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How Does Pension Income Splitting Work?

Tom Drake — Mon, 23 Apr 2012 09:00:37 +0000

One of the difficulties that many Canadians face as they age is the fact that pension income can boost taxes paid. This can be especially frustrating in situations when you might have a higher income due to you pension, investments and possibly a higher income job still, but your spouse has a much lower income and a lower tax rate.

Starting with tax year 2007, the Canada Revenue Agency has introduced a new way of reporting pension income: You can actually split it so that some of the income goes to your spouse in a lower tax rate. Overall, the effect of pension income splitting can be to lower your household tax bill.

Reallocating Pension Income to Someone Else

If you want to reallocate some of your pension income to someone else, you need to be a Canadian resident at the end of the year, and you also need to be in a common law partnership or marriage with the person you plan to transfer the income to. Some of the pension income that qualifies include:

Annuity payments from RRSP & RRIF if you are 65 at the end of the year (or if you are receiving them as a result of the death of an eligible partner)
Taxable portion of life annuity payments from a pension fund or superannuation fund.

These are sources of income that can boost your tax rate and cost you more money. Being able to determine an allocation of funds that can be included as someone else’s income can be helpful in lowering household taxes.

Realize, though, that some of your income can’t be reallocated in this manner. Old Age Security, Canada Pension Plan (and Quebec Pension Plan), and retirement compensation plan income are not eligible for pension income splitting.

How to Report Your Pension Income Splitting

In order to take advantage of the pension income splitting provision, both you (the pensioner) and your partner (the pension transferee) need to file tax returns. Together, you fill out Form T1032, Joint Election to Split Pension Income. Both of you need to sign the form in order for it to be valid. The amount that is split appears on Line E. Each of you need to file a tax return. However, the amount from Line E will go on different lines of your T1 forms. The pensioner reports the amount on line 210, and the pension transferee reports the amount line 116.

Once this is done, the income for each of you changes. If your partner’s income is much lower than yours, there is a good chance that adding more won’t harm your situation. Indeed, he or she will still likely be in a lower tax bracket. And, if you plan it properly, you might even drop to a lower tax bracket as a result of the income splitting. Even if you don’t drop, though, pension income splitting can still reduce your income so that you don’t pay as much in taxes.

http://www.youtube.com/watch?v=n5qM_69wpiU

Talk to a tax professional to get a better idea of how pension income splitting works, or visit the CRA web site.

How Does Pension Income Splitting Work? originally appeared on Canadian Finance Blog on April 23, 2012.

Dual Citizens and Double Taxation

Teacherman — Thu, 12 Apr 2012 09:00:14 +0000

“It’s kind of cool to be a dual citizen,” I used to tell people, “you are able to cross the border easier, you have work options in the USA, and you can even vote for President if you are so inclined.” My attitude has completely reversed in the last year. I should warn that a lot of what I am about to say is basically sour grapes. In case you haven’t paid attention to this ongoing taxation saga in the news (what, not everyone love a good tax story?) many Canadian citizens, or long-time Canadian residents have recently found out that Uncle Sam and the IRS are hot on their trail. I happen to be one of these souls that now has patriotic duties in each country to fulfill. If you are in the same boat as myself, chances are you had likely never heard of this tax filing obligation for dual citizens. The reason is has come to my attention (and many others’) lately is because as of 2013 the IRS is forcing Canada’s financial services to show them our records.

The Land of The Tax Grab

The whole situation is a result of the unique double taxation policy of the American government. The USA is one of the only governments in the world that taxes people based on their citizenship and not their residency status. This means that you can live in Canada, work in Canada, and in theory, never actually have ever been to the USA, but still owe taxes to the IRS. If you’re confused, don’t worry, you’re in good company. There are roughly a million Canadians in this boat, and most of them don’t even know that they need to file taxes, or are determined to stick their heads in the sand until this goes away. Needless to say, I’m not interested in that tactic. The fact is that if you were born in the USA, or one of your parents was born in the USA, you are likely considered an American citizen by the USA government. It doesn’t matter if you call yourself a Canadian. It doesn’t matter if you don’t want to be an American (just wait until I tell you how difficult it is to go down that road), it definitely doesn’t matter if you already paid Canadian taxes on your income. None of those things precludes you from your patriotic duty of filing USA tax returns in the eyes of Uncle Sam and the yawning American debt machine.

You Don’t Owe Taxes… Just 25% Of Your Bank Account

Now that I’ve scared a million Canadians half to death, here is the good news. Almost none of you owe any taxes. Without going into mind-numbing detail, the basic idea is that the USA and Canada have a bunch of deals that mean that Canadian residents will almost never have to pay taxes in the USA. There are some unique circumstances with investing large amounts of money, or owning your own business where I think it might be possible, but I’m not sure. For people that simply work in Canada and have a fairly simple tax situation, I can almost guarantee that you don’t owe any tax dollars. What you may owe, especially if you choose to wait until the IRS comes after you, is all kinds of penalties for not filing your taxes. There are many forms that have to be filled out going back six years, and none of them are really made for easy reporting for people in our position. For some of these forms, the IRS can actually seize 25% of everything in that account as a penalty for non-compliance.

Is Not Filing an Option?

As an American citizen who lives and works in Canada you have to file a million (figuratively speaking) forms that go back at least six years, and then a bunch every year after that. I am in the process of doing this right now. Some of these forms have huge penalties (up to 25% of the entire life’s savings in some cases) if they are not filed on time. Right now there is a sort of vague amnesty in effect, but that will run out eventually. If I was single, or married to someone who was not an American I would pursue renouncing my American citizenship (even though this is extremely difficult to do, and costs hundreds of dollars); however, my significant other is an American and has a lot of family in the USA. Guess how they treat former American citizens who “don’t want to be American” any more at the border? Yeah… it’s worse than whatever you just pictured. The fact is that every American citizen in Canada has to file a basic 1040, and likely a Form 2555 and a FBAR (foreign bank account report). If you have a RESP or a RRSP that becomes another headache. TFSA’s are not recognized in the States as well, so have fun with that. I am right in the middle of this tax filing mess right now. I was quoted “around $1000” to bring my tax situation up to date, and that was from a family friend. I have heard of H&R block gouging people for around $3,000 just to file that recommended six years’ worth of returns. Then you still get to continue to pay every year. I’m trying to do this on my own because I’m too cheap to pay that much money, but let me tell you, I’m reconsidering this adventure (and I find the Canadian tax system pretty easy).

Taxation Without Representation

The bottom line is that the USA is using a massive fishing net to try and catch a couple of big whales. In attempting to get tax evaders (I’m still trying to figure out who in the heck looks to Canada as a tax shelter) the IRS has put hundreds of thousands of innocent people in their crosshairs. So far the Canadian government doesn’t seem at all interested in standing up to the their big brother, and I highly doubt any elected American official gives a crap because we can’t vote for Senators or House Representatives anyway. I don’t like the idea of hoping it all blows over since I could basically be stopped at the USA border at any time and asked why I have not fulfilled my duties as an American citizen. The really irritating thing is that I’m not completely convinced that anyone will even look at these tax reports. Think of the man hours that the IRS will have to spend sorting out all this paperwork in order to get $0 worth of taxes from almost everyone of us! The whole situation is completely ridiculous when you consider that the big whales they are after almost certainly have the resources to evade capture forever. As usual, government efficiency at its best.

Dual Citizens and Double Taxation originally appeared on Canadian Finance Blog on April 12, 2012.

UFile Online Tax Software Review

Alan Schram — Wed, 11 Apr 2012 09:00:09 +0000

Every year I end up filing my own taxes. It’s not something that I ever want to do, but it is something that needs to be done, so I do it. For the last couple of years, I’ve used and reviewed QuickTax and TurboTax. This year, however, I had the opportunity to try out UFile instead. Ufile has a couple of tax preperation software options. You might see them in stores like WalMart or FutureShop around this time of year, when tax season is in full swing. There’s some Windows software, and there’s even a professional version that allows you to file numerous returns through the program, like if you are doing taxes for friends and family. I filed my taxes this year using the online version.

How much does UFile cost?

The online version is really inexpensive. If you take your taxes anywhere, even to HR Block, you’re going to be paying $75+ for your return, depending on how complicated it is. To use the online version if you’re an individual starts at about $16, and for a family, $25. So it definitely doesn’t have to cost you a lot to figure out your taxes. Just like with TurboTax, however, there are limitations to this particular program. If you own your own business, if you have any sort of special deductions or tax circumstances, you may need to invest in something a little more robust. If, however, your only tax claims are T4s and your only deductions are student loan interest payments, well then, I can tell you that any online tax preparation software has you covered.

Why I like UFile

I really enjoyed using the UFile system. The way that it works is that it starts by creating an account with UFile. Once you’re done that, it will give you what it calls an “interview”. Now, during this process it will be asking you a bunch of questions about you and your tax situation. Are you employed where do you live, are you married, etc. The process is a little confusing at first, because you’re not sure if they’re going to ask you the questions that you want to answer (I had a hard time figuring out how to add my spouse – they were going to ask me, but they hadn’t asked me yet so I went digging around to try to find it). I recommend just taking things one page at a time, and not rushing through the reading of anything. One of the most important parts during this process is the “interview setup”, where there’s a ton of check boxes, some enabled by default, some not. This is the hardest part of the process, as you’ll have to read through each and every potential income, deduction, and credit, to check and see if it applies to your situation. If it applies, check it, if it doesn’t, then leave it unchecked. If you do this part right, the rest is a breeze.

By simply having all the information that you need on the page at any given time, and supplying a helpful “next” button at the bottom, UFile allows you to create your own tax preparation questionnaire. Then, on each potential income or deduction, it walks you through how to submit the necessary information. At times, I was confused by certain questions or terminology, but without fail, there was a handy little link in the form of a question mark at the end of each potential question or statement. This link would bring me right to the CRA website explaining that particular issue. I liked that they didn’t try to re-write what was already written, and this way, the information is straight from the government. I also liked that it wasn’t “dumbed down” at all, every potential tweak or option was presented to me so that I could take advantage of it if I needed to.

The finishing process is very simple as well. You are presented with the option of printing and mailing in your return, or saving and submitting the .tax file through Netfile, which I chose to do. UFile did a good job of explaining what I needed to do on the government’s Netfile site to ensure that my return made it there safely. They also offered the option of saving a .pdf version of the return as well, which I took advantage of.

Ufile or TurboTax?

If I had to compare the last two softwares that I’ve used, I would say that UFile is definitely the better software that TurboTax. Most of my complaints about TurboTax are not present in Ufile. There’s no extra “screens” that pop up as advertisements for other products or services, the program didn’t “dumb down” the process so as to make it easier, while also omitting potentially important information, and there was no promise of a “free” version that ended up requiring me to pay because of the specific type of filing that I had done, after I had already gone through the entire process. UFile is not without a blemish, however, as the navigation through various screens can be confusing at times, and the setup makes checking back on things that you’ve already completed difficult. For example, at the top of each page you have the “Family Members”, and below that you have your “navigator”. It is not clear, at first, that you have to select the family member first before you choose to navigate to something, as there are essential two (or more) pages of each of the options in the navigator (for example, to see your T4s), but nowhere is this said or stated, and the interface does not make this clear until you stumble on it yourself. Regardless, once you figure out how it works, then yes, the online program works as designed.

If you haven’t filed your taxes yet, I highly suggest you take a look at this program. Grab your papers, book two hours off, and enjoy getting your tax return filed and submitted.

UFile Online Tax Software Review originally appeared on Canadian Finance Blog on April 11, 2012.

Why I’m Okay With Most People Getting A Tax Refund

Nelson Smith — Thu, 15 Mar 2012 09:00:56 +0000

It’s that time of year again. No, I’m not talking about spring, even though it’s just around the corner. And I’m not talking about the beginning of the baseball season either, even though I am unreasonably excited about that. Instead, I’m talking about tax season.

I haven’t completed my return yet, but I have started on it. This is significant, considering I usually don’t bother starting on it until about April 15th. In fact, I’m probably about halfway done. I should probably buckle down and finish up the rest, but I’m not entirely motivated by the activity. Partially it’s because it’s not a very pleasant thing to do, and partially because I know that I’m going to owe the government money this year.

If you’re due to be getting a tax refund, I can see why you’d be a little more excited about doing your taxes. That’s your money, just sitting there, waiting for you to claim it. You can use it for all sorts of stuff, some things would be smart, others would be foolish. Still, letting the government just keep it would be the most foolish of all.

This begs the question: should you even be getting a tax refund at all?

Negatives About Getting A Tax Refund

If you put yourself in a position where you’re expecting a significant tax refund, you’re essentially giving the government an interest free loan. An an example, if you’re looking at a $2600 tax refund, you just gave the government $50 more per week than you had to. Why should the government use that money, when you could have used it to put yourself in a better financial position?

Most employers automatically take off a little bit extra on your withholding tax, since they don’t want to hear you complain they didn’t take off enough. With just a little work, you can get HR to take off a little less, at least bridging the gap between your refund and owing the government nothing. It’s actually pretty easy to do, assuming your HR person has greater brain power than a peach. Most tax returns are simple enough.

We can take this a step further if you’re sitting on credit card debt. That $50 per week could be used to pay down that debt, getting you a guaranteed 18% return. By letting the government use that money for a whole year, you’re missing out on a few bucks.

However, saying all this, I think most people should be getting a tax refund.

Positives About A Tax Refund

Most people aren’t very smart with their money. They waste it on booze, lottery tickets, and all sorts of other stuff. They also occasionally use it to buy stuff they need too.

If most of the population had an extra $50 a week, they would let it slip through their fingers. They wouldn’t save it, or even use it on their needs. They would simply spend it foolishly.

All that $50 would be is an increase in disposable income. After all, somebody is still going to be able to provide for all their needs without it. Most people just view disposable income as more money they can spend. Sure, you and I look at it and see additional money we can save, but does the rest of the world? They’d find a way to spend it.

When somebody gets a large lump sum, like a tax refund, it causes them to pause for a moment and consider what they’re going to do with it. If someone gets their $50 per week in a lump sum, that $2600 all at once is going to feel like a lot of money.

Sure, they still might blow it on something. They might put it into savings with good intentions, and then to find out a couple months later that it’s all gone. Or someone might use it to buy a rockin’ home theater system or hockey season tickets. The point is, if they waste away their lump sum or if they waste their extra cash every week, aren’t they in the same boat?

Hopefully, if somebody handed you a cheque for a large amount of cash, you’d do something smart with it. I have no scientific evidence to back this up, but I know I’d be more inclined to pay down debt with a lump sum than I would be if I got a little extra every week.

However, if you’re one of those people who has no debt and has their financial house in order, then by all means. Get rid of that tax refund. You’ve earned the right to your money.

Why I’m Okay With Most People Getting A Tax Refund originally appeared on Canadian Finance Blog on March 15, 2012.

Tax Refund: A Good Forced Savings Plan?

Alan Schram — Wed, 14 Mar 2012 09:00:48 +0000

I know a couple of people that use their tax refund like a forced savings plan. Each year, when they are given their tax papers to sign and complete, they check the little box that allows the government to take a few extra dollars out each paycheck. The point of this feature is in case you know you will be making more money than just the paycheque, say, you have a side business that deals only in cash. This way you won’t be hit with a huge payment at the end of the year. Some people, however, check this box not so that they can avoid making a payment, but so that they can get a bigger tax refund. Is this a good idea? Let’s take a quick peek at some of the pros and cons.

Tax Refund Pros

It’s a savings plan that you already have. You don’t have to go to a new bank, or set up a new account online. It’s not something that you have to spend a lot of time thinking about or planning for. It’s just a box that you check on a single piece of paper, and you’re set. Once you tax returns comes in, bingo! It’s like a lottery that you know is coming once a year and you’re guaranteed to win.

It’s a decision you only have to make once a year. I remember as a kid getting my weekly allowance and having to struggle in agony as I had to take that already small amount of money and divide it further so that I could save some. It was a hard decision to make, and every time that I made it I felt physically and emotionally drained. With using your tax refund as a forced savings plan, you only have to make that decision once.

Tax Refund Cons

There’s no interest on your savings. Instead, the government is most likely reaping the benefit of your income tax refund sitting in a bank somewhere, earning interest. Your money could be doing that instead. While most bank account interest rates are fairly low, and while the amount of money that you could be earning throughout the year really won’t add up to a ton, it’s still your money that you’re leaving on the table.

There’s no access to your money. If you suddenly need it in case of emergency, it’s not like you can call up the Canadian government and ask for your tax refund to be processed in November this year. You’ll have to wait until March/April like everyone else before you can access your money.

All in all, it’s pretty hard to make a good argument as to why this particular savings plan is better than an automated bank account withdrawal. It does the same thing, except earns you money and makes your money accessible. The only reason I would suggested setting up a forced savings plan like this is if you lack the ability to sit on your cash as it grows. If accessibility means that you’ll end up spending that money, then by all means, let the tax man take your cash and hold onto it for you if you can’t hold onto it yourself. Just make sure you have a good plan for that money when you do get your tax refund, else your savings and patience will be wasted. Pay down debt, set up an emergency fund, buy a new car, or whatever you need to do, just don’t let that money disappear into your regular checking account.

Do you use your tax refund as a force savings plan? Why or why not?

Tax Refund: A Good Forced Savings Plan? originally appeared on Canadian Finance Blog on March 14, 2012.

Want to Increase Your Tax Refund?

Guest — Mon, 12 Mar 2012 09:00:00 +0000

Tax software programs, like UFile, are great tools to help you calculate your tax return and ensure you receive the tax refund you are entitled to. It can find you tax-saving deductions, credits, and transfers, but you need to give it something to work with – no computer program can read your mind…yet.

So, how do you know you aren’t missing out on great tax credits? We’ve made a list of the most commonly forgotten tax credits that will help you keep more cash in your pockets:

Tax Credit for Public Transit: Are you a Public Transit user? Hold on to your weekly or monthly passes and receipts and be sure to claim the Public Transit amount for the entire year. This amount may be claimed for transit used by you, your spouse, or children under the age of 19. This non-refundable credit is worth up to 15 per cent of the total claimed.

Self Employment Business Expenses: Working from home can mean substantial tax savings. When you have a home office that is clearly set apart from the rest of your home, and you have no office space dedicated to you by your employer, you may claim home office expenses such as electricity and heating according to the space used by your office.

Interest Paid on Student Loans: Get a receipt for the interest charged on approved provincial and federal student loans. If you can’t use the deduction on this year’s tax return, tax software like UFile is designed to carry forward and use the balance of interest in future years.

Children’s Fitness Tax Credit: If your child is enrolled in sports or other physical activity programs, you may be entitled to a non-refundable tax credit of up to $500.00. Children under 16 and disabled children under 18 years are eligible.

Children’s Arts Tax Credit: Starting in tax year 2011, you also may be entitled to a non-refundable tax credit of up to $500.00 per child if your children are enrolled in arts and creative programs including wilderness, nature and educational programs.

In case you miss something, tax software can also help find additional deductions and credits for you. UFile’s MaxBack Refund Analyzer will automatically find your credits related to your age, your employment and your pension income.

Quality tax software will even carry forward amounts that you can use in the future. Specifically, your RRSP balance, refundable tax credits, and tuition or student loan amounts are valuable items that can reduce tax in future years if you cannot claim them in the current one.

This post was provided by UFile, if you would like to see what your return will look like, log on to www.drtax.ca/ufile and plug in your information. You will be shown what your return will be, and then you can choose to pay and file. It’s just that easy. It won’t read your mind, but it won’t make it work very hard, either.

Giveaway

UFile was also kind enough to provide 10 online codes to giveaway. Enter the contest using the form below and we’ll select winners on March 15th using Random.org and send them their online codes!

Want to Increase Your Tax Refund? originally appeared on Canadian Finance Blog on March 12, 2012.

What Will You Do with Your Tax Refund?

Tom Drake — Mon, 05 Mar 2012 10:00:26 +0000

The CRA starts processing tax returns about the middle of February, so if you filed your tax return early, your tax refund probably somewhere in the works. You could see a cheque relatively soon. But have you decided what you will do with your tax refund? Here are some of the more popular uses for a tax return:

Pay for Something You Want Done

Many people use a tax refund as a way to pay for expensive things they want done. Whether it’s replacing carpet, upgrading the heating system in your home, or renovating the kitchen, a tax refund can get you well on your way. If you have been planning to make some changes to your home, your tax refund can be just the capital you need.

Buy Something Fun

Others want to buy something fun. A new laptop might be in order. A tax refund can make a pretty decent down payment on a car. Or, you could go on vacation. There are plenty of people who are interested in purchasing something fun with money that they see as a “windfall.” It feels like extra money, so it seems like spending it on something unnecessary is the way to go.

Save it for a Rainy Day

The more practically-minded are likely to save a tax refund for a rainy day. Boost your emergency fund with the money you get back. Put it in your car repair fund, or put it toward a bigger savings goal you might have, such as buying a house. You could also boost your RRSP contribution. A little extra now can go a long way once compound interest gets involved.

Pay Down Debt

If you have debt, the best use of your tax refund is probably to pay down debt. Debt is a serious drain on your wealth. You continually pay interest to someone else, and your resources aren’t entirely your own. Your tax refund can help you take a big bite out of your debt, saving you money now and in the future.

Do You Even Need a Tax Refund?

One of the questions that comes up, though, is whether or not you really even need a tax refund. I’ve written before that it’s fairly pointless to receive a tax refund. This is because when you have a tax refund, it usually means that you have been over-paying throughout the year. As a result, the government has been enjoying an interest-free loan. Unless you are eligible for a large amount of deductions and credits, the money you are getting back is really your own.

Instead of being used by the government throughout the year, that money could have been used for you, earning interest. You could have been using the money to make more money, rather than letting it sit in government coffers.

Of course, the other side is that some folks like to use a tax refund as a forced savings vehicle. It’s pretty automatic, so it results in savings that add up, and can then be used at tax refund time. But it’s still worth considering whether you even need the tax refund.

What Will You Do with Your Tax Refund? originally appeared on Canadian Finance Blog on March 5, 2012.

Tax Time: Deducting Home Business Costs

Tom Drake — Mon, 30 Jan 2012 10:00:07 +0000

Increasingly, more people are operating businesses out of their homes. These businesses might be full-time ventures, or they might be part-time side hustles. In any case, chances are that you are paying expenses related to your home business. In such situations, it is possible to not only deduct some expenses from your home business income, but you can also deduct these home business costs against your other, “regular” income.

What Home Business Expenses Can You Deduct?

There are a number of home business expenses that you can deduct. However, you need to make sure that the deductions you take are related to your efforts to earn money. Otherwise, you could find yourself on the wrong side of the CRA. Make sure that you keep proper documentation of your expenses so that you can prove the appropriateness of your business deductions.

Some of the items that you can deduct as home business expenses include:

Internet-related costs: Domain registration, web development, web hosting, and other fees.
Dues: If you join a professional organization related to your business, you can deduct the dues.
Office supplies: Make sure these are just used in your home office, and not used for personal purposes.
Advertising: Online and offline ad costs are deductible.
Travel: You can deduct business-related travel, including mileage for driving, hotel costs and airfare. You can also deduct the fees related to conventions and conferences in your business field.
Entertainment and meals: Business meals and entertainment is deductible, but only 50% of the cost can be deducted.
Bank charges and interest: Your related bank fees and interest charges can be deducted.
Payment to others: Payment for business-related services are tax deductible, as are salaries and contracts paid to employers and hired workers.
Courier and postage: When you mail items, or have them sent via courier, you can deduct the costs.
Use of your home: In some cases (make sure you qualify according to the CRA), you can deduct costs related to the business use of your home. This includes utilities, taxes, mortgage/rent payments, and insurance costs.

Add up all of the expenses you pay in order to keep your home business running, and consider deducting them. Remember, too, that some of your costs are only partially deductible, since you might use your Internet connection for business 70% of the time. Determine the percentages involved, and be careful not to deduct personal use as business use.

Deducting Your Home Business Expenses

Your taxable income will be reduced, even though a deduction isn’t a dollar for dollar reduction in what you owe in taxes.

In order to claim home business expenses, you will need to fill out a form T2125. The form contains sections that may or may not relate to your home business. If you aren’t selling actual goods, for example, you won’t need to fill out Part 4, which deals with tangible inventory. Your business expenses will be listed on Part 5 of the T2125.

Because you will need to list your total income for the year, make sure you have been keeping track throughout the tax year. Indeed, it is best to keep good records of your income and expenses throughout the year so that you can reference your information easily. Financial software and bookkeeping software can help you with this. As long as you keep good records, and your business deductions are truly for business expenses, you shouldn’t have a problem with the CRA.

Tax Time: Deducting Home Business Costs originally appeared on Canadian Finance Blog on January 30, 2012.

Tax Breaks 2010: Businesses and Individuals

Guest — Mon, 18 Apr 2011 09:00:00 +0000

The tax deadline is coming faster than anybody wants it to. The due date for filling out Canadian income tax returns is May 2, 2011 since April 30th is on a Saturday. As you’re filling out your tax return you should be aware of some of the tax breaks allotted to both individuals and businesses as they could save you a bunch of cash.

Tax Cuts for Businesses

• Computer Capital Cost Allowance (CCA). If your business bought new computers or purchased software for new or existing computers after January 27, 2009 but before midnight, January 31, 2011 than your business can claim 100% of the cost on your tax reruns. It is unclear whether or not smart phones and tablets, such as the ipad, would also be included.

• Apprenticeship Job Creation Tax Credit (AJCTC). This is a non-refundable tax credit for up to $2000 for each apprentice an employer can claim. An apprentice is someone working in a prescribed trade for the first two years of their apprentice contract. Keep in mind the contract must be registered with a federal, provincial, or territorial government.

• Investment Tax Credit for Child Care Spaces. Baby sitters and day care centres can become expensive and can also be a pain for their parent. As a result, some businesses have created child care spaces for the children of their employees. If your business has done this then you are eligible for a tax cut of a non-refundable amount for each new child care space you create

• Small Business Deduction. Canadian private corporations claiming the small business deduction now have a tax rate of 11%, which is down from last year’s rate of 12%.

• Corporation Tax Rate Reduction. As of January 1, 2010 the tax rate will be 18% for corporations but will decrease to 16.5% on January 1, 2011 and will further decrease to 15% on January 1, 2012.

Tax Cuts for Individuals

• Children’s Fitness Tax Credit. Fitness should be a part of everybody’s life, especially that of a child. If your own kids or the children of your spouse or common-law partner have been enrolled in gyms, play sports, or are involved in other fitness-related extra-curricular activities, you may be able to claim up to $500 per child on your tax returns.

• First-time Home Buyer’s Tax Credit. If you bought a home for the first time in 2010 then you may be eligible for a tax credit up to $750.

• Pension Income Splitting. If you choose to split your pension then you can reduce your overall tax paid.

• Public Transit Tax Credit. Between car payments, insurance payments, gas, and repairs an automobile can quickly become a black hole for cash. If you opt out of using a car and instead take advantage of public transit then you may be eligible for a non-refundable tax credit to help cover the cost of public transit.

• Tradesperson’s Tool Deduction. If you are a mechanic, plumber, electrician, or work as a tradesperson in general, you may qualify for a tax deduction for the cost of your tools.

As you can see, there are a number of tax deductions and credits there for the taking. Look closely at what might apply to you.

Author Bio: Charles Wood is a journalist and freelance author; when not contributing his financial savvy on the web, Charles writes poetry and fiction on his trusty typewriter.

Tax Breaks 2010: Businesses and Individuals originally appeared on Canadian Finance Blog on April 18, 2011.

What You Need To Know About Canadian Tax Benefits

Guest — Tue, 29 Mar 2011 09:00:00 +0000

The way we interact with our government is constantly evolving, especially when it comes to taxation in these troubling economic times. More than ever, families are finding deductions, credits and other tax benefits to be somewhat of a saving grace.

The Canadian Government collects almost three times more from personal taxes than it does from corporations; it may seem unfair, but this is because of fantastic amenities like socialized medicine.
If you’re new to Canada, the Canadian Immigration Tax Benefit can help you get situated. If you’ve immigrated, you probably aren’t yet aware that Canada does not impose estate taxes or duties.You also may not be aware that taxation is based on residence, not citizenship. If you’re living in Canada, expect to file taxes this year. Which brings us to…
Canada taxes residents on their world wide income. Non-residents only pay Canadian tax on certain sourced income or capital gains.
A lot of people don’t realize the tax benefits you file for will be paid out the following year.
Canada Child Tax Benefits are calculated on a sliding scale using a family’s net income. When applying for Basic Child Benefits, if your income is over $40,970, you will receive less in benefits than other households. If you have one child, the reduction rate is 2%, and if you have two or more children, the rate is 4%. There are five additional credits that parents can claim – find the correct child tax credit that applies to your unique financial situation.
New Canadian Permanent Residents can reduce Canadian taxes by planning in advance of their arrival into the country. They are allowed to establish a properly structured offshore trust to shelter non-Canadian sourced income and capital gain for up to five years after their arrival in Canada. During this five-year tax holiday, the new resident can acquire Canadian citizenship and choose to become a non-resident for Canadian tax purposes.

There are many opportunities to help you balance your wallet and optimize what you could be getting back next year. Make sure you don’t miss the chance to file for benefits that can help you pave the road to a smart financial future.

Author Bio: Olivia Mungal is an award-winning writer with pieces of her work archived in the Library of Congress. With a background in Law, she tackles convoluted economic issues in entertaining and engaging ways.

What You Need To Know About Canadian Tax Benefits originally appeared on Canadian Finance Blog on March 29, 2011.