Tax Tips for Individuals

INCOME TAX CALCULATOR:

Here a handy dandy tool I found. It will help you to estimate your tax liability for 2013.

Income Tax Calculator

PENSION INCOME SPLITTING:

You and your spouse maybe eligible to benefit from the new pension income splitting tax measure. Started in 2007, when you and your spouse or common-law partner file your income tax returns, new tax rules allow eligible taxpayers to allocate up to half of their eligible pension income (income that qualifies for the pension income tax credit) to their lower-earning spouse or common-law partner.

RRSP LIMITS:
RRSP Contributions for the current year must be made by the last business day of February of the following year. You may contribute up to 18% of your prior year's earned income annually, or up to the amount in your RRSP contribution room:

Year Limit Earned Income Required
In prior year

Year Limit
Earned Income Required
In prior year
2013 $23,820 $132,333
2014 $24,270 $134,833
2015 $24,930 $138,500
2016 $25,370  $140,944
2017  $26,010  $144,500 

If you are short on cash, consider transferring certain existing asset to your RRSP in order to obtain an RRSP deduction.

If your income will be nil or significantly less next year, buy an RRSP before March 1st., and cash it in one day later.  You will get the deduction this year, but will pay minimal tax on it the following year when the withdrawal is made.

BASIC AMOUNTS:
In 2016, a person can earn $11,474 and pay no tax (2015 - $11,327) . If your spouse earns no income, an additional non-refundable tax credit of $11,474 may be claimed (2015 - $11,327)

SELF-EMPLOYED INDIVIDUALS:
These business people are entitled to claim a wide range of expenses. Basically anything that is incurred to earn income is deductible. If you use a portion of your home to do your work, you may be able to claim home office expenses. Expenses that can be claimed include, utilities, property taxes, mortgage interest, repairs and maintenance, rent, insurance, telephone etc.  The portion claimed for your home office is the percentage of space of your office to the total square footage of your home.                                                                                                                                                    

AUTOMOBILE EXPENSE AMOUNTS:
The 2016 maximum deductible auto lease payment is $800 per month plus GST/HST

The 2016 maximum capital cost of a vehicle eligible for depreciation (CCA) is $30,000 plus GST/HST

The 2016 maximum deductible interest per 30-day period is $300.
An employee driving a company car will get charged a taxable benefit called a "standby charge and operating benefit" based on the amount of kilometers the car is driven for personal use.

For individuals, automobile expenses can be deducted based the percentage of kilometers driven for business over total kilometers driven in the year. Automobile expenses include gas, insurance, license, repairs and maintenance, capital cost allowance (depreciation) or lease payments, and interest on automobile loans.

Remember: travel between home and place of work is not deductible, and you should keep a log of your travels.

COMMISSIONED SALESPERSONS:
Commissioned sales persons are allowed to deduct employment expenses to the extent you have earned commission and given that you were required to incur your own expenses in order to earn income. Expenses that can be deducted by a commissioned employee include:

  • Meals and entertainment - limited to 50% deduction. You must be away from your municipality for at least 12 hours in order to claim meals while traveling.
  • Automobile expenses (see above).
  • A portion of your home expenses (i.e., home office expenses) may be claimed as long as this is the place where you principally perform your employment duties or is exclusively used on a regular and continuous basis for meeting clients/customers in connection to performing your employment duties. As an employee, you cannot claim mortgage interest as part of your home office expenses. Maintenance, utilities, insurance and property taxes maybe claimed.

Make sure your employer issues you form T2200, which states that you were required to incur your own expenses on the job.

PLAN YOUR BORROWING: 
Interest paid on a business or investment asset loan is tax deductible, use borrowed money to purchase business and investment assets, and use your personal cash to purchase personal use assets, such as a house or vehicle.

In order to deduct the interest cost, the direct use of the borrowed funds must be to purchase business or investment assets.

If you are self-employed, borrow to invest in your business, not to purchase investment assets such as stocks or bonds.

 

DEPENDANTS ARE NOT ALWAYS  ONLY YOUR CHILDREN:
Even if a person does not meet all the conditions of a true dependant, you might be able to claim certain credits if that person meets other requirements. Consider the following:

  • Tuition or education amount transfer. Frequently students do not need to claim all of their tuition fees or education amounts to reduce tax payable to zero. They might be able to transfer some or all of the unused portion to you if you are their parent or grandparent (including in-law). The student does not have to live with you to do this.
  • Caregiver amount. You might be able to claim all or part of the Caregiver Amount if you had a grandparent or a mentally or physically infirm dependant who is over 18, lives with you and had a net income of less than $15,334.
  • Amount for an infirm adult. You can claim an amount for you or your spouse or common-law partner's dependent child or grandchild or other dependant relative if that relative was mentally or physically infirm, is 18 years or older and had a net income of less than $6,548. You cannot claim this amount if you were required to make support payments for this dependant.

RESPs:
Registered Education Savings Plans are a great way to save for your child's education. The government of Canada matches your payments with the "Canada Education Savings Grant" equal to 20% of your total annual contribution to a max of $500 per year. Therefore, over the lifetime of a plan, you can get $7,200 of tax- free money from CRA and have it invested to earn income, which is also added to the plan. Your contributions are not deductible, but the income earned within the plan accumulates tax-free. Your child will receive this accumulated income once he/she attends college or university at which time their income is often very low and the tuition credits will offset any income tax that is due. Please call me if you have any questions about this plan or if you are interested in starting a plan for your child. The earlier you start the plan, the greater your income will grow due to compounding.

 

CHILD CARE EXPENSES:
Childcare expenses are deductible by the lower income spouse for amounts paid to individuals (nannies), daycare services, camps, and educational institutions for the part of fees related to childcare. Receipts must be obtained. Up to a maximum of $8,000 is deductible for children up to the age of 6 and $5,000 for children 7-16. If your child earns more then the basic amount, you cannot claim childcare expenses for that child.
Other rules apply, call me for any questions.

 

SCHOLARSHIPS:
All scholarships, fellowships and bursaries received in connection with the enrollment in a program eligible for the education credit will be exempt from taxation.

 

CHILD FITNESS TAX CREDIT AND ARTS TAX CREDIT:

There is a federal non-refundable tax credit available to individuals for registration and membership costs of up to $1,000 per child, for prescribed programs of physical activity and $500 for Arts activities for their children who are, at the beginning of the taxation year was under 16 years of age, or under 18 for a child with a disability. The tax credit is worth about $75 in taxes.

 

FIRST-TIME HOME BUYERS WITHDRAWAL FROM YOUR RRSP:

The Home Buyer's Plan is a program that allows you to withdraw up to $25,000 from your RRSP in a calendar year to buy or build a home for yourself or a related person with a disability.  There are several conditions that must be met:

    * You must be a first-time buyer. You are considered a first-time home buyer if, in the four year period, you did not occupy a home that you or your current spouse or          common-law partner owned.

    * You must have  a written agreement to buy or build a qualifying home.

    * You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

The rules are a bit more complicated and there are some useful tips about contributing and withdrawing in a given year, getting the deduction and being able to withdraw the funds tax free.  CALL ME IF YOU ARE INTERESTED TO FIND OUT MORE.

 

DISABILITY TAX CREDIT:

The disability tax credit provides some tax relief to individuals with a disability or their caregivers. An individual may claim the disability amount after CRA approves their application.  The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face. 

I have seen many clients who are eligible for this tax credit but have never applied and are not aware - especially seniors and parents who have a child with a disability.  An application can be retro-active and if approved could mean substantial refunds for the person with the disability or their caregiver. 

 

TUITION TAX CREDIT:

Tuition tax credits are available to all post-secondary school students attending a qualifying post-secondary school.  In addition to the tuition credits, you get text-book and education amounts for the number of full-time and part-time months that you were in school.  Students can transfer up to $5,000 per year of these credits to parents or spouses.  It's important to file tax returns for students because they need to "log / track" these tuition credits with CRA to be used against future income. In order to deduct these credits, the student will need a special slip from the post-secondary school. The form is called a T2202A  or a TL11A for foreign universities.  The T2202A can be downloaded from the school's website.

Here are some sites:

University of Toronto                         McMaster University

University of Western Ontario           University of Waterloo

York University                                   McGill University

Queens University                              Seneca College

Ryerson University                             George Brown College

Wilfred Laurier University                  Brock University

 

 

 

 

Copyright 2014 Rita Zelikman.