News Archives - Page 11 of 28

Canada’s income tax rates have become uncompetitive, and the economy will pay the price

A new report by the Fraser Insitute shows that Canada’s personal income tax rate is significantly higher than those of the U.S. in addition to other countries. In 2017, Canada’s top marginal income tax rates were the seventh highest top tax rate out of 34 industrialized countries. When people with higher incomes are taxed more, it results in less economic growth. As the government continues to raise the tax rate for potential spending, it could backfire for them with taxpayers responding by working less to avoid paying these taxes, resulting in less money paid to the government.

“Canada’s top marginal tax rates are punitively high, have put Canada in an uncompetitive position and discourage individuals from engaging in productive economic activity, ultimately hindering economic growth and prosperity”

Money in the bank: Ottawa looks for new ways to tax dormant accounts

Canada’s Department of Finance is looking at reforms to reduce or eliminate interest paid on unclaimed dormant bank accounts and terminated pension plans. It is estimated that it amounts to $742 million as of Dec. 31, 2017. It is proposing that balances that stand stagnant in bank accounts, and balances with less than $100 will be held for a shorter period time than the current 30 year waiting period. They also want to expand it to unclaimed pensions and possibly add dormant accounts in U.S. dollars and other foreign currencies.

“The Bank of Canada holds at least $742 million in unclaimed balances that Canadians apparently have forgotten they own. The federal government wants to revamp and expand the system to include some unclaimed pensions.”

5 Common Tax Mistakes Canadians Make Every Year

If you haven’t filed your taxes yet, you might want to avoid these common mistakes that could end up costing you more money. Here are five areas where Canadian commonly make mistakes. Filing late can lead to interest and penalties. Not all medical expenses are deductible, especially alternative healers. Tuition as well as student-loan interest expenses are not in every case eligible for a deduction. Many moving expenses are eligible but not as many as you may expect. If you are unsure, consult a tax professional before you end up making a costly mistake on your taxes.

“Making a mistake on your tax return can cost you dearly. So what do you need to look out for?”

Did you donate to a charity? You may be able to claim a charitable donation tax credit

If you donated to a registered charity, then hopefully you kept the receipt they gave you a proof of donation, because it is good for a tax credit. Donations include any property including land, cash and goods. There are several ways to determine if the charity qualifies, but the easiest method is to call them or through an online search. Receipts must be kept up to six years after you make the claim. Any unclaimed donations can be used during the year they were made or for the last five years. If it was a gift of ecologically sensitive land made after February 10, 2014, then it can be claimed within ten years of the donation.

“You need an official receipt to claim a charitable donation tax credit.”

12 things you might have missed in budget 2019

The Federal government released their latest budget, and BNN Bloomberg highlights 12 items in the 2019 budget. There’s help for students; new excise duties imposed on edibles, extracts and topicals which increase with higher quantities of tetrahydrocannabinol (THC); high-speed Internet accessibility for those living in remote and northern communities; increased investment in cyber security; improved access to The Canada Workers’ Benefit for low-income workers; and not just help for new home buyers but also more housing supply. A crackdown on fraud and money-laundering in Canada’s real estate market; an annual $200,000 cap on the preferential treatment of stock options; one-time boost to the Gas Tax Fund; increased support for the Public Prosecution Service of Canada; help for supply-managed farmers; and support for small-and-medium-sized businesses that produce and use steel and aluminum.

“Here’s a look at the new measures you may have missed in budget 2019.”

Everything you need to know about the enhanced CPP — from how much you’ll pay to how much you’ll get

Generations of young workers will benefit from new reforms to the Canadian Pension Plan. These changes will happen in two phases with a rise in contribution rates being seen in each phase. The reformations should be fully in place by 2065. Employers will be affected differently with varying contributions depending on if they are in the private or public sector. It will essentially be a better package than is available to the current retiring baby boomers.

“Higher premiums to fund it began this month. Once fully phased in almost half a century from now, CPP will replace 33.33 per cent of the average worker’s lifetime earnings to a higher pensionable earnings limit of $65,400 (rounded down, 2019 dollars.)”

Canada: The Do’s And Don’ts Of Interest Deductibility

Under certain circumstances, loans can qualify to have the interest deducted at tax time provided the money borrowed is used towards an income making venture. While mortgage interest doesn’t qualify, homeowners can use restructuring strategies, such as taking out a home-equity line of credit against their home and use the money for investment purposes. In this case, the interest on the line of credit would then be deductible for tax purposes. Businesses can also qualify in different ways. If you are unsure of your eligibility for interest deductions, it’s best to use a tax professional’s help in preparing your taxes.

“When structured or restructured correctly; however, taxpayers, including homeowners and businesses, have opportunities to benefit from the tax sheltering created by an interest deduction.”

Possible tax relief looming for U.S. citizens living in Canada

The Tax Fairness for Americans Abroad Act of 2018, introduced on December 20 by Rep. George Holding of North Carolina, is the first step to try to offer tax relief for Americans working abroad. The implications of the possible changes could impact expatriates living in Canada. The rule would end the country’s current citizen-based taxation and instead only apply tax to income earned in the U.S. The U.S. presently stands alone as the only country to be taxing income that is not earned or repatriated to the United States. This would greatly benefit American citizens abroad.

“A new U.S. bill introduced this month is a first step towards ending the country’s citizenship-based taxation by taxing only those people who live in the U.S.”

Ottawa raised the Home Buyers’ Plan limit to $35,000 — here’s how to take advantage of it

A recent change to the Home Buyers’ Plan (HBP) makes it considerably more favorable to potential homebuyers. The change increased the amount homebuyers can withdraw tax-free from their RRSP from $25,000 to $35,000. HBP requires that this withdrawal be repaid within 15 years, and is available only to first-time homebuyers – although a new rule proposes expanding access in 2020 in cases of divorce or separation. The change in the HBP makes it a strong alternative to Tax Free Savings Accounts (TFSA) as a method of paying for a first home, although TFSAs generally remain a better option for lower income earners.

“The HBP got a new lease on life when the federal budget announced the amount that first-time home buyers can withdraw tax-free from their RRSP to buy a first home will be increased immediately to $35,000 from $25,000.”

Canada’s 2019 tax season: 4 things you need to know

Tax season is fast approaching, which can be a very stressful time for many Canadians. In order to minimize the stress and avoid fees, here are four things that will come in handy. Know your deadlines; most know it is April 30, but they differ if you are self-employed. You can add funds to your RRSP and still get credit provided you do so by March 1st. New tax breaks are available, including a climate action incentive. Some tuition breaks, however, are no longer available. You can also stick with mail filing, and even use an app to pay your taxes. It’s best to review all the changes before you file to ensure your tax return is correct, and you’re not missing out on credits.

“Whether you’re in for a refund or a tax bill this year, simply filing your return can be stressful. There are old receipts to be gathered, deadlines to put on your calendar and a new rules you should know about.”