The following is a list of tax planning considerations. Please contact us for further details or to discuss whether these may apply to your tax situation.
Certain expenditures made by individuals by December 31, 2018 will be eligible for 2018 tax deductions or credits including: moving expenses, child care expenses, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expense. Ensure you keep all receipts that may relate to these expenses.
If you own a business or rental property, consider paying a reasonable salary to family members for services rendered. Examples of services include website maintenance, administrative support, and janitorial services. Salary payments require source deductions (such as CPP, EI and payroll taxes) to be remitted to CRA on a timely basis, in addition to T4 filings.
If you own a business or rental property, also consider making a capital asset purchase by the end of the year. Although not yet passed into law, the Federal Government has announced that most capital assets purchased after November 20, 2018 will be eligible for accelerated depreciation (generally three times the deduction to which they would normally be entitled in the first year). For example, a piece of equipment normally eligible for a 10% deduction in the first year (Class 8), would be entitled to a 30% deduction. This benefit is available even if purchased just before year-end.
A senior whose 2018 net income exceeds $75,910 will lose all, or part, of their Old Age Security. Senior citizens will also begin to lose their age credit if their net income exceeds $36,976. Consider limiting income in excess of these amounts if possible. Another option would be to defer receiving Old Age Security receipts (for up to 60 months) if it would otherwise be eroded due to high income levels.
You have until Friday, March 1, 2019 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2018 year. Consider the higher income earning individual contributing to their spouse’s RRSP via a “spousal RRSP” for greater tax savings.
Individuals 18 years of age and older may deposit up to $5,500 into a Tax-Free Savings Account in 2018. The annual limit will increase to $6,000 for 2019. Consider a catch-up contribution if you have not contributed the maximum amounts for prior years. An individual’s contribution room can be found online on CRA’s My Account.
A Canada Education Savings Grant for Registered Education Savings Plan (RESP) contributions equal to 20% of annual contributions for children (maximum $500 per child per year) is available. In addition, lower income families may be eligible to receive a Canada Learning Bond.
A Registered Disability Savings Plan (RDSP) may be established for a person who is under the age of 60 and eligible for the Disability Tax Credit. Non-deductible contributions to a lifetime maximum of $200,000 are permitted. Grants, Bonds and investment income earned in the plan are included in the beneficiary’s income when paid out of the RDSP.
Consideration may be given to selling non-registered securities, such as a stock, mutual fund, or exchange traded fund, that has declined in value since it was bought to trigger a capital loss which can be used to offset capital gains in the year. Anti-avoidance rules may apply when selling and buying the same security.
Consider restructuring your investment portfolio to convert non-deductible interest into deductible interest. It may also be possible to convert personal interest expense, such as interest on a house mortgage or personal vehicle, into deductible interest.
Canada Pension Plan (CPP) receipts may be split between spouses aged 65 or over (application to CRA is required). Also, it may be advantageous to apply to receive CPP early (age 60-65) or late (age 65-70).
Teacher and early childhood educators – A federal refundable tax credit of 15% on purchases of up to $1,000 of eligible school supplies by a teacher or early childhood educator used in the performance of their employment duties may be available. Receipts for school supplies as well as certification from employer will be required.
Home accessibility tax credit – A federal non-refundable tax credit of 15% on up to $10,000 of eligible expenditures (renovations to a qualified dwelling to enhance mobility or reduce the risk of harm) may be available each calendar year, if a person 65 years or older, or a person eligible for the disability tax credit, resides in the home.
Did you incur costs to access medical intervention required in order to conceive a child which was not previously allowed as a medical expense? Certain expenses for the previous 10 years may now be eligible (amounts incurred in 2008 must be claimed by the end of 2018).
A number of employment insurance (EI) changes have been enacted. These include:
- A new caregiving benefit for up to 15 weeks for those who are temporarily away from work to support or care for a critically ill or injured family member.
- The option to extend parental benefits up to 18 months (from the current 12 months) at a lower rate.
- The ability to claim EI benefits up to 12 weeks before a mother’s due date (from the current 8 weeks).
- A new parental sharing benefit which will increase the total EI parental leave available to both parents by up to five weeks, to 40 weeks. This will require each parent agree to take a minimum of 5 weeks of the combined 40 weeks available. This assumes the standard parental option (55% of earnings for 12 months). Families opting for extended parental leave at 33% of earnings for up to 61 weeks can access up to 8 additional weeks, provided each take at least 8 weeks. The benefit will commence in March of 2019.
- The prior EI Working While on Claim pilot project is now permanent. This allows claimants to keep $0.50 of their EI benefits for every dollar they earn, up to a maximum of 90% of the weekly insurable earnings. This is available for those receiving most types of EI benefits, including maternity and sickness (both effective August 12, 2018).
If EI premiums were paid in error in respect of certain non-arm’s length employees, a refund may be available upon application to CRA.
Effective July 1, 2017, self-employed commercial ride-sharing drivers (such as Uber drivers), have been required to register for (regardless of their total annual revenues), collect, report and remit GST/HST.
Employers of eligible apprentices are entitled to an investment tax credit. Also, a $1,000 Incentive Grant per year is available for the first and second year as apprentices. A $2,000 Apprenticeship Completion Grant may also be available.
If income, forms, or elections have been missed in the past, a Voluntary Disclosure to CRA may be available to avoid penalties.
Are you a U.S. Resident, Citizen or Green Card Holder? Consider U.S. filing obligations with regards to income and financial asset holdings. Filing obligations may also apply if you were born in the U.S.
Information exchange agreements have increased the flow of information between CRA and the IRS. Collection agreements enable CRA to collect amounts on behalf of the IRS.