Core Finance & Taxation

at 970 Burrad Street , Vancouver Canada

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Core Finance & Taxation
970 Burrad Street
Vancouver , BC
Canada
Contact Phone
P: 778-709-5998
Website
http://www.coretaxation.com

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Some hints and tips from Taxtips.ca & Turbo Tax Personal Income Tax Deductions in Canada Canada's federal and provincial governments use income tax deductions to reduce the tax for some taxpayers and to promote certain activities considered to be beneficial. Some deductions reduce the income subject to tax, while others reduce the amount of the tax directly. As a taxpayer, you should be aware of all the deductions that are available to avoid overpayment. Deductible Expenses To calculate your tax due, add up your income from all sources. You may be able to deduct expenses from certain types of income, if the expenses represent costs necessary to create the income in the first place. For capital gains declared on Schedule 3, you may have costs or exemptions that you can deduct. For investment income declared on Schedule 4, you often have carrying charges and interest deductions. If you earned self-employed income from a business, as a professional, from a farm or from a fishing operation, you have to fill out Form 2125, Statement of Business or Professional Activities, and deduct your business-related expenses from your income. If you lost money from any of these activities, you can sometimes deduct the loss from other income. Deductions That Reduce Taxable Income Deductions also can be taken after calculating your total income. Governments don't charge income tax on some of your income and allow you to subtract other amounts, such as RRSP contributions. You can, for example, deduct money spent on child care and expenses related to employment including moving costs if you change jobs. Your total income minus these deductions equals your net income. There are a few items you may be able to deduct from the net income because of special circumstances. You could, for example, deduct losses from previous years and an amount if you are a northern resident. The best strategy for claiming deductions of this type is to go through your income tax form line by line. If you aren't sure how to identify a deduction, look at the guide for the line number next to the deduction. The guide explains how to claim the deduction and whether you are eligible. Deductions That Reduce Income Tax The Canada Revenue Agency allows you to deduct amounts from the tax that you owe based on your taxable income. You can carry out these calculations on Schedule 1. Deductions include the basic personal amount that every taxpayer can use, and amounts for a spouse, age bracket and dependents if you qualify. There are numerous possible deductions on Schedule 1 and, while many represent small amounts, they can add up to substantial savings. Tax specialist and business consultant Natalie Fong-Yee, CA, at Fong-Yee Professional Corporation based in Toronto, says that people sometimes don't claim all the deductions for which they qualify. "Typically one tax credit that clients miss are the fitness and arts amounts for children," she says. You can claim these credits for fees paid to enroll children under age 16 in qualifying fitness or arts activities up to a $500 limit. Non-refundable vs. Refundable Tax deductions that reduce your taxable income, or amounts you can subtract from your tax due, are known as non-refundable. This means you can use the deductions to reduce your tax payable to zero, but you can't claim a refund based on these amounts. Refundable tax credits, as the name suggests, result in a refund. Normally, you have already paid some income tax, either through salary deductions or via installments paid during the year. To these amounts, you can add any over payments you made on employment insurance or the government pension plan. The Working Income Tax Benefit is an example of a refundable tax credit. When the total of these amounts is more than the amount of tax due, or if there is no tax due because the deductions have reduced it to zero, you could receive a refund.

Published on 2015-02-18 19:23:51 GMT

Tax Tip: You can choose to have all your income taxed and then spend what you need for your living, or you can spend what you need and only have what is left over taxed. What do you want to do?

Published on 2015-02-11 19:10:50 GMT

The Registered Retirement Savings Plan (RRSP) remains the key investment tool for many Canadians, even with the emergence of other options, such as pooled registered pensions and tax-free savings accounts. Available to Canadian citizens under 71 years of age, the RRSP possesses features, options and benefits that directly support the accumulation and growth of retirement savings and investment income. Your RRSP provides you with tax savings immediately, in the tax year when you make a contribution, by reducing your taxable income. When you’ve had federal tax deducted based on your taxable income before your RRSP contribution, that tax reduction triggers a refund. The maximum annual RRSP deduction for the 2014 tax year is $24,270, but unless you max out your contribution every year, unused contributions from previous years carry forward. You can find your personal RRSP deduction limit from several sources, including: ~your latest Canada Revenue Agency notice of assessment or notice of reassessment, ~the CRA’s My Account and Quick Access Internet services, and ~the CRA’s Tax Information Phone Service. Unlike many details of your tax return, RRSPs aren’t completely tied to the calendar year. David Somerville, St. Catharines, Ontario, radio personality and financial planner, says, “There are three dates we can’t afford to miss; your spouse’s birthday, your anniversary and the RRSP deadline. Forgetting any of the three will definitely cost you money.” RRSP contributions made in the first 60 days of a calendar year can be claimed for the previous tax year (the 2014 RRSP deadline is March 2, 2015). The strategic value of this can be enormous. For example, if you’ve had a good year for sales with a part-time hobby business, those self-employment earnings may not be covered by payroll deductions from your day job. Once you’ve calculated your tax situation for the previous year, you can use that 60-day period to make a contribution that reduces your taxable income and eliminates any tax you owe when submitting your return. - Scott Shpak