Tax Tips
What's new
Public Transit Canada: People who buy monthly or annual public transit passes receive a tax credit amounting to 15.5% of the cost of the passes, effective July 1, 2006.
Universal Child Care Benefit: Parents receive $1,200 annually for each child under six. These amounts are taxable in the hands of the lower-income spouse.
Physical Fitness Credit: In 2007, parents who enroll their children under 16 in physical fitness activities can claim a tax credit of up to $500 of the cost of the program.
Textbook Credit: Post-secondary students can claim a tax credit on the cost of textbooks up to $500.
RRSP TIPS & FACTS
For most people the RRSP deduction remains one of the best tax shelters and is still the number one way to save and invest for your retirement. RRSP contributions are used to reduce taxable income of the individual up to the amount of contribution room that an individual has accumulated from previous years. Please see the Checklist page for further information.
PLANNING
Rearrange your financial affairs to make interest paid on loans and mortgages tax deductible. Often clients do not take the time to structure themselves properly and take advantage of the various tax saving strategies. Careful planning must be done but the results can be significant tax savings.
CAPITAL GAINS
With the new capital gains inclusion rate being 50% of the gain, most people will find that they end up paying only about 20% tax on capital gains. This means that the tax paid on capital gains will likely be less than that paid on withdrawals from RSP plans which commonly will be taxed at 34%. Therefore, consider holding investments that may produce capital gains outside of your RSP and hold interest producing assets such as GIC's etc. inside your RSP to defer the tax payable.
GST
Remember to claim the GST Input Tax Credits on employment expenses reported on form T777. You generally can get this GST back provided you work for an employer who is GST registered (for example, banks and insurance companies would not qualify for this claim). Complete form GSTR and file it with your personal income tax return. If you have neglected to claim these credits from past years, you can go back four years and recover the applicable GST paid.
BUSINESS OWNERS
Business owners should consider paying their spouse and children wages in order to take advantage of possible lower income tax rates. Of course, these wages must be reasonable in the circumstances and be properly documented by actual payments and T4 slips.
Disclaimer: Tips contained herein are meant to be of a general nature and may not be applicable to specific circumstances. Please consult with us prior to implementing any of these strategies.
