More last-minute tax questions answered
Cleo Hamel, senior tax analyst with H&R Block, answered many of the MSN audience's pressing tax questions last Friday on our live tax chat. Unfortunately, she was only able to get to a portion of the questions that were asked. Cleo has graciously answered many more questions, which we are posting below.
Questions are grouped by category and the categories are in alphabetical order. Enjoy!
- Question: Is it a good
idea to make a charitable contribution each year? How much do you get
Answer: Charitable donations can provide a significant tax savings. You get a 15 per cent credit on the first $200 and a credit of 29 per cent on every dollar over $200. To maximize this credit you should pool the household receipts and one person will claim the entire amount. Or you can hold on to your receipts for five years and claim them all at once.
- Question: I have a
child and live with my parents, but support myself and my daughter. Can I claim
the child tax credit?
Answer: If you are supporting your child you are eligible for the Canada Child Tax Credit. You must file a tax return each year to receive the benefit.
- Question: I have a nephew who came to Canada as an international
student. He lives with us and currently he’s in grade 12. This coming September
he’ll be in university. Can I declare him as my additional dependent?
Answer: If you are your nephew’s legal guardian you can claim him as a dependant. If not, you cannot make a claim.
- Question: Can my wife claim the babysitter expense while I am
claiming the UCC (Underappreciated Capital Cost), since I am in a lower income
Answer: Childcare expenses must be claimed by the lower-income spouse. The only time the higher-income earning person claims the expenses is when the lower income-spouse is in hospital or in school. And then, they can only claim for the period the lower-income spouse is in school or hospital.
If my kids do not live with me can I still be the parent who claims the fitness
& arts credits as I am the higher income earner (& I pay for their
Answer: Even if your children do not live with you, you can claim the Children’s Fitness and Arts Credit for them as long as you and your ex do not exceed the $500 per child maximum, collectively.
- Question: I am separated from my husband and get alimony payments.
Can I claim an amount for an eligible dependant? I have a five-year-old
daughter for whom I am the primary caregiver.
Answer: If you have sole custody or primary custody of your daughter, you are able to claim her as a dependant as long as you are single, separated or divorced.
- [Earlier] question: I am a Canadian. I studied in the USA and I am
doing a residency in the USA. I have lots of tuition credits. Since I am in the
USA, earning in the USA, how can I utilize my Canadian tuition, or can I not
claim until I have earned in Canada?
[Earlier] answer: Unfortunately, you can only claim Canadian tuition credits against Canadian income. You can carry these forward indefinitely until you can use them.
New question: The tuition I mentioned is not Canadian. It is tuition for Saba medical school in Netherlands, paid in American funds.
New answer: To claim tuition from a school outside Canada, the school must complete a TL11A. Without this form you cannot claim any tuition or education credits.
I studied at a university abroad from 2004 - 2006 and got the university to
fill out the relevant forms for the education credits. However, my accountant
forgot to include these and it is only recently that I discovered the missing
information. Can I claim these credits by filling out the adjustment forms?
Answer: You can file a T1 Adjustment for each year missed and since you can go back 10 years you may want to get the 2004 adjustment done soon so you don’t miss out on the credits.
I have an unused Nova Scotia tuition amount of $6,719.00 available to use this
year, carried forward from the 2011 tax year. I moved to Alberta in
January 2012. Should I input my federal amount of 19,416.00 in the box for the
federal amount and also in the box for the provincial amount of unused tuition
since I moved from Nova Scotia?
Answer: Even though you moved to another province, you are still able to claim your tuition carry forward amounts. You need to confirm the amounts with the CRA as the provincial amounts may be different, but you would claim the federal and provincial amounts separately, if needed.
- Question: I work in the hospitality industry and
get conflicting information from other servers about tips and taxes. What's
Answer: The CRA has audited this industry often, specifically looking at tips. With electronic records, the amount of tips paid is easily calculated even if some tips are paid in cash. You are required to report the actual amount of tips received, not a percentage. Tips are expected to be 100 – 400 per cent of your T4 income. So if you earn $20,000 in wages, your tips are at least $20,000, unless you can prove otherwise.
- Question: Hi. I've been
working at home now for almost a year. Can I deduct home repair costs? Is there
Answer: You can claim expenses for a home office if you are self-employed or, if you are an employee, working from home has to be a condition of your employment. The home expenses you can claim are related to the proportion of your office to your entire home. So if your office is 100ft2 in your 1,000ft2 home, ten per cent of your home costs can be deducted. Depending on the type of home office expenses, you may be able to claim a portion of these as well.
- Question: Can my
husband deduct the cost of searching for a job? If we move, are moving expenses
included in those amounts?
Answer: If you move 40 kilometres or more for a job you can claim moving expenses. This includes the cost of a moving van, storage costs, temporary lodging during the move and in some cases realtor commissions. This does not include a job-search or house-hunting expenses.
- Question: Can my husband claim living expenses? He works in
Toronto but we live in London and rent a place in Brampton so he doesn’t have
to commute home every day. His job field doesn’t really exist in our area
so he has to work in the GTA.
Answer: Unfortunately, these living expenses are not an eligible tax deduction.
A bar that my daughter worked at in 2012 closed and she was issued no T4 nor
can she locate anyone to obtain a T4. How should she input her income for tax
purposes when she knows how much she was paid but not what deductions, if any,
Answer: You daughter can contact the CRA to see if they received a copy of her T4. If this is unsuccessful she could use her paystubs to calculate her income and deductions. Using bank statements can help determine her income, as well.
I have a 21-year-old who worked part time and earned $4,000 in 2012.She did not
receive a T4. She is only filing out of honesty. Can I file a regular income
tax return for her or do I have to treat her as self-employed?
Answer: If the employment is continuing, filing as self-employed is recommended but for 2012 the income can be reported on line 104.
- Question: If you file
late, what is the penalty?
Answer: If you are getting a refund there is no penalty for filing late. If you owe, the penalty is five per cent of your tax owing.
- Question: Are there any
good tips on how to get more deductions or deductions that maybe some people
are not aware of?
Answer: Consulting with a tax professional and going over your personal tax situation is the best way to find if you are missing out on deductions or credits.
- Question: What are some
common mistakes that people make when filing their taxes?
Answer: Some mistakes include failing to report all you income, not claiming all the credits or deductions you are entitled to and not keeping records.
- Question: Is there an advantage to filing early?
Answer: Filing early means you get your refund sooner. And even if you have a balance owing, you can start paying earlier to avoid any interest charges for paying after April 30th.
- Question: At what point should you get a professional to do your
taxes for you?
Answer: You might consider consulting a tax professional when your tax situation changes. This could include having a child, retirement, marriage or starting a business.
- Question: Can gym memberships be claimed as a deduction under the
organized sports credit?
Answer: Unfortunately, a gym membership does not qualify for the Children’s Fitness credit.
- Question: How do I enter a US 1042-s on a Canadian return? Is it
simply foreign source income?
Answer: You are correct, you would enter this income as foreign income and any tax withheld is reported on line 437.
My husband and I live in a prescribed northern zone and both get a travel
amount in box 32 of our T4s. I was told that we can both claim two trips
for ourselves on our individual tax returns. I have since seen an article
stating that we are able to both claim two trips for everyone in the household
(two for him and two for me) on our individual returns, for a total of four
trips on each return, or eight trips. Which is true?
Answer: There are no limitations for medical travel but you are limited to two trips per family member or “other” travel.
- Question: My husband is
retired and I am employed. At the moment, my husband rents his taxi plate.
Eventually this plate will be sold to our son. Please advise if claiming CCA
(Capital Cost Allowance) on the plate will have tax consequences at the time of
sale. If he does not claim CCA, will his other old age benefits be reduced or
Answer: I presume when you say “rents his taxi plate” and “will be sold to our son” you mean your husband owns the plate and is renting it out to other people and earning income. If your husband was actually paying to rent the plate, he could not sell it (he did not own it!) and he could not claim CCA on it (once again because he did not own it).
You cannot actually claim CCA on a taxi plate because it is Eligible Capital Property. However, you can claim an eligible capital allowance, which acts almost the same as CCA. The major difference is the starting value is 75 per cent of what is actually paid for the plate. From then on, a claim of seven per cent per year, just like CCA, is permitted on that reducing value.
When the plate is sold, if it is sold for more than its reduced value, all eligible capital allowances claims that have been claimed are added to business income in that year up to the total of all claims made in prior years. In addition, if the plate was sold for more than was paid for it, 50 per cent of the excess is added to income as well.
So in the year of sale there may be additional income and if the additional income is high enough together with his other income he could be required to repay his old age benefits, his age amount could be reduced for that year, and there could be a significant tax bill. His old age benefits would be reduced for the following year, but they would return to the normal amounts for the second following year.
This could happen even if he does not claim CCA if the Fair Market Value of the plate is sufficiently higher than what he paid for the plate. Keep in mind, the amount he has to use in the calculations is the Fair Market Value, even if he actually sold it for less because he is selling it to his son.
- Question: What are the
tax implications of moving to another province before year-end? I was told that
I should only start work (in the new province) on Jan. 1st, otherwise I will have to pay
taxes to both provinces. I am talking about moving out of Quebec to Ontario.
Answer: Provincial taxes are based on residency. Where you call home on Dec. 31st is the deciding factor. So, if you live in B.C. for nine months and then move to Saskatchewan and remain there on Dec. 31st, you are a Saskatchewan resident for the whole year.
- Question: If you have a
tenant, what sort of expenses can you write off?
Answer: If you have a rental, you are able to deduct any expenses related to operating you rental. This can include utilities, property taxes, mortgage interest and maintenance/repairs.
- Question: I was wondering about the moving tax. I moved last year
for work to another province. What can I claim, how does it work — percentage
or dollar amounts?
Answer: Moving expenses must be claimed in the year of the move. The total expenses less any employer reimbursements are deducted from your taxable income. Depending on the time of year that you moved your income may not be enough to deduct all of your expenses and in this case you can carry forward any remaining expenses to the next year.
I have a question about rental property. I had to replace a furnace in my
rental property. Can I deduct this cost?
Answer: Replacing a furnace is a capital expenditure and it cannot be deducted in total. You can claim Capital Cost Allowance on it.
I am a Canadian with a condo in Florida that generates rent which I Include in
my Canadian income tax. You can include the cost depreciation of the condo and
depreciation of new items like furniture or appliances. Revenue Canada’s
information package for rental income indicates that you can claim depreciation
on both the condo and furniture and appliances but indicates that you do not
need to do this unless you have taxable income. Is there any reason for
delaying including this depreciation for future years? It’s not clear to me if
I should start claiming depreciation on furniture or appliances purchased in
2012. I already started the depreciation process for the condo cost in 2011.
Answer: You can claim depreciation against rental income. However, if your rental is generating a loss you are not able to increase the loss by claiming depreciation.
- Question: Hi, I have a small question regarding moving expenses.
Last year in June, I moved from Quebec to Alberta to find a job. After a few
months, I found a job. However, my whole year’s salary is around both federal
and provincial personal credits. If I put my moving expense, all deductions are
wasted. Could I save my moving expense for 2013 income tax rather than 2012?
Answer: Moving expenses must be claimed in the year of the move. The total expenses less any employer reimbursements are deducted from your taxable income. Depending on the time of year that you moved your income may not be enough to deduct all of your expenses and in this case you can carry forward any remaining expenses in the next year.
- Question: Can I claim 2011 medical expenses even though I am filing
2012 taxes? I never claimed the 2011 expenses.
Answer: You can go back and file an adjustment for 2011 to claim the medical expenses or you can use them on your 2012 tax return. You are able to claim the best 12 months of receipts as long as the last month is within the 2012 tax year. For example, you can claim your March 2011 to February 2012 medical receipts on your 2012 tax return.
My wife and I are both employed and I also receive a pension. I see that
I can split pension but can you also split income?
Answer: Unfortunately, not all income can be split. At this time, the only option is pension income splitting.
- Question: On my assessment it says I have $126
of unused RRSP contribution available for 2013. Does this mean I can contribute
$126 more to my RRSP deduction limit for 2013?
Answer: An unused RRSP contribution is a contribution that you have yet to claim as a deduction on your tax return. So you can consider claiming it next year or further in the future.