Taxes Flashcards
Child care expenses
Normally the lower income person would claim childcare expenses. An exception is if that person is in school part time. Higher income spouse can claim
$275 per month for a child with DTC
$200 per month for children under the age of 7
$125 per month for other eligible children
AMT
Alternative min tax
To ensure high income low tax individuals pay a min amount of tax
$40,000 exemption in calculating taxable income under AMT. Calculated as adjusted taxable income in excess of $40,000 at the lowest federal tax rate of 15% with credits allowed for certain personal amounts) plus the applicable provincial tax tax.
Taxpayer must pay the higher of either the regular income tax or the AMT
Calculate fed tax
Calculate taxable income including employment, interest income, taxable cap gains, etc
Gains from small business. FMV-ACB-LCGE = gain?
Apply the tax rates based on the tax brackets provided
How many tax years can AMT be recovered following the year it is paid?
The following 7 years if there is taxable income
AMT - final return?
AMT does not apply to year of death
Filing deadline for deceased?
Death Jan 1-Oct 31 : April 30
Death Nov 1-Dec 31: 6 months after date of death
Regular filing deadlines
Employees : April 30 and any balance owing paid by this date
Self Employed: June 15 but any balance owing should be paid by April 30
Tax installment schedule
Calendar quarterly -= Mar 15, June 15, Sept 15 and Dec 15
Filing deadline penalties
Late fee of 5% plus interest at prescribed rate
What is a tax deduction?
An expense subtracted from total income to arrive at taxable income. Examples : medical, child care, union dues, investment counselling fees, alimony, spousal support, attendant fees
Types of income
employment
business (self employed, sole proprietors)
Rental income
Investment income
What is a tax credit?
Dollar for dollar reduction in the amount of tax that must be paid
What is a non refundable tax credit?
Can only be used to reduce federal or provincial/territorial taxes payable to zero.
Fed credit is determined by x a gross dollar amount o by the lowest fed tax rate 15%
examples: basic personal, spousal credit, age credit, disability credit, caregiver credit, tuition fee and education credits, charitable donation, public transit, CPP, EI premium credit, medical expense credit
PRE prior to 1982
A taxpayer and spouse could each designate one home their PRE and claim a deduction
What is TOSI?
Tax on split income. Applies the highest marginal rate of 33% to split income of individuals under 18 years old
New TOSI rules?
Relate to individuals over the age of 17 with respect to income derived from related business
New TOSI exceptions?
The business owner/major shareholder is over 65 years old allows them to income split in retirement with their spouse without TOSI applying
18 or older and engaged on a regular continuous and substantial basis in the activities of the business
Individuals who are 25 or older who own 10% of the votes
TOSI 18-24
Not subject to the TOSI rules : when taxable cap gains from disposition qualify for the LCGE, qualified farm, fishing propoperty or small business corproation
Qualifying Small Business?
Actively operating primarily in Canada
CCPC
at least 24 months
More than 50% of FMV shares are using principally in the active business - at the time of sale increases to 90%
What is the capital dividend account?
notional account representing cumulative value of non taxable portions of various forms of income
examples: insurance proceeds, tax exempt portion of cap gain, dividends from other CAD corps
Private corp can pay shareholders a dividend to its shareholder. Shareholder receive payment tax free
LCGE 2021?
$892,218
3 strategies to claim capital loss for superficial loss rules
repurchase the same security after 30 days of settlement of the original sale
ensure you don’t own the same security on the 30th day following settlement
sell the share of one company and purchase shares in a different company in with similar exposure to the markets
3 exceptions to the superficial loss rules
deemed to have sold because you are no longer a resident of Canada
You are considered to have sold the property because you have changed its use
The property is deemed to have been sold because the owner died
Car mileage
$0.59/km for first 5000
$0.53/km for upwards
Standby charge when car is owned
2% of cost of car x # of months available to employee
Standby charge when car is leased by company
2/3 monthly car lease ex insurance x # of months available to employee
When can the standby charge be reduced?
total km driven by employee for work is over 50%
AND
total km for personal is less than 20,004
What is the standby charge?
taxable benefit = standby charge + operating cost less any reimbursement by employee within 45 days after the end of the year
