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CHILD CARE EXPENSES – You or your spouse
may claim the expenses you have paid for someone to look after your child(ren)
so that one of you could earn income, go to school or conduct research during
the year. The expenses are deductible from your total income only if the
child was under 16 years or had a mental or physical infirmity.
Generally only the
spouse with the lower net income can claim these expenses.
The maximum limit of
expenses allowed for children under 7 years of age is $7,000 while it is
$4,000 for those over 7 years. For children under 7 years with mental or
physical infirmity, the expenses allowed are $10,000 effective 2001 tax year
and subsequent years.
You may be able to
claim payments you made to a boarding school, sports school or camp. See Form
T778.
From time to time,
Canada Revenue Agency (CRA) asks you to provide a receipt for such expenses.
If an individual issued this receipt, then it must contain the name, SIN
number and the year these expenses relate to. If the child attended a
Day-Care Centre, no SIN is required.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
DONATIONS
CHARITABLE DONATIONS
You may claim your
donations on your personal income tax return. However, please remember that
you get 15.5% federal tax credit for the first $200 of donations. If you both
made charitable donations of $200 each, it may be more beneficial to you to
combine them and claim on one return as you will get 29% federal tax credit
on amounts exceeding the first $200. Note. You will also get Ontario tax credits on top of
the above federal tax credits.
Also, if you did not
claim donations made during the previous years, you can now combine them for
the past FIVE years and claim them.
LIMITS: - Generally, you can
claim all of such Charitable Donations to a maximum of 75% of your net
income. For the year a person dies and the year before that, this limit is
100% of the person’s net income.
POLITICAL DONATIONS
FEDERAL – Federal political
contribution is claimed in a graduated manner. CRA allows these three rates
as follows:
On the first $400 -
Claim 75% = $300
On the next $350 -
Claim 50% = $175 (and a total of $475 on $750)
On the balance - Claim
33 1/3% to a maximum tax credit of $650 in one year.
LIMITS: - If total political
contributions are $1,275 or over, you may have a maximum tax credit of $650.
ONTARIO – Provincial political
contribution is also claimed in a graduated manner as follows:
On the first $336 -
Claim 75% = $ 252
On the next $784 -
Claim 50% = 392 (and a total of $644 on $1,120)
On the balance - Claim
33 1/3% to a maximum tax credit of $1,120 in one year.
LIMITS: - If total political
contributions are $2,548 or over, you may have a maximum tax credit of
$1,120.
NOTE: - CRA will not accept as
proof of payment, cancelled cheques, credit card receipts, pledge forms or
stubs. All donation receipts must have Registered Charity Number and show the
tax year it relates to.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
Filing your First Return
You have to file an Income Tax Return if:
1. You have to pay tax
for year 2006
2. CRA sent you a
request to file a return
3. You have a taxable
capital gain
4. You have to pay
back Old Age Security or EI benefits
5. You have not repaid
amount due under HBP/LLP etc.
Even if none of the
above applies to you, you may still want to file a Tax Return if:
A. You want to claim a
Refund
B. You want to apply
for GST credit
C. You or your spouse
want to begin or continue receiving Child Tax Benefit
D. You want to carry
forward unused portion of your Tuition & Education amount
If you turned 19, had
no income or became a Canadian resident during the year, you must file your
tax return to receive the above mentioned benefits.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
Home Buyers' Plan – This plan allows each
taxpayer to withdraw from RRSP without tax penalty, upto $20,000 for each
spouse to make a down payment on purchase of a home - or $40,000 per couple.
There are some conditions like First Home – that you did not own a house
within the past 5 years and that you will return this money back to your RRSP
plan in equal payments over a maximum period of 15 years.
If you plan to
contribute to your RRSP this year and take advantage of that contribution for
HBP, make sure that the money stays in the plan for at least 90 days before
it is withdrawn for a down payment on your first home. If you plan it
correctly, you can take advantage of both using this money for your RRSP for
tax advantage as well as for your HBP.
Check with your real
estate agent about waiting period for opening a new RRSP plan and cashing it
for down payment.
Labour-Sponsored - Venture Capital Corporations
More commonly known as Working Venture Funds. The
investment in LSVCC shares may be used for purposes of Home Buyers’ Plan and
the Lifelong Learning Plan just like RRSP’s.
LSVCC - Working
Venture Funds – These are RRSP
eligible – RRSP contributions entitle you tax savings at the tax rate that
you are in. In addition, RRSP in working venture funds entitles you to save
another 30% on taxes payable which is offered by both Federal and Ontario governments @ 15%
each. Please note that the banks normally do not deal in these funds (called Labour
Funds also). There are some other funds which offer tax credit of more
than 30%. Call us for info.
RRSP Eligible (you must have RRSP
contribution entitlement - check your Assessment Notice of previous tax
year).)
Holding time – years 8 Federal/Prov
tax credit 15% each = 30% Total
Max. $ Limit W/Venture
Funds $5,000 per year.
Tax Savings (All numbers are
approximate)
- Minimum 2,565 Your
cost = 2,435 - Lowest Tax Bracket
- Maximum 3,508 Your
cost = 1,492 - Highest Tax Bracket
If you cash the above
shares before 8 years, then you will have to refund the above 30% tax credit
back to the government.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
Lump-Sum Payments such as arbitration awards (disability
payment or spousal support for example) have often resulted in higher taxes
paid during the year they were received as they normally covered a time
period of more than a year. Individuals who received qualifying amount in excess
of $3,000 after 1994, Revenue Canada (CRA) could use a special method of
computing tax if it is advantageous to the taxpayers.
Canada Revenue Agency
(CRA – formerly Revenue Canada) will automatically use this special method of computing
tax by breaking this award into related tax years and compute tax for those
years only if it of advantage to the taxpayers.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
Registered
Educational Savings Plans (RESP) –
Starting 1998, the
Federal government has offered a grant of 20% of contributions towards an
RESP with a maximum of $400.00 per year. This grant, called CANADIAN
EDUCATION SAVING GRANT (CESG) will be invested directly into the Plan.
This grant has a lifetime limit of $7,200.
This grant must be
repaid to the government if the student does not use the funds for education.
There is also a
lifetime contribution limit of $42,000 to any one RESP.
Although there is no
income tax benefit to the contributing parent or grandparent, however, the
growth in the plan is sheltered from tax and not attributed to the
contributor.
RESP Enhancement -
Federal Budget 2004
has enriched this plan. Effective January 1, 2005, the government
contribution will increase by:
- 40% on first
$500 of your contribution if your annual family income is less than $35,000;
- 30% on first
$500 of your contribution if your annual family income is $35,001 to $70,000;
- 20% current
rates applies for annual family income over $70,000.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
Canada Learning Bonds
(CLB) - Improved savings for Children's Education – To assist lower-income
taxpayers save towards their children’s education, the Federal 2004 Budget
introduces a new “Canada Learning Bonds”.
The government will
pay “CLB” of $500 into the RESP of children born in 2004 and following
years. An additional $100 will also be paid into their RESP each year until
the child turns 15. In order to receive this, you must be entitled to the
National Child Benefit component of the Child Tax Credit and have an RESP
account opened for the child..
For 2006, Child Tax
Benefit is $1,255 per year for each child under 18. This benefit is reduced @
2.0% for family net income in excess of $36,378. In addition, National Child
Benefit (NCB) of $1,945 annually is also available to low income families.
Ont. Govt. also pitches in for Child Care Expenses for children under 7
years.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
RRSP – Registered
Retirement Savings Plan is the best vehicle for tax deferral. Ideally, the
government encourages you to save taxes now at a higher tax rate and pay it
back upon retiring at a lower tax rate as income during retirements falls
sharply for most Canadians.
The government allows
the taxpayer to accumulate RRSP Entitlement if not used.
Maximum contribution
limit $18,000 or 18% of your earned income of the previous year whichever is
lower. For 2006 check your income for 2005, and calculate 18% of it. However,
some incomes such as EI benefits are excluded from this calculation. Rule of
thumb is – the income which you earned "without any effort" such as
Welfare Payments, Workers Compensation or Employment Insurance benefits
received will be excluded from your total income for RRSP Entitlement
calculation.
Better still, call
Revenue Canada to find about your
RRSP Entitlement for 2006 by calling the telephone number given below; or
look at your 2005 Assessment Notice that shows your RRSP Entitlement for the
year 2006. This year, the last day to buy RRSP is (tentative) March 1, 2007.
How much to Buy? Plan your RRSP in
the amount to optimize your tax refund. And how much you can save depends on
your tax bracket. This year there are 4 tax brackets......20%, 30%, 35% and
41%.
As a Rule of Thumb – if your income is under $36,000, RRSP
contributions will save you approximately 20% on taxes, i.e. if your have the
RRSP Entitlement of $10,000 and you buy RRSP of this amount, then you could
save approximately $2,000. If your income is, for example, $44,000, then you
should buy at least $8,000 RRSP (assuming you have the entitlement) to bring
your income down to $36,000 to maximize on tax saving by saving tax @ 31% on
$8,000. Any excess RRSP will save tax @ 20%. Similarly, if your income is
$84,000 and your RRSP entitlement is $20,000, buy only $12,000 to bring your
taxable income down to $72,000 and saving tax @ 39% on $12,000. Any excess
RRSP over $12,000 will save you tax @ 31% (assuming you have the
entitlement).
Note: If you
contribute to RRSP more than your entitlement, the government will allow an Overcontribution
of $2,000. There is a penalty for Over-contribution on amount exceeding
$2,000.
(Revenue Canada General Inquiry
telephone Number 1-800-959-8281)
Tuition Education & Books Amounts
Students enjoy a number of tax benefits – some with tax refunds
and others with tax deferrals. For details, please see below:
TUITION FEES – If you attended University/College
and paid tuition fees, you may claim the tuition fee from the earnings that
you received by working during the year. However, if you had no income, then
you have two options:
1. Claim these
expenses on your tax returns. The amounts will be carried forward for use by
you against the future income; or
2. You may transfer
these expenses to your spouse, parents or grandparents to claim. You may
transfer a maximum amount of $5,000 in any tax year. Any leftover expenses
will be carried forward to the next year for you to claim.
Each year, the
educational institution issues a form T2202A (Tuition and Education Amounts
Certificate) which indicates the name of the taxpayer, the amount of tuition
fee paid during the year and the month and year of attendance, commonly shown
in number of months. Tuition fees of less than $100 is not deductible.
EDUCATION AMOUNTS - In addition to claiming the tuition
fee, the student may also claim $400 time the number of month the taxpayer
attended the school. This amount is also subject to accumulation or transfer.
For part-time students, the education amount is $120.00 per month of
attendance.
BOOKS - Effective tax year
2006, students can claim cost of books @ $65 per month ($20/month for
part-timers) times the number of month the taxpayer attended the school and
reported on Form T2202A.
Tuition - Education -
Books amounts must first be used by the taxpayer to reduce the federal income
tax to zero. The remaining amount can be transferred to spouse,
parent/grandparent or either spouse. However, the carried-over amounts
cannot be transferred.
BURSARY, SCHOLARSHIP
ETC
– If you were in receipt of any bursary, scholarship or education grants, the
whole amount is now tax free.
INTEREST ON EDUCATION LOANS – If you paid
interest on your education loan during the year, then every financial
institution would issue a letter to the taxpayer indicating the interest
amount paid during the year. You can claim this amount if not previously
claimed. Or you can carry it forward and apply it on your return for any
of the next five years. This amount is non-transferable.
RESP – Please see under RESP.
The above is for your
reading pleasure only. For specific reference, please consult Income Tax Act.
E&OE
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