Tax-Saving Tips and Tax News
As the 2018 year draws to a close, I want to share with you some tax savings tips and upcoming changes in taxes.
Canada Caregiver Credit
Do you have someone dependent on you for support because of a mental or physical infirmity? You may be able to claim the Canada Caregiver Credit.
The medical expense credit regarding service animals is being expanded to include animals especially trained to perform tasks for a patient with mental impairment. For example, it includes a psychiatric service dog trained to assist with post-traumatic stress disorder.
For a list of all medical expenses, click here.
Consider the timing of medical expenses to increase the credit. Note that medical expenses can be claimed in the 12-month period that ends in the tax year. For example, claim from February 2017 to February 2018 as long as no claim has been made before for those months.
Public Transit Credit
Only Seniors can now claim public transit. To qualify for the credit, you must be:
– 65 years or older as of January 1, 2018
– a resident of Ontario on December 31, 2018
Starting in 2019, the Canada Pension Plan (CPP) will be gradually enhanced. You will receive higher benefits in exchange for making higher contributions. The CPP enhancement will only affect you if, as of 2019, you work and make contributions to the CPP.
In 2019, if you earn $57,400 or more, your CPP contribution as an employee will be $2,748.90. As a self-employed individual, you pay both the employee portion and employer portion, so the contribution will be $5,497.80 if net income is $57,400 or higher.
Old Age Security Repayment
If your 2018 net income exceeds $75,910, you will have to repay part or all of your OAS pension. The amount that is repaid is 15% of the excess of your net income over the threshold amount.
Reporting the sale of your principal residence
Just a reminder that if you sold your principal residence in 2018, it must be reported on your personal tax return even if there is no taxable gain. You will need to report the date of acquisition and the proceeds of the sale. Also, if you convert your home to a rental property, this may need to be reported.
Home Accessibility Tax Credit
Seniors and persons with disabilities may be able to claim renovations that allow them to be mobile or functional within the dwelling or that reduce the risk of harm to individual within the dwelling or in gaining access to the dwelling. See CRA website for details.
Contribute by March 1, 2019 to deduct the RRSP on your 2018 return. If you have excess funds but do not need the deduction, you can still make a contribution but save the deduction for a future year, this way your funds can start growing now on a tax deferred basis.
In the year you turn 71 years old, you must collapse your RRSP by withdrawing, transferring to a RRIF or purchasing an annuity.
Home buyer’s plan – make your minimum repayment to your RRSP by March 1, 2019.
Spousal RRSPs – if both spouses are contributing, consider just having one spouse contribute in each of your RRPSs if he or she is in the higher tax bracket and has the deduction room.
Tax Free Savings Account (TFSA)
The amount you can contribute to your tax-free savings effective account January 1, 2019 is $6,000. If you have never contributed to your TFSA, the total amount you could contribute as of January 1, 2019 is $63,500.
Overcontributed? There are penalties for over contributing so make sure to track your contribution especially if using more than one financial institution.
Minimize income by deferring bonuses or severance pay to the new year.
Maximize deductions by claiming employee expenses if your employer gives you a T2200; claim your moving expenses if you made a qualifying move; claim tuition costs if you took an educational course and receive a T2202A tax slip.
Minimize income by deferring any new jobs or contracts until 2019. Note that any income earned in 2018 must be reported, even if the amount is not received until 2019.
Maximize deductions by making capital purchases before the end of the year (e.g. computers, instruments); consider paying spouse or children reasonable salaries if they work in the business; develop a system for making sure all business related receipts are accounted for at tax time.
If you have investments outside your RRSP, RRIF or TFSA, now’s a good time to check in with your financial advisor and see if you have significant capital gains. Consider selling loss securities to reduce capital gains for 2018, or to recover tax from gains in 2017, 2016 or 2015. If you have any loss carry forwards from prior years, they will help offset any 2018 gains.
Make sure your favorite charities receive your donations in time to issue a receipt for 2018.
If you are selling a public traded security that has a gain and also making a charitable contribution for a similar amount, consider donating the security directly to the charity. There is a special 0% inclusion rate for the capital gain, and you will receive a donation receipt for the market value of the security.
Protecting Your Records
CRA released a tax tip about protecting your records against weather related calamities. It is a good reminder to make sure you have back ups of electronic records, and to store them offsite. When disaster does strike, CRA has taxpayer relief provisions when taxpayers cannot file returns on time or make payments on time.
Amounts Owing to CRA
If you owe money to CRA and are thinking about making a payment arrangement, check out the payment arrangement calculator to assist you in formulating a proposed plan to pay off your tax debt.
Did you know we have a Veterans Well-being Act? It provides for up to $80,000 for a course of study at an educational institution for qualifying veterans.
Cannabis in Canada
The Government of Canada has a “What you need to know” webpage regarding Cannabis. In the tax course I took in the fall, I learned that the US has been banning Canadian Citizens from entering the US if they have any association with Cannabis. The US has recently modified their position, it will be interesting to see how this all plays out.
Please contact me if you would like to discuss any of this information.
I hope you have wonderful holidays, and I wish you all the best for 2019.