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TAX
TIPS
To Save You Money Business Income Employment Income
Investment Income Retirement Income
- If children under 18 receive money to invest from a family member,
any income from the investment will be taxed in the hands of the family
member who gave it.
- As a taxpayer you can claim a non-refundable federal tax credit of
17% for interest paid on student loans. Only those loans approved under
the Canada Student Loans Program, the Canada Student Financial
Assistance Act and provincial student loan programs are eligible for the
tax credit. Contact your financial institution or the Department of
Human Resources Development Canada to receive a statement of your
eligible interest payments.
- Any money won from gambling in casinos or lotteries in Canada is not
taxable.
- If you own your own business and pay your spouse and/or children a
wage or salary,they are deductible provided they are paid by you for
work done with respect to your business. These salaries or wages must be
at rates that you would normally pay an unrelated employee for doing the
same work. These salaries must be reported on T4s just like for any
other employee.
- When entertaining clients at a golf club, remember that 50% of the
cost of meals and beverages is deductible, provided the entertainment
has a business purpose. Note that no deduction is allowed in respect of
any expense incurred in respect of membership fees or dues (whether
initation fees or otherwise). Ypu shouldmake sure that deductible items
are clearly itemized on the receipt, otherwise no amount will be
deductible.
- Under the Canada Elections Act, political donations at the federal
level may be eligible for tax credits, so keep your receipts. You can
claim 75% of the first $200 donated and 50% for any amount over $200 to
a maximum of $550. For the amount over $550, you are allowed to claim
1/3 of the excess contribution to a maximum credit of $500, which credit
is reached when $1,075 has been contributed.
- If you have any children under the age of 18, you should receive a
monthly Child Tax Benefit for each child. You should place these funds
in an interest-bearing bank account in your child's name. Since the
account is not in your name, the interest earned on it will not be
taxable to you.
- If you have a severe and prolonged mental or physical impairment you
may be eligible for a non-refundable tax credit. To qualify for the
disability credit you need a doctor, or in certain cases, a person with
special qualifications in regard to a particular disability to certify
on Form T2201 that your ability to perform activities of daily living
are noticeably restricted and that the impairment has lasted or can be
reasonably expected to last for a continuous period of twelve months.
- You are allowed a tax credit for medical expenses for yourself, your
spouse and your dependants, subject to certain rules, for any 12 month
period ending in the tax year.
- If you as an officer or employee are ordinarily required to work
away from your employer's office, you may be allowed to deduct
travelling expenses so incurred and not reimbursed by your employer. In
order to claim these, your employer must complete form T2200 on your
behalf.
- Your Canadian Pension Plan Benefits can be transferred to your
spouse. This may put you both in a lower tax bracket.
- If any of your employment income is from tips, you should include
them on your income tax return. It would be wise to keep a written
record of the tips. This may help you keep your tip income from being
reassessed.
- If you work and have children, you are eligible for a variety of
child care expense deductions.
- If you are self-employed and work from home you should make sure you
claim all of your allowable home business expenses.
Business Income
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Expenses
- A variety of expenses may be deducted in different ways. Therefore
it is advisable to contact your Chartered Accountant to determine the
most favourable tax treatment.
- The Income Tax Act allows you to deduct any reasonable expense, as
long as it is incurred for the purpose of doing business or earning
income.
- Certain items are treated as capital property, such as a computer,
manufacturing equipment, or an automobile. These should be treated as
capital costs.
Meals And Entertainment
You
Can Deduct:
- 50% of the cost of meals and beverages when you entertain clients.
- 100% of providing meals for employees working at remote work sites
(with some exceptions).
- Meals and entertainment generally available for all employees in
respect of six or fewer special events in a calendar year.
Travel Expenses
You Can Deduct:
- Business travel expenses such as lodging, public transportation and
meals, subject to certain limitations.
Office
Expenses
You Can Deduct:
- Supplies like pens, pencils, paper supplies, etc.
Non-Deductible:
- Capital property such as desks,chairs, storage cabinets, etc. With
these items, the capital cost allowance rules apply.
Prepaid Expenses
These are expensed as the
benefits are incurred.
Salaries
You Can
Deduct:
- Salaries to members of your family (spouse and or children) if they
are paid by you for work carried out in your business.
Vehicles
Vehicle expense deductions depend on a
variety of things, including whether your car has been leased or
purchased, type of vehicle, personal use, etc.
Employment
Income
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Under Revenue Canada guidelines, there is a
distinction made between employed and self-employed persons. Your taxable
income can vary greatly depending on which category you fall into. When
deciding whether you are employed or self-employed, CCRA considers:
- the control your employer has over your work re time and re way
services are to be performed
- if you are required to work a certain number of hours a day
- who carries the risk of business loss
- whether you supply your own tools
- whether you have an opportunity for profit or risk of loss from the
enerprise
- whether you are able to determine your own work schedule, and
- whether you provide services to more than one source
You Can
Deduct:
- Interest on money borrowed for business purposes, subject to certain
exceptions
- CPP/QPP and EI contributions re wages paid to employees.
- Wages to employees.
- Vehicle travel expenses incurred in the course of employment, which
are not reimbursed by your employer, subject to certain limitations.
+ Many other legitimate expenses
Investment
Income
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Investment income is income that you earn from your
property. This can include: rental income, royalties, dividends, interest,
etc., as well as the interest earned on investments such as Canada Savings
Bonds. Stocks, bonds, trade-marks, computers, office buildings and lands
are capital property. You will normally incur a capital gain or loss when
you sell property. A capital gain is taxable at 50%. A capital loss can be
taken as a tax deduction, but the amount of the loss will vary depending
upon the year that it occurred. You are allowed to carry losses back three
years, use them in the current year, or carry them forward
indefinitely.
Retirement Income
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The Canadian Pension Plan (CPP). This plan provides
periodic benefits to retirees, dependent children, a surviving spouse, and
the disabled. As an employee, you contribute a percent of earned income.
This amount is matched by your employer, who claims it as an expense. A
self-employed you must pay both portions of CPP.
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Contact me For All Your
Business And Personal Accounting, Auditing or Taxation
Needs!
Herb Kokotow, Chartered
Accountant
3
German Mills Road, Thornhill, Ontario, Canada, L3T 4H4
Telephone:(905)
764-6175 or Email:kokotow6175@rogers.com
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