Exclusions – Can Not Use Efile

You cannot use EFILE Online or EFILE Online Plus to file an amended return or a return for any year except the 2011 tax year. In addition, you cannot file a return electronically in any of the following situations:
1. The taxpayer is a deemed resident (not subject to provincial or territorial tax).
2. The taxpayer died prior to the current tax year. Early filed and Elective deceased returns also remain as exclusions.
3. The taxpayer’s social insurance number begins with “0.”
4. The taxpayer is coded bankrupt according to Canada Revenue Agency’s records and is filing an in-bankruptcy or post-bankruptcy return. Only pre-bankruptcy returns are accepted through EFILE.
5. The taxpayer is an immigrant, an emigrant, or a non-resident.
6. The taxpayer’s address is outside Canada.
7. The taxpayer is subject to provincial/territorial income tax in more than one jurisdiction.
8. The taxpayer is reporting:
o Canadian source income from Lloyds of London;
o employment income earned from an International Organization;
o lump-sum pension income accrued to December 31, 1971;
o income or a loss from self-employment or rental operations for which more than six sets of financial statements are prepared;
o an Ontario, Saskatchewan, British Columbia, or Yukon Qualifying Environmental Trust Tax Credit (may also be referred to as Mining Reclamation Trust Tax Credit);
o a statement of qualifying retroactive lump-sum payment (T1198);
o a Nova Scotia research and development tax credit recapture; or,
o foreign business income (e.g. Box 24 of a T3 slip).
9. The taxpayer is electing to defer tax on a distribution of spin-off shares by foreign corporations.
10. The taxpayer is claiming:
o less than the maximum federal foreign tax credit;
o foreign taxes paid to more than one country, or is claiming business foreign tax credit(s);
o a deduction for scientific research and experimental development expenses;
o an overseas employment tax credit (T626);
o an Alberta stock savings plan tax credit (T89);
o a Saskatchewan royalty tax rebate (T82);
o a disability amount for themselves or for their spouse or common-law partner and there is no Form T2201, Disability Tax Credit Certificate, on record, or a new Form T2201 is required;
o a disability amount for a dependant other than their spouse or common-law partner and there is a first time claim, or a new Form T2201 is required, or the claim is for more than 10 dependants
11. The taxpayer is reporting farming income with the AgriStability and AgriInvest application that involves:
o farming income from a partnership reported on a T5013 slip or a partnership that includes a corporate partner;
o a Canadian Indian reporting self-employed income that is “tax-exempt income”
o more than 10 occurrences for either crop and livestock inventory on EFILE Online returns (SFD type 9 only);
o more than 50 occurrences for either crop and livestock inventory on EFILE Online Plus returns (SFD type 9 only).

Tax Deductable Moving Expenses

With only a month left in the tax season, many people are still trying to figure out all of their possible deductions.  One often overlooked deductable expense is relocating for working purposes.  Today we are going to have a look at some of the rules involved with moving expenses.  The information in this posting comes from the CGA 2011-2012 Personal Tax Planning Guide.

Taxpayers may claim eligible moving expenses to change residences within Canada, provided the move brings them at least 40 kilometres closer (e.g., using the shortest normal route) to a new or existing job, business location in Canada, or post-secondary institution at which they enter full-time attendance.

The claim amount is limited to income from the new business or employment, or prizes and research grants, either in the year of the move or the following year. For individuals who are reimbursed in whole or in part, the full amount of the moving expense can only be claimed as a deduction if the reimbursement amount is also included in calculating income.

Students who were in full-time attendance at a post-secondary educational institution in Canada and who move at least 40 kilometres within Canada for employment purposes may also claim moving expenses against income earned from a full- or part-time job (including a summer job) the year the move took place or the following year. This also applies the year after graduation.

Eligible moving expenses include such items as:

• Travel costs, including reasonable amounts for meals and accommodation to move the individual and members of the household.

• Costs for up to 15 days of temporary board and lodging near either residence.

• Transportation and storage costs for household effects.

• The cost of connecting or disconnecting utilities as a result of the move.

• The cost of cancelling a lease and reasonable costs related to selling the old residence, including real estate commissions and advertising.

• Legal fees.

• Taxes, fees or duties (excluding the GST/HST) upon registration of title to the new residence only if a former residence has been sold.

• Costs to revise legal documents to reflect the new address, including replacement of drivers’ licences and non-commercial vehicle permits.

Additional related expenses with respect to maintaining a vacant former residence, such as mortgage interest, property taxes, insurance premiums, maintenance of heat, power and utility connections, are also deductible. These deductible amounts are limited to the lesser of actual costs involved in maintaining the former premises, or $5,000. These costs are deductible so long as reasonable efforts are made to sell the old residence.

You do not necessarily need to have a job at your new location to become eligible to deduct moving expenses against earned income when you eventually find and begin work within a reasonable period of time. An example of this could be where a taxpayer moves from one geographic location to another in Canada where employment opportunities are better.

The Tax Court of Canada ruled in 2009 that a person, who accepted a new full-time position in a different department, but at the same hospital where she previously worked part-time, was eligible to claim expenses for a move that brought her more than 40 kilometres closer because that helped enable her to work full-time hours.

Taxpayers who rent out a former home in their original location prior to moving because they are unable to sell it might be able to claim rental income and losses in connection with that property. Limited tax-free compensation may be available where employers reimburse employees to cover a loss or diminishment in the value of their former home. Compensation of up to $15,000 for an eligible housing loss is tax-free. If the compensation exceeds $15,000, half that excess is taxable.

Under certain circumstances, a taxpayer who is required to move into a temporary home before moving a second time into a permanent home might be able to deduct expenses related to both moves. In determining whether a home is considered temporary or permanent in nature, the tax courts are likely to look at a variety of factors such as if certain of the taxpayer’s material belongings remain in storage and if family members have relocated with the taxpayer.

Furthermore, taxpayers who move to a new location and work there for only a short period of time (e.g., a few months), before moving a second time for employment reasons — perhaps back to their original venue — might be able to claim expenses for two moves provided they can prove they were “ordinarily resident” in terms of being settled into the daily routine of life, while in both places.

Moving expenses might also be deductible in certain circumstances that involve a move in or out of Canada, provided the taxpayer is, and remains, a Canadian resident.

The tax courts have ruled there is no time limit on when you move closer to a “new” job or business opportunity you have commenced, or educational institution you attend, in order to be able to deduct eligible moving expenses.

If a former home is sold for a loss in a year after relocation, a taxpayer might be able to select in which of those two years it is best to claim that loss for tax purposes.

If you require any additional information, please contact Brightstar at 416-498-1988 or at info@brightstargroup.ca for assistance.

You can also learn more information or and read more articles at www.brightstargroup.ca

 

Deducting Charitable Donations on This Year’s Taxes

There is only five weeks left for tax season.  A lot of people are thinking about adding every deduction they can to their tax return.  This week’s posting is all about deducting charitable donations.  The information for this post comes from the CGA Personal Tax Guide 2011-2012.

The federal charitable-donation tax credit is calculated as 15 per cent on the first $200 of eligible donations, plus 29 per cent of any amount in excess of $200. The corresponding provincial tax credit for Ontario residents is 5.05 percent of the first $200 and 11.16 per cent of any amount over $200.

A credit can be claimed for donations made in the current and/or the preceding five years (if not already claimed), based on an annual limit — generally 75 per cent of net income. That increases to 100 per cent in the taxpayer’s year of death and for the preceding year.
Donations of appreciated capital property giving rise to capital gains also benefit from higher limits of up to 100 per cent of net income. Note, however, that the federal government introduced a rule, effective December 5, 2003, which limits the value of a gift of property for charitable-donation purposes to the donor’s cost of the property, where such property has been donated within three years of acquisition.

Where a donation other than cash has been made to a registered charity, the charity must issue a receipt for the FMV of the property at the time the gift was made.

Make sure you request a tax receipt from the organization to which you are making a tax-deductible donation. The receipt should include the charitable organization’s registration number with the CRA, among other information.  You don’t need to send receipts if you are completing an electronic return, but you will need to maintain them for your records in case they are requested.

CRA permits taxpayers to choose which spouse or common-law partner will claim the charitable donation credit. To maximize this credit, consider combining both your donations if they total more than $200. If not, it may be best to defer claiming these deductions, subject to the five-year carry-forward limitation, to get above the $200 threshold. Donations already deducted from a paycheque and recorded on a T4 slip may not be transferred to your spouse or common-law partner.

A taxpayer may claim a credit for charitable donations made to an organization outside Canada, provided a donation has also been made to that same organization by the federal government, or representatives of the government, during either the current or preceding years.

The income inclusion rate on capital gains arising from donations of publicly traded securities made to recipients other than private foundations was previously 25 per cent. The 2006 federal budget entirely eliminated the income- inclusion rate for such donations, effective May 2, 2006. It also eliminated any tax inclusion for qualifying charitable donations of listed publicly traded securities acquired with employee stock options as well as, in certain instances, where taxpayers donate ecologically sensitive land, also effective May 2, 2006.

Additional savings may result from reduced provincial surtaxes when the higher-income spouse or common-law partner makes the charitable-deduction claim.

Special rules may also apply for donations of certain securities to private charitable foundations on or after March 19, 2007.  Consult your certified general accountant if you have questions about the proper tax treatment of charitable donations you make, or the propriety of a particular charitable promotion that is being offered, particularly if these involve donations of property. The rules concerning donations of property can be complex. For example, the 2011 federal budget placed restrictions on the exemption from tax on capital gains with respect to donations of flow-through shares. Other complex donation arrangements, such as those involving leveraged transactions that return a significant benefit to the taxpayer, may also be closely scrutinized by the CRA.

The CRA provides an online listing of registered charities in English at http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html, or in French at http://www.cra-arc. gc.ca/chrts-gvng/lstngs/menu-fra.html.

The Canada-U.S. Tax Convention might provide limited tax relief in certain instances where a Canadian resident provides a charitable gift to a U.S.-based organization.

For more information, please contact Brightstar Finance and Accounting at 416-498-1988 or at info@brightstargroup.ca.  You can also get more information and see more articles at www.brightstargroup.ca

Education and Tuition Tax Benefits

For this week’s entry, we are going to have a look at the tax implications and benefits that are involved with schooling and tuition payments.  The source of the information in this posting comes from the CGA Personal Tax Planning Guide 2011-2012.

Tuition Fee and Education Credits

Post-secondary students who are not otherwise reimbursed for the cost of their courses, or who have received financial assistance such as a grant, benefit, or other allowance, are generally entitled to a credit for the cost of the courses and certain related school fees that they or their families must pay.  In order to qualify for an education tax credit, full-time students must generally be taking courses of at least three consecutive weeks involving at least 10 hours of study per week for the duration of the course at a designated educational institution. Typically, this is at a university, college, or other school in Canada that offers courses at a post-secondary level; or internationally at a university or in a university-related course that leads to a degree.

Full-time students may claim an education credit of 15 per cent of $400 per month, or $60 in 2011, with the education credit allowable only if they are attending a designated educational institution as defined by the federal government.  In Ontario, this education credit is indexed; students may claim a monthly provincial credit of up to 5.05 per cent of $490, or $25 in 2011.  Full-time students may also claim a federal tuition tax credit of 15 per cent of eligible tuition fees. The 2011 federal budget proposes that this tuition creditbe expanded to cover out-of-pocket examination fees for licensing in professions such as accounting, law, medicine, and nursing; or for occupational or trade certification/licensing in a variety of fields.

To qualify for an education, tuition, or textbook tax credit (see description below), Canadian students attending an eligible post-secondary educational institution outside Canada had to take a course of at least 13 consecutive weeks’ duration leading up to a degree at a designated university, under rules in effect until the end of the 2010 taxation year. The 2011 budget proposes to reduce this to three consecutive weeks, beginning in the 2011 taxation year.  (The tuition tax credit has no minimum duration requirement for a qualified program that is taken from an eligible Canadian institution).  To qualify for these credits, students need not attend full-time, but only be enrolled as full-time students. Students with disabilities may also be enrolled part-time to qualify for a full-time credit.

Students who are engaged in part-time studies — defined as a minimum of three consecutive weeks involving at least 12 hours of course work per month at a designated educational institution in Canada only (although exceptions might apply for part-time students who live in Canada and commute to a listed school in the U.S.) may also claim the tuition fee credit of 15 per cent of eligible fees. In 2011, part-time students may also claim a monthly federal education credit of up to 15 per cent of $120, or $18. In Ontario, part-time students may claim a monthly provincial education credit of up to 5.05 percent of $147 (indexed), or $7. The same transfer and carry-forward provisions applicable to full-time students also apply to part-time students.  There is also a federal textbook credit for students eligible for the full- and part-time education credits. In 2011, the federal textbook credit is 15 per cent of $65, or $10 per month for full-time students, and 15 per cent of $20, or $3 for part-time students. The purpose of the textbook credit is to provide tax relief to students buying textbooks — not to allow them to claim the actual cost of their textbooks. Therefore, it is not necessary to retain receipts to prove or claim textbook costs.

Additional Points Relating to Tuition Fee and Education Tax Credits

People with disabilities who are enrolled in Human Resources and Skills Development Canada (HRSDC) or equivalent provincial/territorial-approved training programs can deduct those related expenses. Under this adult basic education (ABE) deduction, such courses may, for instance, allow taxpayers to finish secondary school, improve their literacy skills or upgrade existing educational credentials, in order to improve their employment chances. (Note: The ABE deduction is retroactive and might apply to financial assistance received during taxation years after 1996 and before this announcement in 2001).

If you reside in Canada near the U.S. border and are registered in, and commute to, a designated educational institution in the U.S., you might be able to claim and/or transfer a tuition credit for a course of any duration.

A Canadian satellite campus of a foreign-headquartered university might qualify as a Canadian university if the taxpayer’s primary connection (e.g., determined by factors such as fees paid, physical or online attendance, examinations taken) was to the Canadian campus.

The 2004 federal budget expanded the education credit to include students who are pursuing career-related post-secondary education at their own expense.  Courses taken outside a university, which are designed to improve personal skills, would not likely qualify for the tuition credit. The Income Tax Act states that to qualify for this credit, such courses must be designed to improve occupational skills and be held at a certified place of instruction.

Students who are enrolled in two designated educational institutions in order to achieve a combined course load equivalent to that of a full-time student may be entitled to the full-time education credit provided at least one of the designated institutions issues the appropriate T2202 or T2202A form if a Canadian institution, or TL11A, TL11C, or TL11D form (all of these forms are variations of the Tuition, Education and Textbook Amounts Certificate) if outside the country, to indicate that the courses taken at both schools qualify them for that status.

Tuition fees paid to obtain up to 110 hours of instruction for a commercial pilot’s licence or to become a professional flying instructor also qualify as eligible tuition fees provided they are taken at a certified flying school or club.

There are some mandatory ancillary charges, such as fees for computer services, labs, health and athletics that are also eligible for the tuition credit. Tuition fees at a qualified Canadian educational facility must exceed $100 per institution and be claimed on a calendar year basis. Courses must be taken at a post-secondary level or be for occupational skills provided by a qualified educational institution for students 16 or older.

All or a portion of the fees charged in an internship program may be eligible tuition fees for purposes of the tuition tax credit, provided they relate to the process of academic instruction and do not constitute a placement fee.

All scholarship, fellowship or bursary income with respect to post-secondary education or occupational training is fully exempt from taxation, provided it applies to enrolment in a program that entitles the student to claim the education credit. (They must be eligible to claim that education credit during the current, preceding or following taxation year). This exemption also covers elementary and secondary school education, such as in a private school setting. Certain limitations might apply to part-time students, unless such individuals have a disability and cannot enroll on a full-time basis. Check with your certified general accountant for details.

Those with access to the education credit include taxpayers who are receiving financial assistance for their post-secondary education through the EI or a similar provincial program. Students need not necessarily be in physical attendance at a qualified institution in Canada to claim either the tuition or education tax credits.

Recent court rulings have interpreted the Income Tax Act differently with respect to whether students must physically attend a designated institution outside Canada in order to claim the tuition credit. However, there now appears to be a general acceptance that they do not. Therefore, online course participation through, for example, the internet website of a recognized post-secondary institution, either in Canada or internationally, may also qualify the taxpayer for both tax credits.

Fees for your child’s extracurricular classes may also be eligible for the tuition credit if your child is at least 16; the classes are taken through a certified educational institution in Canada; and the program provides occupational skills. Dance or skating lessons are examples of classes that might qualify.

The CRA has ruled that students may deduct tuition fees paid to an accredited post-secondary institution for audit/hearer courses in which they attend lectures, but do not write examinations or receive credit.

Transfer of Credits

Unused tuition, education and textbook credits may be carried forward indefinitely to offset students’ income taxes in future years. Alternatively, students may transfer unused federal credits of up to $5,000 (an indexed $6,295 for the Ontario portion of this credit), reduced by their income in excess of personal credits, to a supporting person such as a parent or grandparent, but the transferred credits must be claimed in the year incurred.

Students who are attending an accredited institution outside Canada — generally in a university-level course of at least three consecutive weeks’ duration leading to a degree — are eligible to transfer their unused credits provided they owe Canadian income tax. All, or at least a substantial portion, of their income must be considered taxable income earned in Canada during the year the tuition fees were incurred.  Those students who attend a higher education facility outside Canada should consult a certified general accountant.

Student Loan-Interest Tax Credit

A 15 per cent federal tax credit and a 5.05 per cent Ontario provincial tax credit are available on the repayment of interest on federally or provincially approved student loans.  To be eligible students must consolidate their loans with an authorized lender after graduating and assume responsibility for paying interest by the first day.   Students have the option of applying that non-transferable credit to either the current year or carrying it forward to any one of, or spread over, the next five taxation years.

For further information, please contact Brightstar Finance and Accounting Associates at 416-498-1988 or at info@brightstargroup.ca.  You can gain learn more and read more article at www.brightstargroup.ca

Medical Expense Credits

For this week’s entry, we are going to have a look at a tax issue that affects millions of Canadians.  Medical expense credits.  The information from this posting comes from the CGA’s 2011-2012 personal tax planning guide.

Individuals may claim a credit for any non-reimbursed medical expenses. The federal portion of this credit for the 2011 taxation year consists of 15 percent of expenses in excess of the lesser of: $2,052; or three percent of the individuals’ net income for the year. Such expenses may be incurred on the taxpayers’ own behalf or that of their spouse or common-law partner, or their dependant under 18.

A taxpayer and spouse can apportion the medical expenses claimed on behalf of each other to best minimize their overall tax liability. In some cases, it might be advantageous for the lower-income spouse to claim allowable medical expenses.

Up until the end of the 2010 taxation year, the formula with respect to the medical and disability-related expenses claimed by caregivers supporting other qualified dependant relatives was the lesser of: $10,000; or the amount by which expenses paid exceeded $2,052; or three per cent of the dependant’s net income.

Beginning in 2011, the federal government has proposed to eliminate the $10,000 limit on eligible expenses, so the tax treatment for all dependant relatives is the same.

A parent or other guardian who does not live with, and/or have legal custody of a child might still be able to claim certain medical expenses on the child’s behalf. Even if the child is not wholly dependent on the taxpayer, if the taxpayer is providing for essential needs, factors such as support payments and expenditures for security and education will also be taken into account when the CRA decides whether the expenses qualify to be deducted.

The Ontario portion of the medical-expense credit consists of 5.05 per cent of expenses in excess of the lesser of: $2,061; or three per cent of the individual’s net income for the year. The maximum amount of allowable medical expenses that can be claimed for each other dependant is $11,107.

Generally, medication must be prescribed by a registered physician or dentist (nurse practitioners are also allowed to prescribe certain medication), and dispensed and recorded by a qualified pharmacist, if such expenses are eligible to be claimed for the medical-expense tax credit. Payments may also be issued indirectly to a medical practitioner, e.g., through an institution that provides medical services on their behalf.

Receipts must support expenses claimed. Normally, these expenses can be claimed for any 12-month period ending in the year but should the return be prepared for a deceased taxpayer, that period is expanded to encompass claims for any 24-month period, including the individual’s date of death.

Eligible Medical Expenses

The list of expenses eligible for the medical-expense tax credit includes, but is certainly not limited, to:

  • Full-time attendant care for individuals with severe and prolonged mental or physical impairments, including all expenses with no maximum.
  • Supervision of an individual eligible for the DTC who is residing in a Canadian group home devoted to the care of people with a severe and prolonged impairment.
  • Part-time attendant care — up to $10,000 federally (indexed at $12,589 for the Ontario portion of this credit), increasing to $20,000 (indexed at $25,178 in Ontario) if the individual died during the year.

A pharmacist is also considered to be a medical practitioner. Therefore, if your pharmacist provides such services as running a disease-management clinic or other activities for which a fee is payable, this may qualify as a deductible medical expense.

Practitioners in so-called “alternative treatment” fields, such as naturopathy, chiropractic medicine and massage therapy, among others, might qualify as authorized medical practitioners in Ontario. If in doubt, check with the CRA or your certified general accountant to determine whether expenditures for the health-related services you are receiving in Ontario are covered for tax purposes.

  • A block, or annual fee, paid to a medical centre or physician to cover uninsured medical services.
  • 50 per cent of the cost of an air conditioner needed for a severe chronic ailment, to a maximum of $1,000.
  • 20 per cent of the cost of a van that is, or will be, adapted for the transportation of an individual using a wheelchair, to a maximum of $5,000 (indexed at $6,296 in Ontario).
  • Expenses incurred for moving to accessible housing, to a maximum of $2,000 (indexed at $2,521 in Ontario).
  • A device such as a wheelchair to assist an individual with a mobility problem.
  • Sign-language interpreter fees.
  • Voice-recognition software necessary to assist a person with a disability.
  • Various medical devices, along with accessories, required to assist with impaired seeing or hearing.
  • Tutoring services from a non-related person for individuals with a certified learning disability or mental impairment.
  • Certain costs related to attending an educational facility with specialized personnel, equipment or facilities to address a physical or mental handicap.
  • A portion of reasonable expenses relating to certain construction or renovation costs incurred to assist individuals with a severe disability gain access to, or be mobile or functional within, their principal residence.
  • Reasonable expenses for driveway alterations made to enable a mobility impaired individual to access a bus.
  • Reasonable travel expenses incurred to obtain medical services not available in the vicinity of the patient’s home, and necessitating travel of at least
  • 40 kilometres one way, to the extent these have not been reimbursed by a provincial health plan, or other source.
  • In addition to reasonable travel expenses, taxpayers who must travel at least 80 kilometres one way to obtain medical services may also be able to claim accommodation, meal and parking expenses

You may include premiums paid for private health insurance in your medical-expense claim.

You may deduct reasonable travel expenses if required to seek specialized medical treatment outside Canada. To qualify, you must have an existing medical condition or illness and seek the care of health professionals.

The cost of full-time care in a nursing home might also include care that is provided by professionals other than those on staff.

Patients who are incapable of travelling without the assistance of an attendant may be able to deduct a full range of reasonable travel expenses on behalf of the person required to assist them travel to a facility the requisite distance away from home to seek proper medical treatment.

A stroller designed specifically for a child with special mobility needs is considered equivalent to a wheelchair and, therefore, deductible as an eligible medical-expense item for tax purposes.

The list of expenses eligible for the medical-expense credit is lengthy. For a review of eligible medical expenses, and certification that might be required to be eligible to make such claims, refer to CRA publication IT519R2 – Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, or other related documents.

Future parents who are in the process of adopting a child might still be able to claim eligible medical expenses for that child prior to the actual adoption date — provided they become totally responsible for the child’s care and supervision before the arrival and ultimate adoption takes place later that year. This situation could be especially relevant in a case involving an international adoption.

Other Medical Credits

Some taxpayers may qualify for a federal refundable medical-expense supplement of up to $1,089 (up from $1,074 in 2010). The actual supplement amount is the lesser of: $1,089; or 25 per cent of attendant-care expenses claimed under the disability-supports deduction (see below), plus 25 per cent of allowable expenses claimed under the medical-expense tax credit. To qualify for this supplement, taxpayers must be 18 or older and have total business and employment income of at least $3,179 for the year. This supplement

is reduced by five per cent of family net income in excess of $24,108.  There are also broad rules governing income earned by a trust established for the benefit of a person with a disability, as well as for duty-free goods for an individual with a disability.

For please direct any questions or comments you have to Brightstar International Group at 416-498-1988 or info@brightstargroup.ca

You can find more information and articles at www.brightstargroup.ca

Tax Benefits When Moving

Every year, tens of thousands of Canadians move from one home to another yet many are unaware of the tax benefits that can be taken when moving.  This week, we plan to look at what claims you can make on your taxes after you move.  The source of information for this article comes from the CGA Personal Tax Guide 2011-2012.

Taxpayers may claim eligible moving expenses to change residences within Canada, provided the move brings them at least 40 kilometers closer (e.g.using the shortest normal route) to a new or existing job, business location in Canada, or post-secondary institution at which they enter full-time attendance.

The claim amount is limited to income from the new business or employment, or prizes and research grants, either in the year of the move or the following year. For individuals who are reimbursed in whole or in part, the full amount of the moving expense can only be claimed as a deduction if the reimbursement amount is also included in calculating income.

Students who were in full-time attendance at a post-secondary educational institution in Canada and who move at least 40 kilometres within Canada for employment purposes may also claim moving expenses against income earned from a full- or part-time job (including a summer job) the year the move took place or the following year. This also applies the year after graduation.

Eligible moving expenses include such items as:

  • Travel costs, including reasonable amounts for meals and accommodation to move the individual and members of the household.
  • Costs for up to 15 days of temporary board and lodging near either residence.
  • Transportation and storage costs for household effects.
  • The cost of connecting or disconnecting utilities as a result of the move.
  • The cost of cancelling a lease and reasonable costs related to selling the old residence, including real estate commissions and advertising.
  • Legal fees.
  • Taxes, fees or duties (excluding the GST/HST) upon registration of title to the new residence only if a former residence has been sold.
  • Costs to revise legal documents to reflect the new address, including replacement of drivers’ licences and non-commercial vehicle permits.

Additional related expenses with respect to maintaining a vacant former residence, such as mortgage interest, property taxes, insurance premiums, maintenance of heat, power and utility connections, are also deductible. These deductible amounts are limited to the lesser of actual costs involved in maintaining the former premises, or $5,000. These costs are deductible so long as reasonable efforts are made to sell the old residence.

You do not necessarily need to have a job at your new location to become eligible to deduct moving expenses against earned income when you eventually find and begin work within a reasonable period of time. An example of this could be where a taxpayer moves from one geographic location to another in Canada where employment opportunities are better.

The Tax Court of Canada ruled in 2009 that a person, who accepted a new full-time position in a different department, but at the same hospital where she previously worked part-time, was eligible to claim expenses for a move that brought her more than 40 kilometres closer because that helped enable her to work full-time hours.

Taxpayers who rent out a former home in their original location prior to moving because they are unable to sell it might be able to claim rental income and losses in connection with that property.  Limited tax-free compensation may be available where employers reimburse employees to cover a loss or diminishment in the value of their former home.  Compensation of up to $15,000 for an eligible housing loss is tax-free. If the compensation exceeds $15,000, half that excess is taxable.

Under certain circumstances, a taxpayer who is required to move into a temporary home before moving a second time into a permanent home might be able to deduct expenses related to both moves. In determining whether a home is considered temporary or permanent in nature, the tax courts are likely to look at a variety of factors such as if certain of the taxpayer’s material belongings remain in storage and if family members have relocated with the taxpayer.  Furthermore, taxpayers who move to a new location and work there for only a short period of time (e.g., a few months), before moving a second time for employment reasons — perhaps back to their original venue — might be able to claim expenses for two moves provided they can prove they were “ordinarily resident” in terms of being settled into the daily routine of life, while in both places.

Moving expenses might also be deductible in certain circumstances that involve a move in or out of Canada, provided the taxpayer is, and remains, a Canadian resident.

The tax courts have ruled there is no time limit on when you move closer to a “new” job or business opportunity you have commenced, or educational institution you attend, in order to be able to deduct eligible moving expenses.

If a former home is sold for a loss in a year after relocation, a taxpayer might be able to select in which of those two years it is best to claim that loss for tax purposes. Consult your certified general accountant if this situation applies to you.

Hopefully this information help you to understand your tax benefits a little better after moving.  For more information, please contact Brightstar International Group at 416-498-1988 or email us at info@brightstargroup.ca.

You can find more articles and information at www.brightstargroup.ca

Child Care Tax Benefits

A couple of weeks ago, we released an article of tax credits for children`s activities.  We revisit the tax benefits that you can claim from your children this week by looking at child-care expenses.  This is an issue that faces many Canadian families and is a very common topic during tax season.  The source of information in this article comes from the CGA 2011-2012 personal tax guide.

A claim may be made for expenses incurred on behalf of eligible children to allow individuals or their spouses or common-law partners to:

  • Earn income from employment or self-employment.
  •  Spend at least 12 hours per month studying in an educational programlasting at least three consecutive weeks at a secondary school, college,university or other designated educational institution.

Generally, the parent with the lower net income claims the least of:

  • The actual amount paid.
  • Two-thirds of that parent’s earned income.
  • $10,000 for each child on whose behalf a disability tax credit may be claimed, regardless of age; plus $7,000 for each other eligible child under seven at year-end; plus $4,000 for each other eligible child between seven and 16, inclusive (extending past 16 only for children who have a physical or mental infirmity and remain dependent on the taxpayer or spouse).

Eligible children include the taxpayer’s, the spouse’s or common-law partner’s natural or adopted children, or one for whom the individual had custody and contributed to the support; who was under 16 at any time in the year; or dependent by reason of mental or physical infirmity.

Although one condition of being able to deduct child-care expenses involves earning a living, this deduction might still be available during periods in which temporary, extenuating circumstances, such as a strike or other labour stoppage, prevent you from working. Furthermore, there may be other instances when child-care expenses remain deductible because the services provided help enable a parent to earn a living or attend classes, even though the services were not provided at the exact time they were at work or school.

For parents of children with a disability, there is no requirement that the parent claiming the child-care expenses for eligible services, such as baby-sitting, or those provided at a day nursery or day-care centre, among others, be the one who claims the disability tax credit (DTC) on behalf of an eligible child. In many cases it will be advantageous for the other parent to claim the DTC. In some cases the child, after having attained the age of majority, might be able to claim the DTC.

A maximum of $250 per week can be claimed for all children 16 or younger for whom anyone is entitled to claim a DTC.  Under certain conditions, the supporting person with the higher income will be able to claim child-care expenses, up to $175 per week for each child under seven or who has a severe disability, plus $100 per week for other eligible children.  For example, in two-parent families where one spouse or common-law partner is working while the other is studying full- or part-time, the higher income spouse

is eligible to claim a deduction (for part-time education the corresponding amounts eligible for deduction are $175/$100 per month, respectively).

Parents who have shared custody for a child over the course of a taxation year might each be entitled to claim a deduction for eligible expenses incurred while that child resided with them.  Payments made to a boarding school or camp, including a sports school that requires lodging, qualify up to a maximum of $175 per week per child under seven and a maximum of $100 per week for other eligible children between seven and 16, inclusive.

The child-care portion of fees paid to a private school that provides both educational and child-care services (such as before or after-class supervision) might also be deductible as child-care expenses.  A grandparent who supports grandchildren may be able to claim child-care expenses as the primary caregiver.

The deductibility of summer day camps, sports schools or other recreational activities may depend on factors such as the child’s age, the program’s sophistication (e.g., if it is oriented more toward achieving a progressive, measurable improvement in skills, rather than serving as a recreational sporting activity, the CRA would generally not equate that to child-care), and whether such expenses are incurred to allow the parent or supporting person to carry on earning a living. Court cases have also emphasized that the expenses incurred should relate primarily to guardianship, protection and child-care.

Child-care expenses claimed might reduce the amount eligible for the taxpayer to claim as a child tax benefit.

For further information, please contact Brightstar at 416-498-1988 or at info@bigaccounting.ca

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