Other Income and Deductions

Question 1

4 common types of non Employment income, Business income, Property income, Capital income include

Answer 1

Scholarships and bursaries and Research grants (exempt, conditions exist)
Alimony & Maintenance (spousal only)
Worker’s compensation
Pension Benefits

Question 2

Pension Benefits include

Question 3

How are Scholarships, Bursaries, Research Grants taxed

Answer 3

student can claim the education tax credit, otherwise are exempt only up to $500 annually

Provides that research grants are taxable and costs related to it are deductible against it

Question 4

How is Alimony taxed

Answer 4

Deductible for payer
taxable for receiver
conditions:
Payment made pursuant to order of competent tribunal or pursuant to written agreement
Payment as an allowance for maintenance of recipient
Payable on a periodic basis
recipient must be living apart from spouse as a result of divorce or judicial separation

Question 5

How is Alimony (Legal Fees) taxed

Answer 5

To enforce pre-existing rights support are deductible. Now includes legal costs to obtain spousal support.

Question 6

How is Worker’s Compensation
taxed

Answer 6

Include any WCB benefits into income
However get a deduction under Paragraph 110
(1) (f) in arriving at taxable income for full
amount

Question 7

RRSP deduction limit 2023

Answer 7

+ lesser of:
$30,780 (for 2023) minus last year’s pension adjustment (PA)
18% of “earned income” of previous year minus last year’s PA
Amount contributed in year and in first 60 days following taxation year

+ the individual’s unused RRSP deduction room carried forward from 2022

Question 8

How to get RRSP earned income

Answer 8

Income from office and employment (sect. 5 to 8 excluding deduction for RRP)
Business income
Rental income from real property
Alimony and maintenance income
Research grants net of related expenses

Minus
Business losses
Rental losses
Alimony and maintenance deductions

Question 9

What is Pension Adjustment (PA)

Answer 9

Provided on individual T4.
Represents the value of tax- assisted or sheltered benefits accruing to the taxpayer in a year.

Question 10

Implications of EXCESS CONTRIBUTION TO AN RRSP

Answer 10

Subsection 204.1 (2) Levies a tax of 1% per month on the excess contributions

Excess contribution is in excess of $2,000 above deductible contribution limit

Excess contribution is not deductible but taxable on withdrawal

Any excess amount can be withdrawn from the plan and included in year of receipt, if withdrawn within a year can be deducted, not double taxed

Question 11

max contribution to spouse’s RRSP is?

Answer 11

Max RRSP contribution still limited to the amount that may be deducted by taxpayer for his / her own RRSP

Question 12

how are Pooled Registered Retirement Savings Plan taxed?

Answer 12

Similar to an RPP:
Employers can deduct contributions
Employees not taxed until withdrawn

Question 13

Tax Free First Home Savings Account (FHSA) max contribution

Answer 13

contributions can be made to a FHSA, up to $8,000 per year
$40,000 lifetime contribution limit
Only for one property

Question 14

Tax Free First Home Savings Account (FHSA) Benefits

Answer 14

Contributions are deductible for tax purposes
Income earned in the FHSA is tax-free
Withdrawals from the FHSA is tax-free, if used to buy a qualifying first home
Can transfer to RRSP, without impact on RRSP room

Question 15

Registered Education Savings Plan (RESP) & Canada Education Savings Grant CESG
max contribution

Answer 15

$50,000 lifetime contribution limit
-Annually – 20% of contribution up to
$2,500 – max grant $500
- May be increased to $1,000 if maximum grant was not received in prior years
-Lifetime –maximum grant $7,200

Question 16

Registered Education Savings Plan (RESP) Benefits

Answer 16

Investment returns accumulate in plan on tax deferred basis Similar to RRSP
Investment returns are taxed in child’s hands
Usually a lower income levels resulting in lower overall tax

Question 17

Registered Education Savings Plan (RESP) maximum withdrawals (EAPs)

Answer 17

First 13 weeks of consecutive studies:
-Full-time studies – Max of $8,000 per year
-Part-time studies – Max of $4,000 per year

Receipts from Contributions made by Contributor:
-Paid Tax Free

Receipts from Earnings and Grant
Taxable when received

Question 18

Registered Education Savings Plan (RESP) withdrawals to contributor

Answer 18

Original contributions
– not taxable
Earnings – two levels of tax
-Income taxed at usual levels
-Additional tax of 20%

Rollover to RRSP avoids both levels of tax
Must have contribution room

Question 19

Tax-Free Savings Accounts (TFSA)
max contributions

Answer 19

Contributions are limited to
-$6,500 for 2023
-(cumulative $88,000)
Can contribute individual and/or spouses plan
-Combined contribution is $13,000

Question 20

when are tax deductiableMoving Expenses ITA 62 & how much is deductible

Answer 20

Eligible if new residence location is at least 40 km closer to new work location than previous home
or to attend a post secondary

Only deductible to the extent of employment/business income at
new location (+ scholarship + grants)

Question 21

What moving expenses are deductible

Answer 21

• Traveling costs for taxpayer
• Cost of transporting furniture, etc.
• Cost of food and lodging at the old or new location for up to 15 days
• Cost of canceling a lease on former residence
• Cost of selling his former residence
• Legal fees and transfer tax on new residence (only if old residence is being sold)
• Cost of maintaining a vacant former residence

Question 22

Max childcare deduction

Answer 22

$200/ child / week for children under 7 years old at year end ($8,000/40)
$275/ child/ week if infirmed ($11,000/40)
$125 / child / week for other eligible children ($5,000/40)

Limited to 2/3 of earned income

Question 23

Earned Income for childcare deduction is calculated as: (ITA 63 (3) (b))

Answer 23

income from employment or business plus taxable training allowances, scholarships, bursaries, prizes, research grants

Question 24

Circumstances where spouse with higher income is allowed to claim childcare deduction

Answer 24

• is in full time attendance at a designated educational institution
• is certified by a doctor to be incapable of caring for children by reason of medical or physical infirmity
• is in prison for at least 2 weeks in the year
• Is living apart for at least 90 days in the
  year by reason of marriage breakdown

Question 25

When are legal costs deductible

Answer 25

fees associated with:
-An assessment of taxes
-Penalties or interest under Act
-Decision under Canada Employment and Immigration Commission, UI Act and CPP Act

Provides an income inclusion for any amount received

Question 26

How are spousal RESP contributions taxed

Answer 26

Last 3 years of contributions are taxed to contributor

Question 27

How long can you carry forward/back non capital loss

Answer 27

3 years back & 20 years forward

Question 28

How long can you carry forward/back a capital loss

Answer 28

3 years back and indefinitely forward