you haven't converted to a RRIF yet, or
if you only have non-registered investments, this
calculator is still useful for you!
We have many 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. Make sure you
take advantage of available tax credits!
This month's video includes: Principal residence
exemption - large lots; 2019 tax-free automobile allowances; Incentive
payments for travel to pick-up site; Construction industry T5018 form
penalties; Canada Child Benefit and shared custody; CPA Canada - Tax
system review needed.
So far we know of 2 dates for provincial budgets - BC on
February 19th and Manitoba on March 7th. There are also a few pre-budget
consultations still underway.
It's amazing how some large companies who are GST/HST
registrants do not provide proper invoices. Proper invoicing is required
so that the customers of the business can properly claim their input tax
credits. GST/HST must be shown separately on an invoice. Federal and provincial
HST parts are not shown separately. Provincial retail sales tax (PST, RST, etc)
is shown separately from the GST. The seller's business number must be
shown if the total sale is $30 or more.
Make sure you file a declaration if you're in one of the
designated areas, otherwise you'll be billed for this tax even if you shouldn't
be paying it. If you don't receive a notice but are in a designated area,
call the BC government! This tax applies to vacant residential land as well as
land with a residence on it. The City of Vancouver Empty Homes Tax
is another separate tax.
Besides annual property tax on the assessed value of
properties, there is property purchase tax when a property changes hands, as
well as a foreign buyers' tax, which is an additional property purchase
tax. There is now an additional school tax for high-value residential
properties, as part of the annual property tax bill.
The non-refundable LIFT credit will be in effect for 2019 and
subsequent years, and will provide a provincial income tax reduction of up to
$850 for an individual and $1,700 for a couple. There is no LIFT credit if
the individual has no employment (T4) income. This credit is included in
the Detailed Canadian Tax Calculator.
This table of returns on investments has been updated with
the December 2018 Consumer Price Index (CPI). See returns for 1, 5, 10, 20
and 50 years. Then use our Investment Return Calculator to determine your
own returns.
You can transfer shares from a non-registered account
to a registered account such as an RRSP. However, if you transfer
shares on which there is a loss, the loss will not be deductible. If
you transfer shares on which there is a gain, you will have a taxable
capital gain.
If you incur interest expense related to investments, make
sure you keep a clear record of it. Interest expense is claimed on line
221 of the personal income tax return.
Changes effective January 1, eliminate family deductibles for
family net income of $30,000 or less, reduce deductibles for net income of
$41,667 or less, and eliminate or reduce family maximums for net income of
$45,000 or less. Note that you MUST REGISTER for Pharmacare
benefits.
All income and
expenses must be reported on your tax return in Canadian dollars, converted
either at the transaction date exchange rate, or the average exchange rate for
the year. The average US exchange rate for 2018 is 1.2957.
It was a bad year for the S&P/TSX and for the S&P 500. However, the S&P 500 return in Canadian
dollars was better than in US dollars because the Canadian dollar decreased in
value against the US dollar. See the historical returns for 1, 5, 10, 20,
and 50 years, and how much $1,000 invested at the beginning of the period in
various investment types are worth at the end of the period. Over the past
5+ years one would be losing money after inflation by investing in
Canadian 3-month T-bills or Canadian government 1-3 year bonds.
Use our investment return calculator to determine your
returns for 2018 or any time period for a particular investment or investment
account, or your entire portfolio.
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