PERSONAL TAX
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MEDICAL EXPENSES - TUITION, TRAVEL
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MEDICAL EXPENSES - DRUGS
Certain drugs, medicaments or other preparations prescribed by a medical practitioner or dentist and recorded by a pharmacist are medical expenses.
MEDICAL EXPENSE - DEPENDANT PARENT
It is possible for someone to be dependent on more than one person. Accordingly, it is possible that more than one person may claim a portion of an allowable credit.
MEDICAL EXPENSE - TRAVEL INSURANCE
The cost to acquire certain medical travel insurance policies can qualify as a medical expense if paid as a premium, contribution or other consideration to a Private Health Services Plan.
MOVING EXPENSES
In a February 16, 2007 Tax Court of Canada case, the Court permitted most of the moving expenses including $3,500 for storage and transportation of household effects, $350 for travel, $50 for meals, $96 for accommodation, $16,200 for real estate commissions, $451 and $1,276 for legal services, and $2,534 for land transfer tax.
TRANSIT PASS CREDIT (TPC)
Taxpayers may claim a TPC for passes for buses, commuter trains, local ferries, streetcars, and subways on behalf of family members including spouses and children under age 19.
The Transit Pass must be for at least a month’s duration and should contain information such as the period for which the pass is valid, the transit authority that issued the pass, the amount paid for the pass, and the identity of the rider.
In a December, 2006 CRA Interpretation, CRA confirmed that the TPC would not be available for daily or weekly passes.
ON-LINE TUITION FEES
In a November 10, 2006 Tax Court of Canada case, the taxpayer was enrolled in an on-line Master of Science postgraduate degree at the University of Liverpool in England. The tuition fees were $16,278. The Program was taken exclusively over the Internet while the taxpayer was physically in Canada.
Taxpayer Wins!
The Court permitted a tax credit for the on-line tuition fees.
FITNESS TAX CREDIT
Effective January 1, 2007, parents who enroll children under the age of 16 in organized sports will be eligible for a Fitness Tax Credit. Eligible programs must include at least thirty minutes of physical activity for kids under ten and an hour for those ten and over. The program must last a minimum of one session a week for eight weeks, except for camps where kids get a full week of exercise.Qualifying costs could also include membership fees at facilities and community centres, fees charged for teams or programs at schools that are managed either by the school or a third party, camps with a physical activity theme, and fees for training or coaching courses, as long as they meet the physical activity requirement.
For Children’s camp fees to qualify for the fitness tax credit in 2007, the camp must have a five-day duration with more than 50% of the program time devoted to physical activity - up to a maximum of $500.
UNIVERSAL CHILD CARE BENEFIT (UCCB) (top of the page)
Parents and primary caregivers who have not yet applied for the $100 per child per month Universal Child Care Benefit (UCCB) should be aware that benefits will only be paid retroactively to a maximum of eleven months.
The UCCB came into effect in July, 2006. All persons with children under six benefit, regardless of income or the type of child care they choose.
Persons receiving the Canada Child Tax Benefit (CCTB) should automatically be receiving the UCCB. However, higher income Canadians who are not eligible to receive the CCTB must apply for UCCB. (For information search Universal Child Care Benefit at www.cra.gc.ca).
The benefit is taxable in the hands of the lower-income spouse.
EMPLOYMENT
INCOME (top
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FITNESS CLUB MEMBERSHIPS
Generally the payment or reimbursement of club dues or membership fees by an employer results in a taxable benefit to the employee. However, if it is primarily to the employer’s advantage for an employee to be a member of a club, the employee will not have a taxable benefit.
In general terms, CRA do not consider a situation to be primarily advantageous to the employer where the employee’s membership in a fitness facility is part of an employee-wellness program designed to provide indirect benefits to the employer, such as the employee being healthier and better able to perform his/her duties.
MEAL REIMBURSEMENT
An employer may pay a tax-free allowance for travel expenses (including meals) to an employee who is travelling away from the municipality where the employment ordinarily occurs. This also applies to reimbursements.
EMPLOYMENT VS. INDEPENDENT CONTRACTOR
In a September 15, 2005 Tax Court of Canada case, the Court found that twenty-seven workers were found to be employees not independent contractors. The workers were engaged to complete credit card application forms.
There are significant extra costs, such as Canada Pension Plan and Employment Insurance, that the payor must now pay.
BUSINESS/PROPERTY INCOME
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of the page)PRIVATE HEALTH SERVICE PLAN (PHSP)
Business proprietors and partners may deduct premiums payable under a PHSP in respect of the individual and family members living with the individual, within certain dollar limits.
OWNER-MANAGER REMUNERATION (top
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2007 INDIVIDUAL PENSION PLANS
An Individual Pension Plan (IPP) is a pension obligation between a sponsoring company and its employee(s). It can be offered selectively (i.e. to owner-managers) and retroactively. The retroactive aspect allows a large tax-deductible deposit representing past service going back to potentially 1991.
With this large first year deposit and the regular annual deposits, one can achieve a much larger tax sheltered retirement account than available in an RRSP program alone.
An IPP is most advantageous for a person who is age 50+ and has been taking regular salaries out of his/her corporation.
ESTATE PLANNING (top
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RRSP - FRAUDULENT SCHEME
In an April 2, 2007 Tax Court of Canada case, the taxpayer contended that he was the victim of a scheme by which he was defrauded out of his $53,300 of RRSP funds and that he should not be required to include any amount in his income.
Taxpayer Loses
The Court noted that even though it is difficult not to be sympathetic with the taxpayer, this cannot have a bearing on the tax consequences that flow from the transactions.
CHARITABLE DONATION
In a February 14, 2007 CRA Release, CRA notes that a gift for tax purposes also includes a gift in kind, which is a gift of property other than cash.
A Registered Charity that accepts a gift in kind can issue a donation receipt for a charitable donation tax credit. The receipt should be for “fair market value”.
ELIGIBLE PENSION INCOME
The October 31, 2006 Department of Finance Release announced that persons eligible for the $2,000 pension income credit will be able to transfer up to 50% of this income to a resident spouse/common-law partner in 2007 and subsequent years.
For individuals aged 65 before the end of the year, “pension income” includes lifetime annuity payments from a superannuation or pension plan, an annuity from a Deferred Profit Sharing Plan, or a Registered Retirement Savings Plan, a “payment” from a Registered Retirement Income Fund or the income portion of a general annuity contract.
For individuals under 65 years of age a “qualified pension income” includes lifetime annuity payments under a superannuation or pension plan. It also includes other “pension income” amounts received as a result of the death of the individual’s spouse or common-law partner.
Before doing this transfer on the 2007 Personal Tax Return, it is important to consider other tax implications such as the loss of low income credits that may otherwise be available to the recipient spouse.
CHARITABLE DONATION SCHEMES
In a February 9, 2006 Federal Court of Appeal case, the Federal Court upheld the Tax Court decision that denied the Appellant’s charitable donation credits claimed because the donations were not truly for the amount appearing on the receipts. Also, gross negligence penalties were upheld by the Federal Court of Appeal.
INTERNATIONALtop
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U.S. ESTATE TAX ON U.S. PROPERTY
A Canadian citizen/resident who dies is subject to U.S. Estate Tax on U.S. situs assets, subject to a tax credit of $13,000 which applies on $60,000 of U.S. situs assets. Also, a prorated exemption is calculated by multiplying $2 million by the Canadian person’s U.S. situs assets divided by the value of the worldwide assets.
In addition, a marital exemption is allowed equal to this prorated exemption.
ENGAGED IN A TRADE OR BUSINESS IN THE U.S.
Canadian businesses engaged in a trade or business in the U.S. must file a U.S. Federal Income Tax Return. If it is uncertain whether you are engaged in a U.S. business it may be advisable to file a “protective” U.S. Income Return showing zero tax liability on business income.
If you are engaged in a U.S. business but you do not have a “permanent establishment” in the U.S. there may be no U.S. Federal Income Tax liability but you still must file a U.S. Income Tax Return to take advantage of this Tax Treaty claim.
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Last updated: December 2007