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Did you know that if you moved more than 40km for work, you may be able to claim the expenses associated with that move on your personal tax return?
How do you know if you qualify? There are three simple questions to ask:
- Did you move in 2017?
- How far did you move?
- Why did you move?
If you answered yes, more than 40km, and because of work; then you can claim your moving expenses.
What kind of expenses are covered?
- If you have to sell your house, you can claim the cost of the realtor, lawyer fees, disbursement fees, and fees associated with paying out your mortgage early.
- Moving expenses – did you have to hire movers? Did you rent a U-Haul? Did you do it yourself? If so, you can claim your gas (or mileage). All of these are eligible expenses that you can claim.
- Accommodations – if you moved provinces or cities, or had to sell and weren’t able to find a new home before possession date, you can also claim your hotel and meals for up to 15 days.
- Vacancy expenses – If your old house sat vacant because it wouldn’t sell before you bought something new, you can potentially claim any costs associated with making sure it is secure; whether it’s quick trips to your old house, hiring a house sitter, installing an alarm system with monitored service, etc.
All that being said, if you moved without a job offer, then your expenses cannot be claimed. You must be moving for a job, not a potential job. So make sure you have an offer in hand before making the move. I should also note, CRA tends to audit or ask for more information from anyone claiming moving expenses because these tend to be high priced deductions. If you do not have a receipt or proof of an expense, you cannot claim it.
If you are ever in doubt on an expense, drop us an email and we would be more than happy to determine if you can claim it or not!
One of the hardest things we’ve had to do is tell someone that they can’t claim a certain expense because it’s not eligible. Unless you own your own company, what you can claim as employment expenses is very limited.
As a salaried employee, you cannot claim your travel to and from the office as an expense. You can, however, claim expenses from the following categories:
- Accounting and Legal Fees: You can deduct any legal or accounting fees you incur to collect or establish your salary or wage. What this means is if you had to contact a lawyer and put the on retainer in order to collect your pay cheque from a delinquent employer, then you can claim that expense as an employment expense on your tax return.
- Automobile Expenses: The best example is the travelling salesman. If you work for a company that requires you to use your own vehicle for company purposes, then you can claim the costs related to running and operating your vehicle as long as you did not receive compensation from your employer for this.
- Travelling Expenses: If you had to travel to another city or country for your job regularly, then you can claim the cost of your lodging and meal expenses as long as you had to be away for more than 12 hours and your employer did not reimburse you for the expense. The maximum you can claim for food and beverage is 50% of what you actually paid.
- Parking: You can claim the cost of parking as long as it is not related to your regular place of work. You cannot claim parking outside of your employers main office but you can claim parking if you had to travel to another city and pay for parking. If you were reimbursed by your employer for parking or were paid a per-kilometer rate, then you cannot claim parking (or any automobile expenses).
- Supplies: If your employer requires you to purchase your own supplies to complete your work, then you can claim these as an expense. The supplies has to be a direct relation to the work you complete and are considered consumables (paper, ink, pens, etc). Things such as briefcases, calculators, etc are not considered supplies and are not an eligible expense.
- Salary Expenses: If you had to hire an assistant and pay them out of your own salary, then you can claim their amount as an expense as long as your employer did not reimburse you. If you were reimbursed in part for this expense, then you can only claim the remaining amount.
- Office Rent: You may claim any expense relating to rent charged to you in order to earn your income that was not reimbursed by your employer.
- In-Home-Office-Space: There are certain limitations on what you can claim as an eligible home office IF it is required for you to earn your income and not reimbursed by your employer. You must use it more than 50% of the time and you must use it to meet with clients, complete your work, and carry out your other employment duties regularly.
Most of these expenses requires you to fill out and maintain a Declaration of Conditions of Employment and get it signed by your employer. If you have employment expenses, we will require seeing this before we can enter any of the expenses.
Commissioned employees have much of the same expenses but have a few added ones:
- Advertising and promotion
- Food and beverages
- Entertainment expenses
- Bonding premiums
- Medical underwriting fees
- Computers, cell phones, and other equipment
- Training costs
- Travel fare
The above categories all require that the expense be required to earn your income, not reimbursed by your employer and your total expense amount cannot be greater than your commissioned amount for the year.
If you are a tradesman and require specialized tools that are not covered by your employer, then you can claim the cost of the tool. There is a rather complex calculation that is required to see if the cost is fully deductible or not. The write up can be found here.
There are three other types of employment that have eligible expenses related to them: Transportation employees, Forestry operations and Employed artists. These are not as common in Calgary as the ones listed above.
As always, Accountable Value Financial Services is here to help. If you are not sure if you qualify for employment expenses, contact us today. We would be more than happy to help you with your tax return and any questions you may have.
We’ve all seen or been around someone who is getting to the age where they can start drawing a pension if they choose. The question is, is it the best time to do so?
This question is on a lot of Canadian’s minds every year; do I apply for CPP and OAS or do I defer and draw it when I am older? It’s a tough question to answer because there are many factors that play into whether you should wait or not. But first, let’s look at what those ages are…
For CPP, the minimum age you can start drawing out the pension is 60 but don’t jump onto that right away without doing your research first. At age 60, you can apply to start taking a reduced CPP at a rate of 0.6% per month you draw out before your 65th birthday. This works out to be 7.2% per year to a maximum of 36%. The adverse is also true. If you decide to defer your CPP payments until after you are 65, then you will receive an increased benefit of 0.7% for every month you defer. This works out to be 8.4% per year up to a maximum of 42% at the age of 70. After you hit 70, you have to take out your CPP.
One thing that should be noted, you have to apply for your CPP. CPP will not start automatically and the government will not apply on your behalf.
Now that we’ve gotten the age out of the way, let’s look at when you should start to draw CPP or some common scenarios.
Although Amrita enjoys her job as a nurse, she plans to retire when she reaches 65 in 2014. Based on her CPP Statement of Contributions, she expects her CPP retirement pension in 2014 to be $6,220 annually. This amount will then grow with the cost of living, as measured by the Consumer Price Index.
However, if Amrita decides to delay taking her CPP pension until she reaches 66 in 2015, her CPP retirement pension will increase by 8.4% (0.7% x 12 months). Based on this change, the annual amount of her pension will increase by $522, and will then grow with the cost of living, as measured by the Consumer Price Index. ~ Taken from the Canada.ca website
OAS is similar in that it will offer you a monthly payment but it’s one that you do not contribute to directly. It’s funded through general revenues from the government. There are three deciding factors in if you qualify:
- be 65 years or older
- be a Canadian citizen or legal resident at the time your OAS is approved
- have resided in Canada for at least 10 years since the age of 18
If you meet those three criteria, then you can apply (there are some other deciding factors if you reside outside of Canada but are still a Canadian citizen). Like your CPP, you can defer for up to 5 years. Each month you defer your OAS, you will receive 0.6% more per month to a maximum of 36% by age 70. If you do defer, you will no longer be eligible for the guaranteed income supplement and your spouse or common-law will not be eligible for the allowance benefit. The questions we will ask you when determining when the best time to take your OAS or if you should even defer is:
- What is your current and future sources of income;
- What is your current and future employment status;
- Are you in good health or have any family history of health issues; and
- What are your plans for retirement
You are allowed to continue to work and receive your OAS, but there is an annual maximum income amount that you can receive before you have to start repaying some OAS back. The ideal solution is to defer until your income will be lower to avoid the penalty if you can.
It’s never to early to start planning for your retirement. There are two main people you should sit down with and start the discussion: Financial Adviser for your investments and a Tax Specialist on how you can limit your tax liability when you retire.
At Accountable Value Financial Services, we can sit down with you and determine the best time to apply for your CPP and OAS. We can also help you plan for your retirement so you can continue doing things that you love. We can also put you in contact with Financial advisers who can help set up your retirement benefits such as RRSP’s and non-registered savings plans. Declaring your CPP and OAS on your taxes is a must. If you have pensionable earnings to declare, we can help! Contact us today to get started with your pensions.
Medical Expense Tax Credit
Most medical expenses that you incur in the year can be claimed on your tax return as a tax credit. Tax credits are different than tax deductions in the sense that it lowers your Part I tax liability on an individual. With the Medical Expense Tax Credit, an individual may decrease their tax liability by 3% of their earned income to a maximum of $2,268.00, whichever is less, for the given tax year (2016). This amount is calculated at the lowest tax rate (15%). For example, if you have a total of $5000.00 in medical expenses for the year, your total tax credit would be $750.00 (this doesn’t mean you would get a tax refund of $750.00 if you didn’t have to pay any tax for the year, this simply means that it would lower any potential tax liability by up to $750.00. If you owed $1000.00 in taxes and claimed a tax credit of $750.00, you would only end up paying $250.00 in taxes). I know this all seems like a lot to take in, and it is, but we can sit down with you and explain it in more detail when the time comes to file your taxes.
What can I claim?
There are a lot of expenses that an individual can claim on their tax return to lower their tax liability. The common ones are prescription, optometry, dentistry, chiropractic, acupuncture, physiotherapy and amounts paid to a medical practitioner. What you may not realize, is the list doesn’t stop there. CRA has an extensive list of what you can and cannot claim here, here and here. If you have any questions about what may or may not be covered, contact us and we would be happy to answer any of your questions!
How do I claim the medical expenses?
Claiming medical expenses is easy. Collect them in an envelope for the year and when you meet with your tax professional, give them the envelope. They will sift through the expenses and ensure they are all eligible medical expenses and make an entry on your tax return. Alternatively, if you are doing your taxes yourself, your tax program will ask you if you have any medical expenses for the year. You are required to keep all the receipts for your medical expenses even after they are claimed on your taxes with your tax return. It’s best to keep them for 7 years in case CRA ever requests to see them.
Accountable Value Financial Services are experts with the medical expense tax credit. For over 8 years, Justyn Perry has worked with companies in administering Private Health Spending Accounts (also known as Health Spending Accounts) which utilizes the medical expense tax credit for eligible medical expenses. If you have any questions about this tax credit or PHSP’s/HSA’s, feel free to reach out to us.
We’ve all heard of RRSP’s. They grace TV ads; there are posters plastered at our local bank; there are ads on buses; even social media has ads peppered through our feeds. But what are they exactly and how do they benefit you?
I am sure the majority of us have grandparents or even parents who invested in RRSP’s when they were first introduced. It’s the government’s way of basically forcing us to save for our retirement by giving us tax breaks now on what we contribute; but are they all that they appear? Here are some common questions and answers that pop up frequently:
- What is an RRSP exactly?
RRSP stands for Registered Retirement Savings Plan. Think of it as a safe place to put some money for investment for your retirement. As you contribute to your plan, it earns interest tax free (sort of).
- How does an RRSP work?
When you are working, you are technically allowed to contribute however much you want to an RRSP but there are limits on how much are tax deductible. You are allowed to contribute 18% of your annual earned income to an RRSP up to a maximum (for 2017, this maximum is $26,010.00). You receive a deduction for the amount you contribute on your taxes for the year you make this contribution up to the maximum. This tax break will lower the amount you have to pay OR give you a larger refund. It can be a great tool to effectively lower your personal taxes. Over the course of the term (up until you retire), you can direct your RRSP’s to certain types of investments (for example a common split is 60/40 for stocks and bonds). As you get older, you may want to change them to something less risky (say mutual funds). Any interest that these RRSP’s earn are tax free at the time. When the time comes to retire and start withdrawing the funds (by converting them to an RRIF), CRA will require you to pay tax on these. The best part is most people who withdraw, are at a lower tax rate than when they invested in them meaning they will pay less tax over the course of their lifetime.
- Why should I contribute?
I hear a lot of people ask this question (I was one of them a year ago!). Why wouldn’t I just invest the money myself and not put it into an RRSP? The answer I always got (or heard the most) was why wouldn’t you? By putting your money into an RRSP, not only is it a tax deduction, but you can let someone else worry about making sure it grows. It’s a great way to force you to save for your retirement. If you put funds into a regular savings plan, you will always have the temptation to withdraw and spend on items today rather than saving for items tomorrow.
- When should I start contributing?
The best answer is now. But the realistic answer is when you can. If you have high debt, the best is to pay down your debt first. The amount you save on the interest on this debt will be more than what an RRSP could pay (unless you are risky and having all your RRSP’s in stocks). If you can afford $25.00 a pay period initially, then you should start with that. Every little bit will help you reach your retirement goal. The average person should retire with at least $500,000.00 in either their RRSP or some form of savings plan. To reach this goal, they would need to contribute a minimum of $10,500.00 per year at age 35. If this number seems daunting, then extend it out and start contributing earlier in life. The best thing to do is to sit down with a financial planner to plan for your retirement. It’s never to soon to start thinking about your financial situation at retirement. At Accountable Value Financial Services, we have lots of connections to Financial Advisers and would be happy to refer you to someone who can help you.
- Who can contribute?
Any individual who works, earns an earned income, and files a Canadian Tax Return can have an RRSP. When you purchase RRSP’s, you purchase them for yourself (you can purchase spousal RRSP’s, which counts towards your annual contribution limit and your tax deduction).
The deadline for contributing to your RRSP’s for the prior year is March 1. You should sit down with your tax professional to see if you should contribute more or less to help your tax situation. You should also sit down with your financial adviser or RRSP specialist to ensure you are on the right track for your retirement.
Accountable Value Financial Services can help with your tax planning. Contact us today to see how we can plan your taxes for the current year and future years. It’s never to early to plan for your future.
Whether you are getting help filing this year or doing it yourself, if you get organized and stay organized, it will make things a lot better and less painful!
These 5 steps are a great way to make sure you are organized when it comes time to do your taxes.
- Find and Classify your Statements
This sounds silly, but a lot of people have all their statements in a box or one big file folder. If you take 5 minutes and go through this mass of papers, it will save you hours later trying to find that one statement. You should organize based on the following
- Stocks / Bonds / Investments – Statements and any buy/sell information
- Bank Statements (including Credit Card statements)
- Employment Related Expenses
- Employment Related Income
- Medical Receipts (we will touch base on this at a later post)
- Moving Expenses (this will be covered more in a later post)
- T Slips as they come in – By creating a folder specifically for these, you know they will all be in one place
- All Others
- T Slips
Figure out what T Slips you should be receiving. T Slips usually arrive between mid-January and the end of February. If you have not received a slip by February 28th, contact the provider to ensure you can get one before you start the tax process. Just because you don’t receiving a T slip, that doesn’t mean you can skip those amounts. The big ones for the majority of Canadians are:
- T4 (Employment Income)
- T4A (Pension Income, Self-Employment Income)
- T3 (Trust Income)
- T5 (Investment Income)
- Be Prepared for Tough Questions
If you seek professional tax help, be prepared to answer some questions. We have an extensive questionnaire that we ask our clients when we sit down to gather their information for tax returns. Some common ones are:
- Do you have investment income? This may include earned interest on savings accounts or interest earned in a non-registered savings account. Did you know that anything under $50.00, the bank or issuing institute typically does not issue a T5? You have to be prepared with those numbers yourself.
- Do you have any RRSP’s? If you bought any RRSP’s during the year, you should be receiving a T slip for those. If not, be prepared with those numbers to give to your tax professional.
- Did you cash in any RRSP’s? If so, you need to provide a T slip or those amounts.
- Do you have any tuition or school related expenses?
- Do you take transit? Your transit expenses may be eligible.
- Did you move because of work? Moving expenses that you incurred because you had to move for work are all eligible credits and deductions on your tax return. So make sure you keep all your receipts and expenses.
- Self Employment
If you have self employment income, you can claim a fair bit of your expenses. Make sure you gather all your company information including all income and expense statements. If you operate your business out of your home, you can claim a portion of your house expenses as business expenses.
- Seek Help Earlier
If you start gathering your information and are unsure on what you can claim on your taxes or if you are lost amidst your papers, help is available! By getting help with your taxes sooner rather than later, you avoid the deadline crunch and possible penalties by CRA. It gives you time to gather missed slips or expenses and will allow your tax professional the time they require to get everything together for you.
As always, Accountable Value Financial Services is here to help you with your taxes this tax season! With returns as low as $30.00, how can you not afford peace of mind knowing that your tax return is in the hands of a trained specialist. We will make sure your tax return is done proper and complete so your refund is back to you as quickly as possible. Contact us today to see how we can take the stress out of taxes.