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This year, because of the Covid-19 pandemic lockdown, the tax-filing deadline has been extended to June 1 (and June 15 for the self-employed). Payment of any tax owing has been extended to Sept. 1, but you must still file a return by June 1. So if you’re preparing your tax return now, make sure you’ve got all your slips and receipts and you’ve reviewed the list of deductions and credits you might be entitled to.
Here are some of the tax deductions and credits I’m most often asked about. It’s not exhaustive by any means, but it includes many that are often overlooked.
Employment expenses. You can deduct certain expenses (including any GST/HST) you paid to earn employment income, but only if you were required to pay expenses under the terms of your contract, did not receive an allowance for them, or if an allowance was included in your income. This deduction typically will not apply to most employees, and you cannot deduct the cost of travel to and from work or any other expenses, including tools and clothing. In addition, you can deduct any legal fees paid to collect salary or wages.
However, the Tradesperson’s Tools Deduction lets employed tradespeople deduct the cost of eligible new tools over $1,222 purchased in 2019 to earn employment income as a tradesperson and as an eligible apprentice mechanic. A maximum claim of $500 applies.
Home Buyers’ Tax Credit. You can claim $5,000 for the purchase of a qualifying home in 2019 if you or your spouse or common-law partner acquired a qualifying home and you did not live in another home owned by you or your spouse or common-law partner in the year you bought the home or in any of the four preceding years (first-time home buyer). The maximum tax savings generated by the non-refundable tax credit will be up to $750 (that is, $5,000 x 15%). This is also available to existing homeowners who qualify for the Disability Tax Credit and who purchase a more accessible home.
A qualifying home must be properly registered and must be located in Canada. Both existing homes and homes under construction qualify, and include single and semi-detached family houses, townhouses, mobile homes, condominiums, and apartments in duplexes, triplexes, fourplexes, or apartment buildings.
Medical expense deductions. You may claim only eligible medical expenses if you or your spouse or common-law partner paid for the medical expenses in any 12-month period ending in 2019 and did not claim them in 2018. Generally, you can claim all amounts paid, even if they were not paid in Canada. You can find a list of common medical expenses at the CRA website.
Canada Caregiver Credit. You may be able to claim the CCC if you support your spouse or common-law partner, child, grandchild, parent or other relative with a physical or mental impairment. The amount you can claim depends a variety of factors, including your relationship with the person, your circumstances, the person’s net income, and whether other credits are being claimed for that person.
Moving expenses. You can claim eligible moving expenses if you moved to a new location for employment or business purposes, or you moved to attend college or university as a full-time student. To be eligible for the deduction, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new work or school than you were before.
Interest on student loans. Interest paid on your student loan in 2019 or the previous five years may be claimed as a credit by you or a related person. If you have no tax payable for the year, you can carry the interest forward for five years and claim it when you do have tax payable.
Childcare expenses are deductible from income where one or both parents are working or where one spouse is attending school for all or part of the tax year. Childcare expenses can include daycare fees, boarding school, hockey school, or summer camp fees. The maximum you’re allowed to claim under the childcare deduction in 2019 is $8,000 for each child under age seven at the end of the year, and $5,000 for each child over seven and under age 16. The deductions cannot exceed two thirds of your earned income.
Transferring tuition, education, and textbook amounts. The education and textbook credit was eliminated as of Jan. 1, 2017; however, you can carry forward unused amounts. The tuition credit is still applicable for tuition fees totalling $100 or more paid to a post-secondary institution. If there is any amount remaining after a student reduced their own tax owing, they may transfer it to a parent, grandparent, spouse, or common-law partner. Note that amounts for transfer cannot be carried forward from previous years and cannot exceed $5,000, less the amount the student used to reduce their own tax owing. Only one person can claim this transfer from the student, and it can be a different person each year.
Charitable Donations Tax Credit. This can be worth up to 29% of your donation on federal tax and up to 24% depending on your province. Federally, the credit is calculated as 15% of the first $200 of donations and 29% for donations above that. Provincial credits range between 4% and 24%. Check the CRA website for more detail on what is eligible and how to calculate your credit.
Investment advice. You may deduct fees paid for certain investment advice related to buying or selling a specific investment, or for recording investment income. The CRA says fees paid for advice such as “general financial counselling or planning” are not eligible, even though fees paid to the same advisor for advice on buying and selling investments are. However, it doesn’t actually specify what “general financial counselling or planning” is, but allows that fees paid for an advisor providing the following services generally qualify: the custody of securities; the maintenance of accounting records; the collection and remittance of income; and the right to buy and sell on their own judgement on behalf of some clients without reference to those clients (that is, discretionary portfolio management).
And what about your cable fee to get BNN Bloomberg, or subscription fees paid for financial newspapers, magazines, or newsletters, either digital or physical? Sorry, no dice. CRA says these expenses are not deductible. Likewise, safety-deposit box charges are not deductible.
Investment management. Fees you paid to professional investment managers to manage and administer your investments are deductible. But administration fees paid for your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or Tax-Free Savings Account are not. You also cannot deduct mutual fund or ETF management fees or brokerage fees or commissions paid to buy and sell securities. Instead, you may be able to use these costs when you calculate your capital gain or capital loss. Investors who pay fees directly for separately managed accounts (SMAs) or wrap accounts may deduct those fees as carrying charges on their tax return.
Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.
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The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.
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