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What's New by Month
December 2018
Federal Climate Action Incentive (CAI) Refundable Tax Credit
The 2018 tax returns for Manitoba, New Brunswick, Ontario and Saskatchewan will include a refundable tax credit for residents of those provinces, with an additional amount for those living in small and rural communities. Saskatchewan will receive the highest credit amount, up to $669.90 for a family of 4 living in a rural community. This article also includes links to climate plans and/or incentives of other provinces and territories.
November 2018
Life in the Tax Lane December 2018
This month's topics include: faster CCA write-offs; What is manufacturing and processing equipment; Corporate passive investment income and the small business deduction; CRA audits - liquor sales; 2019 indexation; Carbon tax and climate incentive payments.
Pre-Budget Consultations for 2019 Federal Budget
Canadians are invited to submit their ideas toward the Federal 2019 Budget.
Taxpayer Relief Deadline December 31, 2018
Haven't filed your 2008 tax return yet? Taxpayers are running out of time to file requests under the taxpayer relief provisions for the 2008 tax year and any reporting period that ended in the 2008 calendar year. As a result of a Federal Court of Appeal Case, Bozzer v Canada, the taxpayer relief provisions (fairness provisions) can apply to reduce interest and penalties which have accumulated in the 10 taxation years preceding the request for leniency, even if the tax debt causing the interest arose prior to that period. So, if a tax debt arose from a tax year prior to 2008, penalties and interest that have accumulated from 2008 to 2018 could still be reduced as a result of a 2018 request for leniency.
TD1 Forms for Employees and Pensioners
The TD1 forms for 2019 are 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.
RRIF Minimum Withdrawal Prescribed Factors
The prescribed factor for your 2019 withdrawal from a RRIF will depend on your age at the beginning of 2019. This is your age, or the age of a younger spouse, on December 31st, 2018. When your RRSP is converted to a RRIF, you can elect to use the age of a younger spouse to calculate your minimum withdrawals, as long as this election is done prior to receiving any payments out of the RRIF.
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.
Last Trading Date for 2018 Gains and Losses to be Recorded in 2018
The last trading date in 2018 for Canadian and US publicly traded stocks is Thursday, December 27th. Stocks purchased or sold after this date will settle in 2019, so any capital gains or losses on sale will apply to the 2019 tax year.
Investment Income Tax Calculators for 2019/2018 - all provinces and territories except Quebec
The purpose of these calculators is to show the big difference in taxes payable on different types of investment income, for taxpayers of any age. Even when the age credit and Old Age Security are clawed back, Canadian dividends and capital gains result in the least taxes payable when compared to other types of income such as foreign dividends and interest. The Quebec investment income tax calculator will hopefully be available soon.
RRSP Contribution Deadline for 2018
The deadline for RRSP contributions for the 2018 taxation year is Friday, March 1, 2019.
Canadian Income Tax and RRSP Savings Calculator for 2019 and 2018
This detailed income tax calculator includes the most common deductions and tax credits, and pension splitting. This version has a separate tab (page) for Dependants, and we've added the ability to transfer a disability credit from a dependant. It is a tax planning tool and financial planning tool, but will not actually file your tax return for you. It will be especially useful as a tax planning tool for those who have some control over their income.
Federal Fall Economic Statement November 21, 2018
The Fall Economic Statement has no personal income tax changes. The main business tax provision is legislative changes that allow full immediate write-offs for purchases after November 20, 2018 of machinery and equipment used in the manufacturing and processing of goods, and of specified clean energy equipment.
Ontario Fall Economic Outlook and Fiscal Review November 15, 2018
A new tax credit was announced for low-income workers residing in Ontario, effective for the 2019 and subsequent taxation years, providing a tax reduction of up to $850 for an individual. The non-eligible dividend tax credit rate was revised. Changes are also proposed for the provincial small business deduction, and tax on split income (TOSI).
2019 Basic Income Tax Calculator
Compare taxes on both types of Canadian dividends, capital gains, and other income with this simple calculator which shows every province and territory for 2014 to 2019. Also shows the marginal tax rates for different types of income for the year selected, again for every province and territory.
2019 Canada Pension Plan Contributions - Enhanced CPP
The maximum pensionable earnings for 2019 will be $57,400, and the rate will be increased to 5.1%, including the 0.15% first additional contribution for the enhanced CPP. The additional contributions will be deductible from income.
October 2018
Bill C-86, Budget Implementation Act, 2018, No. 2
Bill C-86 was tabled on October 29, 2018 by the federal government. It includes many provisions, including those re charities and non-partisan political activities, allowing CRA to calculate the new Canada Workers Benefit if a tax filer has not claimed it, extending the income tax reassessment period in a few different situations, and many other measures.
2019 Personal Tax Rate Tables
We've published our 2018/2019 tax rate tables, which show the combined federal and provincial/territorial tax rates for capital gains, both types of Canadian dividends and other income. There is a possibility things could change on November 21st with the federal fall economic update, and again when 2019 budgets are tabled. The indexation factors and amounts have not yet been confirmed to Canada Revenue Agency or to Revenue Quebec.
2019 Dividend Tax Credit Rates for Non-Eligible Dividends
We've updated the table of dividend tax credit rates to include 2019. Since the gross-up rate is reduced to 15% in 2019 from 16% in 2018, the dividend tax rate is changed for many provinces. Rates could still change when 2019 budgets are tabled.
2019 Enhanced Dividend Tax Credit Rates for Eligible Dividends
We've updated the table of dividend tax credit rates to include 2019. The only changes are BC and Quebec. This could change when 2019 budgets are tabled.
Old Age Security (OAS) Clawback
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!
Tax-Free Savings Account (TFSA) Withdrawals
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 several months, do it before Dec 31st so it increases your contribution room in January.
The TFSA contribution limit for 2019 will be $6,000, up from $5,500 in 2018.
2019 Non-Refundable Personal Tax Credits
We've published the tables of non-refundable tax credits for 2019 for Canada and all provinces and territories except Quebec. The indexation factors and tax credit amounts have not yet been confirmed to Canada Revenue Agency amounts.
Life in the Tax Lane November 2018
This month's topics include a multi-million dollar shareholder taxable benefit; eligible child care expenses; 2019 changes to employment insurance, 2019 increases to Canada Pension Plan premiums; and Independent contractor vs employee.
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.
Conversion of RRSP to RRIF - Partial Conversion Prior to Age 71
By converting some of your RRSP to a RRIF in the year you turn 65, you can take advantage of the pension income tax credit and pension income splitting with your spouse. If your financial institution says that you can only convert your entire RRSP to a RRIF, not just a portion of it, question this!
Provincial Budget Consultations
We'll try to post when there are provincial budget consultations available - right now we only know about Manitoba.
September 2018
Life in the Tax Lane October 2018
Topics this month: Donation of wine - valuation; Donation of life insurance - different tax consequences depending on how it's done; Tax on split income - business; Airbnb - hotel tax; GST/HST coming for online advertising; Voluntary disclosures program - number of applications; Working while on employment insurance.
On September 17th, the federal government posted Regulatory and Legislative Proposals Relating to the Taxation of Cannabis, and Explanatory Notes. This relates to excise duties on cannabis.
Detailed Canadian Tax Calculator - Northern Resident Deduction
The Northern Residents Deduction can now be entered in the detailed tax calculator. The residency portion provides a deduction of up to $8,030 per year. The calculator does not check to ensure that the limit for this deduction isn't exceeded - you'll still have to use the CRA form T2222 to calculate your deduction.
Effective January 1, 2019, employers with total annual payroll exceeding $500,000 will have to pay the new Employer Health Tax. Annual payroll includes bonuses, vacation pay, taxable benefits and other taxable payments to employees. Charities and non-profits will pay EHT when total annual payroll exceeds $1,500,000, and this threshold will be applied to each location of the organization with BC payroll.
Making a Spousal RRSP Contribution Online
If you plan to make a spousal RRSP contribution online, BE CAREFUL! You probably have to be logged into your spouse's RRSP account online to do this, and indicate it is a spousal contribution. If you're not sure about what you're doing, don't do the contribution online.
Donating Shares or Other Capital Property Can Eliminate Capital Gains
Capital gains can be eliminated by donating certain types of capital property (qualified investments, prescribed debt obligations, or ecologically sensitive land) 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.
Transferring Capital Losses to a Spouse
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.
Draft Legislation Released For Comments - Respond by October 13, 2018
Federal draft legislation would allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy. These changes also affect amateur athletic associations.
2019 Employment Insurance (EI) Rates
The 2019 employee EI rate is reduced to 1.62% from the 2018 rate of 1.66%. The employer rate is 2.268%, down from 2.324%. The maximum insurable earnings (MIE) is increased to $53,100 from the 2018 rate of $51,700. The resulting maximum annual contribution per employee for 2019 is increased to $860.22 from the 2018 maximum of $858.22, an increase of 0.2%.
Quebec 2019 Employment Insurance (EI) Rates
Because Quebec has their own parental insurance plan (QPIP), they pay a lower EI rate than the rest of Canada. Their 2019 employee EI rate is 1.25%, down from 1.30% in 2018. Employers will pay 1.75%, down from 1.82% in 2018. The employee maximum will be $663.75, down 1.24% from $672.10. Quebec has the same maximum insurable earnings (MIE) as the rest of Canada.
What Happens to Unmatured Fixed Term Investments Upon Death?
Most fixed term investments are not cashable or redeemable except on the death of the owner, and sometimes in the case of financial hardship. Our article refers to investments in a registered account, but the same would apply in a non-registered account. To be sure, terms and conditions of the investment should be reviewed before purchase, if this is a concern.
Northern Residents Deduction
The Northern Residents Deduction is a deduction from income, not a tax credit, so tax is saved at your marginal tax rate. There are two parts to the northern residents deduction - the residency deduction, and the travel deduction. If you are living in a prescribed zone for an entire year, the residency portion provides a deduction of up to $8,030.
August 2018
Life in the Tax Lane September 2018
This video discusses the CRA vehicle expenses project; non-partisan political activities of charities; GST/HST debt collection (yes they can recover the money you used to pay off your mortgage); royalties and active business income; "reasonable" business expenses; and US travel issues around cannabis.
Benefit and tax credit programs for people living in Ontario - access an online tool to find information about benefit programs you may be eligible for. It takes only a few minutes, and may help you.
How are RRSPs and RRIFs Taxed at Death?
When the annuitant of an RRSP or RRIF dies, the fair market value of the account at death is included in the income of the deceased for the year of death. When these accounts have named beneficiaries, no tax is withheld when the account is paid to the beneficiary, so the estate should be planned to make sure funds are available besides those accounts, to pay any tax liability. However, the named beneficiaries can be held liable for taxes unpaid by the estate.
US Federal Estate Tax May be Payable by Canadians
A U.S. federal estate tax return must be filed if a deceased Canadian resident who is not an American citizen owned U.S.-situated assets exceeding $60,000 US in fair market value at the time of death, including US stocks held in a Canadian brokerage, even if held in RRSPs or other registered accounts. However, the US Tax Cuts and Jobs Act (TCJA) amended the basic exclusion so that if your total worldwide estate in 2018 is less than $11.18 million US, you will probably not have to pay any US estate tax.
US Federal Estate Tax Calculator for Canadians
This very simple calculator will give you a rough idea of how much, if any, you may have to pay in US federal estate tax. The calculator is for Canadian residents who are not US citizens. Read our article on US Federal Estate Tax prior to using the calculator.
School's Starting Soon - Students and Income Tax
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.
Voluntary Disclosure Program (VDP) Changes
Changes were made to the VDP effective March 1, 2018. A new "Limited Program" now applies to taxpayers who have intentionally avoided their tax obligations.
CPP Contributions on Self-Employed Earnings Where No Tax Return Filed After 4 Years
When a tax return which includes the reporting of self-employed earnings is more than 4 years late in being filed, the contributions required on those earnings are deemed to be zero, and future benefits will be reduced related to those earnings. There can be penalties payable for failure to file a return of self-employed earnings, as well as for late tax returns.
Minimum Wage Rates, Labour Laws and Employment Standards
Employers and employees should be aware of minimum wage rates and current employment standards, including those regarding vacation and statutory holiday pay, rest periods, parental leave, and many other standards. Most provinces have had a minimum wage rate increase already in 2018. Alberta, Manitoba and Saskatchewan will have increases effective October 1, 2018.
Present and Future Value Calculator
This calculator will determine how much you need to invest today to achieve a desired amount in the future, and how much you could have in the future based on what you have invested today. It will also determine the effective interest rate, and how long it would take you to achieve a desired amount in the future based on other factors.
July 2018
Life in the Tax Lane August 2018
The Aug 2018 10-minute video talks about extended reassessment periods; individual income tax refunds beyond 10 years; Employment scam related to collections of accounts receivable; Corporate owned life insurance, capital dividend account, and ACB of the life insurance; Time limit for input tax credits; Sales taxes may now apply on sales to U.S. residents; Ontario carbon market cap-and-trade; BC government ending hidden ownership of real estate.
Federal Draft Legislation Released for Comments
On July 27 2018 the federal government released draft legislation related to sales and excise taxes and related to income tax, including extended reassessment periods. Canadians are invited to comment by September 10 2018.
Consultation on Canadians' Unclaimed Bank Balances and Unclaimed Pension Balances
On June 22, 2018 the Government of Canada released for comment a consultation paper. The aim of the consultation is to modernize the unclaimed balances regime and provide proposals for an unclaimed pension balances framework. Written comments should be sent by email, by August 21, 2018.
Guaranteed Income Supplement (GIS)
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. Note that capital gains can reduce the GIS payable even if they are offset by capital losses carried forward.
Understanding Our Tables of Marginal Tax Rates
Please read this article to understand the tables of marginal tax rates, especially if you're trying to compare to one of our tax calculators, such as the Basic Income Tax Calculator. In our tables, the marginal tax rates for capital gains and dividends at any income level (say $60,000) are the marginal rates on the next dollar of actual capital gains or actual dividend income, if the taxpayer has $60,000 of taxable income from sources other than capital gains or Canadian dividends.
2018 Donation Tax Credit Rates
Saskatchewan's donation tax credit rates for 2018 are reduced from 2017, while BC's rate for donations over $200 is increased.
Transferring Shares to a Registered Account
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.
Buying Real Estate From a Non-Resident of Canada
Know the tax implications of purchasing Canadian-situated real estate from a non-resident. Not knowing could be very costly!
Everyone in business, or with a rental property, is faced at some point with the decision as to whether an expense is capital or current in nature - in other words, whether the cost should be capitalized or expensed. There are general guidelines that can be followed to determine the answer, but in some cases the decision is left to the courts.
Alberta Assured Income For The Severely Handicapped (AISH)
AISH provides financial and health benefits for eligible Albertans with a permanent medical condition that prevents them from earning a living. Legislation enacted June 11, 2018 allows persons with disabilities to be the beneficiary of a trust without affecting their eligibility for the AISH program.
June 2018
Life in the Tax Lane July 2018
Lots of variety this month: Bill C-74 passed including TOSI and passive investment changes; Is a director liable for corp income taxes on liquidation?; Business vs personal expenses; Issues re meals and entertainment expenses; Retiring partner payments not pensionable; IRS launches non-resident projects.
Federal Budget - Bill C-74 Enacted
Bill C-74 received Royal Assent on June 21, 2018. It included the provisions for the Tax on Split Income (TOSI) changes and CCPC passive investment changes, as well as the new Canada Workers' Benefit (formerly Working Income Tax Benefit or WITB), indexation of the Canada Child Benefit, small business tax rate reduction and other provisions.
Information For Business Owners
See our Business page for articles for self-employed people and incorporated businesses - taxes, expenses, employees, payroll, keeping records, whether to incorporate, and many other topics.
Payroll Deductions for Ontario
Canada Revenue Agency has withdrawn the payroll tables that were revised for the proposed tax changes in the Ontario 2018 Budget. The government was replaced, and those tax changes were never enacted and will not happen. We'll have to wait for a budget from the new government to see what changes will be made. If you use p/r software and haven't received an update you'll hopefully receive it soon.
Should You Borrow to Contribute to RRSPs?
Let our article and our calculator help you with this decision. However, if you have never invested, don't start by borrowing for your RRSP!
Annual Retirement Income Calculator
How much will you be able to withdraw from your investments each year until they are reduced to zero? Our very simple calculator shows annual withdrawal amounts at varying average rates of return (which you can change), over several time periods. There is no allowance for inflation, and the withdrawal amounts are pre-tax. The withdrawals will not be 100% taxable of course - they will consist of capital gains, dividends, perhaps interest, and withdrawals of capital.
Waiting Past Age 65 to Start Your CPP Retirement Pension
The CPP Retirement Pension Plan calculation allows for increased pension for those who delay starting it until after age 65. If you wait till age 70 but don't work past age 65, this won't reduce your pension amount because those years of earnings can be dropped out.
This calculator, updated for 2018 budgets but NOT including Ontario 2018 budget tax changes, helps you to see the advantages of borrowing to invest in stocks and exchange traded funds (ETFs). You can input different interest rates, rates of return and other data to compare scenarios. Borrowing to invest is not advised for a novice investor - please read our article on Borrowing to Invest.
May 2018
This calculator has been updated for 2018 budget changes, but NOT including Ontario 2018 budget tax changes. It may be able to help you decide whether RRSPs or TFSAs are better for you. If you're in the lowest tax bracket, go with TFSAs!
Life in the Tax Lane June 2018
June video topics: Employer provided social events may result in taxable benefits to employees; Return of capital from funds purchased with borrowed money; CRA checking class 10 vehicle additions; Taxation of CPP death benefit / automatic upload to tax returns; Gifting receipts re golf tournaments; New information required on donation receipts; RRSP overcontributions.
The RRSP vs Mortgage (or other loan) calculator, which has been updated for 2018 budgets (except Ontario 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!
CPP Retirement Pension Calculator
The CPP Retirement Pension Calculator has had a software update, and will now retain your data. The main purpose of the calculator is to help you see the effect of starting to receive your pension at different ages, not to provide an exact amount of your pension.
Saskatchewan 2018 Marginal Tax Rates for Non-Eligible Dividends
The marginal tax rates for 2018 for non-eligible dividends have been revised to reflect the change from the Saskatchewan 2018 Budget. The Detailed Canadian Tax Calculator, Basic Tax Calculator and Investment Income Tax Calculator have all been revised to reflect the change.
Basic Canadian Tax Calculator 2018 and earlier years
The Basic Tax Calculator, updated for 2018 budgets EXCEPT the tax changes from Ontario 2018 Budget, is a very simple calculator which requires little input, but will show you the total taxes, as well as the marginal tax rates for all types of income, for all provinces and territories.
2017 and 2018 Canadian Tax Calculator
The Detailed Canadian Income Tax and RRSP Savings Calculator has been updated for all provincial budgets EXCEPT for the tax changes from the Ontario 2018 Budget, since no bill has yet been tabled for the budget, and an Ontario provincial election will be held early in June.
2017 and 2018 Quebec Tax Calculator
The Detailed Quebec Income Tax and RRSP Savings Calculator has been updated for changes from the Quebec 2018 Budget.
Investment Income Tax Calculators for 2017 and 2018
These calculators, for all provinces and territories, show the big difference in taxes payable on different types of investment income. Even when the age credit and Old Age Security are clawed back, Canadian dividends and capital gains result in the least taxes payable when compared to other types of income such as foreign dividends and interest. The calculators have been updated for all budget changes EXCEPT for the tax changes from the Ontario 2018 Budget.
Interest Expense re Investments and Return of Capital
Interest expense incurred to earn investment income can be deducted as carrying charges on your tax return. If there is a return of capital from those investments, this may make some of the interest expense non-deductible!
Time to Plan Ahead for 2018 Tax!
Now that your 2017 tax return is done, make sure your tax records are organized, and plan to accumulate any tax-related documents in one place (perhaps electronically), to make things easy when the 2018 tax return has to be filed. If your tax situation is getting more complicated, now is the time to find a tax professional to work with you, not next tax season when they'll all be extremely busy!
Principal Residence Exemption Formula
The "one plus" rule allows a principal residence exemption to be claimed for both the sold home and the new home at the time a new home is acquired. See our example of the calculation for when 2 homes are owned at the same time for a number of years.
So far there are no changes from the 2017 sales tax rates, except for the reduction of the rate applied to taxable purchases of electricity in BC, from 7% to 3.5%. There is no PST in BC on residential purchases of electricity.
April 2018
If you are an employee, you should be paying the premiums on your disability insurance to ensure the income will be tax-free. If you are self-employed, it's extremely important to buy disability insurance to ensure you'll have income in the case of a medical event which results in you being unable to work for a period of time.
Browse our topics for businesses, including income tax issues, expenses, employees and payroll/payroll taxes. Learn about the small business deduction, capital gains exemption, foreign income and asset reporting, vehicle costs and taxable benefits, capital vs expense, and many other topics.
Free Taxation Videos and Recorded Webinars
Canada Revenue Agency (CRA) provides free videos and webinars to assist individuals, families, businesses and charities in learning about government services and income tax.
Resources for Persons With Disabilities
Know what deductions, refundable and non-refundable tax credits are available, and information about medical expenses. Some tax credits can be transferred between spouses. Information about Registered Disability Savings Plans (RDSPs), government benefits, and unlocking locked-in pension plans.
There are many tax issues for students and/or their parents, such as eligibility for tuition, education and student loan interest tax credits, private school tuition fees, deducting moving expenses, and child care expenses.
If you've discovered an error in your return, or a missed deduction or forgotten T-slip, it's quite easy to request a change to your tax return.
May video topics: Making payment arrangements with CRA; Incentives must be included in business income; End of U.S. Offshore Voluntary Disclosure Program (OVDP); Problems with using legacy software; Amended T4s may not be assessed quickly; and Allowable business investment loss (ABIL).
Be aware of what can be claimed as eligible medical expenses, including transportation costs where the taxpayer must travel at least 40 km to required medical services, premiums paid to a private health services plan, such as travel medical insurance, provincial prescription drug plan premiums, and many other expenses.
Quebec 2018 Table of Marginal Tax Rates
The Quebec 2018 table of marginal tax rates has been revised to reflect the changes in the dividend tax credit rates for both eligible and non-eligible dividends, for dividends received after March 27, 2018, as per the Quebec 2018 Budget.
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.
Can't Afford Tax Software? NetFile Your Tax Return for Free
Don't use paper forms when you can NetFile for free - some software packages are free for everyone.
What If I Can't Afford to Pay the Tax I Owe?
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.
Tax Treatment of Income From Investments in Call and Put Options
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.
Saskatchewan 2018 Budget - April 10, 2018
There are no provincial tax rate increases in this budget, and no personal income tax changes. A couple of PST exemptions are being discontinued - exemption for Energy Star appliances, and exemption for used light vehicles.
Prince Edward Island 2018 Budget - April 6, 2018
The PEI budget provides for a $500 increase in the basic personal amount for 2018, and a further $500 increase for 2019, with pro-rata increase for the spousal and equivalent-to-spouse amounts. The provincial portion of HST will be rebated on the first block of residential electricity and on lower emitting heat sources. The small business corporate tax rate will be reduced from 4.5% to 4% this year, with a corresponding adjustment to the non-eligible dividend tax credit. There is a new Small Business Investment Grant.
RRSP Contribution Not Recorded on Previous Year Tax Return
If you made RRSP contributions from March 1, 2016 to March 1, 2017, this should have been included on Schedule 7 which was filed with your 2016 tax return. Check our article to find out what to do if the contribution wasn't recorded, and which line number to use when adjusting your tax return with CRA.
US Citizens Outside the US - Offshore Voluntary Disclosure Program (OVDP) is Closing
The OVDP is closing, and the deadline for submissions is September 28, 2018. See this article on USTaxTips.net.
March 2018
If your business is incorporated, you must file a separate corporate income tax return. If not, the business income is included on specific forms in your personal income tax return. A professional accountant can help to ensure that you claim all allowable expenses.
Everyone in business, or with a rental property, is faced at some point with the decision as to whether an expense is capital or current in nature - in other words, whether the cost should be capitalized or expensed. There are general guidelines that can be followed to determine the answer. This article also deals with expense and capital items which are used both for business and personal use.
Life in the Tax Lane April 2018
This month's 10 minute video discusses a malicious prosecution by CRA; Passive income provisions of the 2018 budget, related to the small business deduction; Tax on split income; and US transition tax and Canadian Corporations.
Withdrawals For Home Buyer's Plan (HBP) or Lifelong Learning Plan (LLP)
Withdrawals from your RRSP from Jan 1 to Dec 31, 2017 for the HBP or LLP will be on a 2017 T4RSP, and must be reported on Schedule 7 of your 2017 tax return, even though they don't affect your income.
Repayments to Home Buyer's Plan (HBP) or Lifelong Learning Plan (LLP)
If you made repayments to your RRSP for the HBP or LLP from Jan 1/17 to Mar 1/18, make sure you report them properly on your tax return in order to not lose RRSP contribution/deduction room.
Why File a Tax Return if no Tax is Payable?
Even if you have low or no income resulting in no income tax payable, it may be to your advantage to file a tax return to qualify for certain benefits or to receive refundable tax credits, and to create RRSP or TFSA contribution room.
Do you have a worthless investment? Can't sell shares because they've been delisted? There may be a way to claim the capital loss.
Ontario 2018 Budget - March 28, 2018
The budget proposes to eliminate the personal income tax surtax, and revise the tax brackets and rates, as well as increase the tax rates for the portion of donations in excess of $200.
Ontario 2018 Current vs Proposed Personal Income Tax Rates
Our table shows the current 2018 marginal tax rates and compares them to the tax rates proposed by the Ontario 2018 Budget.
Federal Budget Implementation Act, 2018, No. 1
Bill C-74 was tabled in the House of Commons on March 27, 2018, including legislative provisions for the Canada Workers Benefit, indexation of the Canada Child benefit, reduction of the small business tax rate, income sprinkling, passive investment income, and other measures.
Quebec 2018 Budget - March 27, 2018
Quebec's budget introduces a new first-time home buyer credit. The small business tax rate will be reduced each year until it is 4% in 2021. Many personal and business tax credits are enhanced. Eligible and non-eligible dividend tax credits are reduced immediately, and again each year for a few years.
Newfoundland and Labrador 2018 Budget - March 27, 2018
Not many tax changes in this budget - a new Search and Rescue Volunteer Tax Credit will be available, the retail sales tax on auto insurance will be reduced, and the exemption threshold for the provincial payroll tax is being increased, with all these changes effective in 2019.
Alberta 2018 Budget - March 22, 2018
There were no major tax changes announced in Alberta's 2018 Budget. A new Interactive Digital Media Tax Credit will take effect April 1, 2018. The Alberta Investor Tax Credit and Capital Investment Tax Credit are extended to 2021-22. The budget also details how much excise tax will be collected for them on cannabis sales.
Loans to Lower-Income Spouse or Child
The interest rate for these loans must be at least equal to a prescribed rate set by Canada Revenue Agency at the time the loan is created, unless the rate that would have been agreed upon between parties dealing with each other at arm's length would have been lower. This interest rate is then used throughout the loan. The prescribed rate for these loans is increasing from 1% to 2% effective April 1, 2018.
Nova Scotia 2018 Budget - March 20, 2018
The Nova Scotia government is removing the $10,000 limit on medical expenses eligible for the medical expense tax credit for other dependent relatives, making it consistent with the Federal tax credit. They are creating a new Innovation Equity Tax Credit starting in 2019. The budget also details how much excise tax will be collected for them on cannabis sales.
RRSP Deduction Room Carried Forward, RRSP Unused Contributions Carried Forward
If you have not contributed to an RRSP the maximum that you are allowed to contribute, then you have deduction room (or contribution room) carried forward. When you have made RRSP contributions but have chosen not to claim all of those contributions on your current year tax return, you have unused RRSP contributions carried forward.
Manitoba 2018 Budget - March 12, 2018
The Basic Personal Amount is increased for 2019/2020, and the Small Business Deduction (SBD) limit is increased effective January 1, 2019. A carbon tax will be in effect starting Sep 1, 2018. Tobacco tax increases effective midnight March 12th, 2018. A child care centre development tax credit is introduced for private corporations. Other tax measures were also announced.
Employed tradespersons and employed apprentice mechanics can deduct a maximum of $500 when they are required to purchase their own tools as a condition of their employment.
Claiming Tax Credits and Deductions With a Spouse
There are several tax credits that can be shared between spouses, or claimed by either spouse. To ensure the maximum credit for medical expenses, they should be combined and claimed on the tax return of one spouse. Donations should also be combined and claimed by one spouse. Which spouse? That depends on a few factors - see the article.
Child care costs are normally deductible by the spouse with the lower net income before deducting the child care costs. There are weekly and annual limits for child care costs deducted, as well as a limit based on your annual income.
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.
Election to Stop Paying CPP Contributions
An employee can complete the CPT30 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.
Do you own rental property? See what expenses can be deducted, and what happens if you move into your rental property, or start renting out your principal residence. Is your rental income considered property income or business income? Why does it matter?
Yukon tabled their 2018 Budget on March 1st with no tax changes. Upcoming budgets include Manitoba on Mar 12, Nova Scotia on Mar 20, Ontario on Mar 28 and Saskatchewan on Apr 10.
February 2018
By 1980, the oil companies knew there was going to be large production of oil from the oil sands. Since 1980, 23 refineries have been shut down in Canada.
2018 Federal Budget - February 27, 2018
The budget proposes to rename the Working Income Tax Benefit to the Canada Workers Benefit, and enhance the benefit, starting in 2019. Tax measures include a reduction to the business limit for the small business deduction, based on the investment income earned by a Canadian Controlled Private Corporation (CCPC), and a revision to the Refundable Dividend Tax on Hand (RDTOH) system of refundable taxes. Tobacco excise taxes increase immediately, and legislation for cannabis excise tax is introduced.
The small business deduction provides a reduced rate of tax for CCPCs, for their active business income up to the business limit. The business limit is reduced based on taxable capital, and starting in 2019 will be reduced based on investment income earned in a CCPC, as per the 2018 federal budget proposal.
We've prepared a table to compare the newly proposed 2019 Canada Workers Benefit to the existing 2018 Working Income Tax Benefit, for most provinces and territories.
Canadian Income Tax and RRSP Savings Calculator Update
The detailed Canadian Tax Calculator has been updated in relation to Caregiver credits, to simplify things, and has been updated for the change in the BC Caregiver credits for 2018. More Tax Calculator changes may be required after the federal budget on Feb 27th.
Life in the Tax Lane March 2018
Lots of info in this month's 10 minute video! Education/textbook credits; Home accessibility credit; Caregiver credits; Principal residence dispositions; Income-splitting loans; Salaries to family; Owner/manager employment expenses; and US estate tax. Lots to learn!
Quebec 2018 Budget - Pre-budget Consultations
Provide your opinion by taking part in the pre-budget consultations.
Filing Your Tax Return - Deductions From Income
Deductions are usually better than a tax credit, because they are reducing your income, so your tax is reduced at your marginal tax rate, not the lowest tax rate. Available deductions include child care expenses, interest expense, moving expenses, and other deductions.
Reinvested (Phantom) Distributions From Canadian Exchange Traded Funds (ETFs)
The T3 you receive for your income from an ETF may have an amount in box 21 for capital gains. It is possible that all or part of this amount was not actually paid to you, but was reinvested. You have to increase your adjusted cost base (ACB) for the amount of reinvested distributions. This will reduce your capital gain when you eventually dispose of the investment. You may have to do some searching to determine the amount of the ACB increase, although at least a couple of brokerages have done things to make this easier.
Tax Treatment of Income From Investments
Learn how to properly track your adjusted cost base (ACB) and report income depending on the type of investment - shares, bonds, mutual funds, income trusts, ETFs, call and put options and more. Discussion of return of capital, negative ACB and reinvested distributions from ETFs.
Federal and Provincial Rights Under the Canadian Constitution Act
If the Alberta-BC trade dispute results in a Constitutional fight before the Courts, it could easily go on for a decade. The only way for this to be resolved without an extended court battle is by agreement between the provinces.
BC 2018 Budget - February 20, 2018
MSP is to be eliminated effective Jan 1, 2020, and a new Employer Health Tax will be created starting Jan 1, 2019. New Child Care Fee Reduction program, to be followed by Affordable Child Care Benefit. A new BC Caregiver Credit replaces the Infirm Dependant and In-home Care of Adult Relative tax credits, starting in 2018. Increases to property transfer taxes, foreign buyers tax, school tax, and some provincial sales taxes. Measures regarding users providing accommodation via such websites as Airbnb.ca. See the article for more information.
There are several ways of splitting income, either with a spouse or child. Some methods of splitting income with a spouse are done only on the tax return, such as pension splitting.
Eligible Dependent / Equivalent to Spouse Tax Credit
Are you a single parent? Or, are you supporting a parent or other dependent relative? The equivalent to spouse tax credit may be available.
Why Do We Export Oil Out Of North America?
Any oil that is exported from North America must then be replaced by importing oil back into North America. It would reduce the chance of a major tanker oil spill if oil was not exported by tanker in the first place. Conclusion: Canada and the provinces need to tax imports and exports of oil shipped by tankers in order to build a reserve fund of at least $20 billion, so that the taxpayers don't end up paying for a major spill.
Many people don't realize that they should be paying lower premiums, or no premiums, for BC MSP. For 2017 or 2018, a person with ADJUSTED family net income less than $42,000 (so, senior couple with line 236 family net income of $48,000) should be applying for premium assistance. If you've been paying in past years when you shouldn't, MSP will refund as far back as 2011 premiums (as per a person I spoke with at MSP today). ADJUSTED family net income of less than $26,000 for 2018 (so, senior couple $35,000) means NO PREMIUMS are payable.
If your income is relatively low ($30,000 for an individual) and your tax return is fairly simple, you may be able to get free help to prepare your tax return.
NetFile and EFile Available February 26, 2018
NetFile will be available starting Feb 26, 2018 for filing 2014 to 2017 personal income tax returns. Returns for years prior to 2014 must be filed on paper. EFile will also be available starting Feb 26, 2018.
Lifetime Capital Gains Exemption (LCGE)
The LCGE is increased for indexation to $848,252 for 2018, from $835,716 for 2017, for qualified small business corporation (SBC) shares. LCGE of $1 million is available for qualified fishing or farming property.
The Federal 2018 Budget will be tabled on Tuesday February 27th at approximately 4 pm eastern time.
Cost of Oil Spill Cleanups / Who Pays for the Cleanup
We've added information on three oil spills for which we could find cleanup cost information, including how much oil was spilled, and who pays the cost of the cleanup. In warm waters such as the Gulf of Mexico, there are oil-eating organisms which break down oil. These organisms can't survive in cold water, so the oil persists.
North American Oil - Alberta-BC Trade Dispute
We've included some points to ponder about the Alberta-BC trade dispute. The points discussed today are about taxation. We'll have more to come in future weeks. If you have comments please feel free to make them on the Facebook post, which will allow discussion between different parties.
Are you just out of school and wondering how you'll eventually become financially independent? Or older, but still wondering? Free in 30 is the story of the couple who own this website, how they started out married life very young and with nothing, but managed to retire at 50. No - they're not retired any more, but this is by choice. You too can become financially independent, but not by overspending!
Yes, it's that time of year again. Both New Brunswick (Jan 30) and Northwest Territories (Feb 8) have tabled their 2018-19 budgets, with no new tax measures announced. BC will table its budget on February 20th, and Manitoba on March 12th. Budget consultations will end on February 18th for Prince Edward Island, and on February 23rd for Nova Scotia.
January 2018
Deductible Employment Expenses
Expenses that are paid to earn employment income can sometimes be deductible, including any GST/HST that was paid on them. This can only be done if your employer requires you to pay the expenses, and either you didn't receive reimbursement for the expenses, or if you were reimbursed, then the amount you received is included in your income. Form T2200 must be completed by your employer in order to claim employment expenses.
The RRSP vs Mortgage (or other loan) calculator, which now uses 2018 tax rates, 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!
Filing Your Return - Income, Deductions, Tax Credits
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. Make sure you take advantage of available tax credits!
Life in the Tax Lane February 2018
This month's 10 minute video discusses: CRA's postal code project targeting rich homeowners; CRA obtaining information from 3rd parties such as PayPal; taxation of cryptocurrencies such as BitCoin; Tax Court Case re miscoding of revenues on corporate tax return; another change for 2017 re filing requirements for principal residence exemption; IRS revoking or denying passports for unpaid taxes.
RRSP/RRIF Withdrawal Calculator
Now that you know your end-of-year RRIF market value, use our RRSP/RRIF calculator to calculate your 2018 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! The maximum withdrawal calculation has been refined to provide a result closer to the number of years desired.
The investment return calculator will provide you the % return and the annualized % return on an investment account, a portfolio, or a single investment. It will retain data for you on your computer so you don't have to re-enter everything the next time you use it.
Historical Returns on Investments - Stocks, Bonds, T-Bills
It was an exceptional year for most stock markets, and a good year for the S&P/TSX. However, the returns on foreign stocks in Canadian dollars were less than in US dollars because the Canadian dollar once again increased 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 1, 5 or 10 years one would be losing money after inflation by investing in Canadian 3-month T-bills or Canadian government 1-3 year bonds.
Which is Better - TFSA or RRSP?
Whether the TFSA or the RRSP would be a better choice for you depends on your income and your financial situation. This article points out the advantages and disadvantages of each of these registered accounts, and when one might be better for you than the other.
This calculator, which now includes 2018 tax rates and TFSA/RRSP limits, may be able to help you decide which type of account is better for you.
Transfer Shares to Your Registered Account, But Not at a Loss!
You can transfer shares from a non-registered account to a registered account, such as your RRSP or TFSA, in order to make your contribution. 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.
Canada Revenue Agency (CRA) New File My Return Telephone Service, Mailout of Tax Forms
Starting February 2018, eligible individuals with low income or a fixed income that is unchanged year-to-year will be invited to make a phone call to a dedicated automated phone line, answer a series of short questions and give some personal information, to file their tax returns.
Also starting February 2018, tax packages will be mailed to individuals who normally file paper returns, so that they don't have to go to a Canada Post office to get these forms.
Working Income Tax Benefit 2017 and 2018
The working income tax benefit (WITB) is a federal refundable tax credit for low-income individuals or families with working income over $3,000 (base amount for most provinces and territories). The tables for 2017 have been confirmed to CRA amounts. The tables for 2018 are our calculations based on the 2018 indexation factors, and will be confirmed when WITB amounts are available from CRA in November 2018.
Exchange Rate for Purchase of Foreign Shares
If foreign funds are used to purchase or sell shares, Canada Revenue Agency indicates that the exchange rate on the settlement date, not the trade date, should be used when converting to Canadian dollars.
Reporting Foreign Income and Expenses on the Tax Return
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 2017 is 1.2986.
See also Prior Years:
Revised: December 16, 2018