What's New by Month
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 that changed the dividend tax credit rate for non-eligible dividends to 2.18% for 2019 and subsequent years.
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.
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.
Our information has been updated to reflect the 2019 amounts for provincial political contribution tax credits.
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!
The new PEI government will likely table their 2019 budget in late June. The Alberta new government plans to table their 2019 budget in the fall.
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.
How to file a late tax return, learn what your exposure is to interest and penalties.
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.
Unable to file tax returns or pay taxes due on time? Tax relief can be requested for inability to pay, financial hardship, or other circumstances.
The federal 2019 budget announced that incentives of up to $5,000 will be available for zero-emission vehicles, in a program that will take effect May 1, 2019. BC and Quebec have their own incentive programs for fuel-efficient vehicles.
Discovered a missed tax slip? Missed expenses? It's not difficult to change your tax return, and can be done with the tax software you used to NetFile your return.
For most taxpayers, the gain or loss on the sale of securities will be considered capital gains or losses. For some taxpayers, such as day traders, the gains and losses will be considered income gains or losses (100% taxable). However, an election can be made so that the gains or losses on all Canadian securities are considered capital gains and losses.
HSAs and PHSPs are a way of providing tax-free medical benefits to employees. CRA indicates that some businesses have improperly claimed these deductions. The rules for sole proprietors and sole shareholders are more restrictive - make sure you know the rules.
We've created a table with the average annual exchange rates for converting US$ to Canadian$, going back to 1997.
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 method of recovery depends on whether the overpayment relates to the current year, or a prior year.
There is very little in the way of tax changes in the NL 2019 budget.
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 $50,000.
The federal government tabled Bill C-97 on April 8th to implement a number of measures proposed in Budget 2019.
Attendant care costs can be claimed for persons who are eligible for the disability amount, and in some situations for persons who do not qualify for the disability amount. The limit on Federal and Ontario attendant care expenses only applies if the taxpayer claimed the disability amount.
If you have purchased an investment in a non-registered account, it is your responsibility to keep records which will allow you to calculate the adjusted cost base (ACB) of that investment, in Canadian dollars, even for investments held in US$. 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.
Joint investment income; tax credits and deductions; how to report your marital status and when to update CRA on a change in your marital status.
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.
Always file your tax return on time, even if you can't afford the tax, in order to avoid late filing penalties!! Then talk to Canada Revenue Agency.
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.
There were no tax changes announced in the Nunavut budget.
There were no new tax measures other than a new Venture Capital Personal and Corporate Tax Credit, and phasing out of the Equity Tax 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.
Do you have a worthless investment? Can't sell it because it has been delisted? There may be a way to claim the capital loss.
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 only tax change in the SK budget was the introduction of new tax credits for volunteer firefighters and emergency medical first responders.
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.
There were no personal or business tax changes in the Yukon budget.
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.
If you're a novice investor, or just don't have the time or inclination to pick stocks, see our recommended stocks.
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.
The 2019 Federal Budget will be tabled on Tuesday, March 19, 2019.
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.
See also Prior Years:
Revised: August 09, 2019
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