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What's New by Month
June 2018
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: June 04, 2018