Tax Tips

1. Capital Gain

You will not be taxed on your capital gains until you dispose your investment/property.

The taxable capital gains will be 50% of total capital gain. However, if there is a deem disposal, the capital gain will be taxed at the year when the deem disposal occur.

2. Capital Loss

A capital loss can be carried back 3 years and carried forward indefinitely. It can be used to offset capital gains within its applicable period.

3. Childcare Expense

4. Deductibility of Fines/Penalties

Starts from March 22, 2004, any fines or penalties imposed by a government, a government agency, regulatory authority, court or other tribunal, or any other person with a statutory authority are not deductible.

5. Deem Disposal of an Investment

A deem disposal occurs when an investment is transfer into an RRSP, or when the investment is given as a gift, or when the tax payer is dead.

6. Disability Insurance

Disability insurance received will be taxed if the insurance premium was paid by the employer, and they were not included in the taxable income of each employee. On the other hand, disability insurance will be tax free if you paid the premiums, or if the employer pays the premiums and they were treated as taxable income for all employees.

7. Donations

8. Education Amount for Student

If you are a student eligible to claim the education amount, then the first $3,000 of scholarships, fellowships, bursaries, study grants and artists' project grants are not taxable. Your T4A slips will report the total scholarships or awards. You should total the T4A slips, then report on your tax return this total less $3,000. (from Taxtips.ca)

If you are a student not eligible to claim the education amount, then only the first $500 awards is tax free.

9. Interest Income and Dividend Income

Interest income and dividend income are taxed in the year you receive the income.

Canadian dividend income will be gross-up by 25%. However, there is a dividend tax credit which reduces the tax payable, resulting in a low tax rate.

10. Late-Filing Penalty

You need to pay for the late-filing penalty if you pay tax after the due date. This penalty is calculated as 5% of the balance owing and an extra 1% of the balance owing for each full month that your return is late, to a maximum of 12 months. If you have been charged the late-filing penalty in any of the three previous years, the penalty charged for late-filing this time may be higher than what we stated above. It is 10% of unpaid tax and 2% of that tax for each month of default not exceeding 12 months. If there are circumstances beyond your control that lead to your late- filing, the CRA may waive the penalty and applicable interest.

11. Moving Expense

12. Previous year's return for a deceased person

A person may die after December 31, 2004, but on or before the filing date for his or her 2004 return. If he or she has not file that return, the due date for filing the return as well as the payment of the balance owing, is six months after the date of death.(from CRA's website)

The deceased's will or a court order may set up a testamentary spousal or common-law partner trust. When testamentary debts of the deceased or the estate are being handled through the trust, the due date for the final return is extended to 18 months after the date of death. (from CRA's website)

13. Self-employed Loss

If you are self employed and had a loss for tax purposes in your latest tax year, but had no other income against which to offset this loss, you can carry back this loss to any of the previous 3 taxation years.

14. Tuition Fees

Students can claim their tuition fees if they received an official tax receipt or a completed form T2202A, Tuition and Education Amounts Certificate from the educational institution.

However, the amount is not claimable if the tuition fee paid is less than $100. In addition, the costs of books, room and board, or student association fees cannot be claimed.

Tax Calendar (from CRA's website)

Individual's tax return for 2004 has to be filed by April 30, 2005.