Claiming of Moving Expenses

If you move, you may be able to deduct the moving expenses.

You can deduct the moving expenses provided you move for the following purposes:

1)      To take up a new job or new place of employment.

2)      To start a new business.

3)      To study on a full time basis at a post-secondary institution.

Moving expenses are deductible only if you move more than 40 kms.

Some of the expenses that qualify for moving expenses deductions are as follows:

1)      Reasonable travelling costs including the cost of the meal and lodging for you and your family members. You can claim the meal cost at flat rate of $17 per meal, three times a day times the number of days involved in moving or at actuals whichever benefit you.

2)      The cost of moving your household effects, including storage charges.

3)      The cost of the meals and lodging near either the old or the new home up to 15 days.

4)      Lease cancellation costs.

5)      The cost of revising the legal documents to reflect the new address, replacing the driver’s licenses and automobile permits.

6)      Charges for utilities connects and disconnects.

7)      Selling costs of your old home including real estate commission.

8)      If you sell your old home, legal fees and land transfer tax payable when you buy a new home.

9)      Mortgage interest, property taxes, insurance premium, insurance premium and utility costs related to your old home up to a maximum of $5,000.

10)  In case of travel by automobile for moving, the cost of moving is at actual or at a predetermined rate of Canada Revenue Agency ( CRA) ranging from 43.5 Cents to 59 Cents per km. depending on the Province or Territory in which you begin travelling.

In case if the moving expenses are reimbursed by your employer, you may be taxed on the reimbursement provided by your employer. However, your employer can reimburse you for the following purposes without creating a taxable benefit.

1)      The cost of the house hunting trips to the new location.

2)      Travelling costs for you and your family members while you and your family members are moving from old home to the new one.

3)      The cost of the transporting or storing your household effects and the other personal property while moving from old home to the new one.

4)      The cost of revising the legal documents to reflect the new address, replacing the driver licenses, automobile permits, utility connects and disconnects.

5)      Mortgage interest, property taxes, insurance premium and utility costs related to your old home up to a maximum of $5,000.

6)      If your employer pays you non-accountable moving expenses allowance, it is not taxable up to $650.

7)      Reimbursement of loss on sale (proceeds minus the cost of the home) of your old home up to first $15,000 and thereafter at the rate of 50% on the excess amount of loss reimbursed by your employer.

In addition to above, the moving expense deduction is limited to the income from the new employment or business or the amount of grants or bursaries received for full time study. If the income is insufficient, the balance amount of moving expenses will be carried forward to the following year and can be deducted against the income from the same job or business.

When you immigrate to Canada, you cannot deduct the moving expenses on your first Canadian income tax return because at the time of move you are not a resident of Canada for tax purposes.

However, if you move out of Canada, you may be able to deduct the moving cost to other country as you will be still a Canadian tax resident at the time of moving to other country.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

  

Fraudsters Calling In The Name Of CRA

Many a time taxpayers get a frightening call from someone representing Canada Revenue Agency (CRA) asking him to pay an astronomical sum of money in the name of tax payment due. In a week, on an average three to four clients report to me about receiving such a call.

Usually, these calls are made by fraudsters in the name of CRA and contain the common features like:

1)      You owe a large sum of money by way of tax payment which is remaining outstanding for long.

2)      CRA has proceeded against you and issued an arrest warrant.

3)      A compromise settlement can be reached by paying a certain sum of money that you need to pay immediately.

Therefore, the immediate reaction of the person receiving such calls is fearfulness and not knowing what to do immediately.

After sometimes, if you receive such call, you can immediately call your accountant (if you have one) to verify your amount of owing.

Upon receiving such calls, you should not get worried and keep in mind the following things:

1)      If you have tax owing, you can immediately verify the same by going online and checking your account with CRA under CRA module called “My Account”. “My Account” can be checked online if you are registered with CRA and have the username and the password. You can check at CRA website www.cra.gc.ca

2)      If you owe the taxes to CRA, CRA never threatens you over phone to pay up immediately but communicates in writing and reminds you several times about your outstanding debt/s.

3)      If you are not sure of the amount of tax money that you owe to CRA, you can call CRA on their general phone lines for Individual tax payers 1-800-959-8281 and 1-800-959-5525 for businesses and verify if you have any outstanding payable to them.

4)      Call your accountant (if you have one), and discuss about your outstanding tax owing, if any.

5)      Report to the Crime Stoppers on the number displayed on CRA website to stop them harassing to others.

6)      Never pay or agree to pay to the fraudsters any sum of money in compromise of any tax dues.

7)      CRA normally does not file a law suit against you for collection of any outstanding taxes but hands over the matter after a considerable time to collection department and such department asks for payment in a civilised tone and would also suggest you to make an agreement to the tax dues in installments.

Hope the above information would help you if you receive such a call.

Since the year end and the tax season is round the corner, such fraud calls will only be on the increase.

Disclaimer:

Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Filing of Form T-1135 –Foreign Income Verification Statement

What is form T1135 and who needs to file?

When you file your income tax return each year, one of the questions that you need to answer is whether you hold (own) asset/s outside Canada in excess of $100,000 at any time during the year. Canada Revenue Agency (CRA) wants to keep a track on those taxpayers who are holding assets outside Canada and generating income out of such assets.  

This requirement applies to all the types of entities namely individual, partnership, corporation and trust.

What is the deadline for filing this form?

This form needs to be filed along with the individual tax return (T1) and the latest date to file is April 30 each year.

What is the penalty for not filing or late filing?

The failure to file this form is per day penalty of $25 up to a maximum of 100 days (maximum $2,500)

What does this form contain?

Mainly following assets require disclosure:

1)      Funds held outside of Canada

2)      Shares of non-resident corporations

3)      Indebtedness owed by non-resident

4)      Interest in non-resident Trusts

5)      Real property outside of Canada

6)      Other property held outside Canada

This form also contains the disclosure of information such as cost at the end of the year, maximum      amount outstanding at the year end and income generated out those assets. Please take a look at the below mentioned link

https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/E/pbg/tf/t1135/t1135-16e.pdf

How do you determine the cost of assets for this form?

When you enter Canada and own the assets outside of Canada, the fair market value of asset as on the date of entry needs to be regarded as cost for the purpose this form. In case if you are already a permanent resident and subsequently become the owner of the asset outside of Canada by purchasing asset, the cost to acquire such asset is considered for reporting for this form. In case if you become the owner of an asset by any other means such as inheritance from the parents, grandparents etc. The fair market value of such asset as on the date of inheritance should be regarded.

Methods of Reporting:

Please note that the requirement to file this form applies when you own assets outside of Canada, the total of which exceeds $100,000 and not when each asset is exceeding $100,000. Figures are to be expressed in Canadian Dollars in this form.

There are two methods of reporting 1) Simplified reporting method 2) Detailed reporting method.

When you own assets the total of which is between $100,000 and $250,000, simplified reporting method can be adopted. Under simplified method of reporting, you need to report only the different kind of assets held, income and gains or losses generated out of such assets. You do not need to report the total cost of such assets held.

Detailed Method of Reporting:

Under this method, each individual asset held needs to be reported along with its cost at the end of the year, maximum outstanding during the year, country where such asset is held and the income or gain (or loss) from such asset.

Staring the year 2015, this form can be e-filed to CRA.

Exclusions from the reporting:

There are some exclusions from the above reporting the most prominent ones being, one personal vacation property and any asset held outside Canada in carrying out active business. 

Filing of this form is very important when the global standards of information sharing are changing each day due to the information sharing treaty taking place between Canada and rest of the world.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

   

Proposed Tax Changes for Private Corporations

On July 18, 2017 Department of Finance, Canada announced its intention to introduce changes affecting private corporation taxes whereby it sought to plug the tax loopholes with a view that everyone pays a fair share of taxes. Attached is the link below:

https://www.fin.gc.ca/n17/17-066-eng.asp

As soon as above proposed tax changes were tabled by the Finance Minister Mr. Bill Morneau, lots of opposition were raised expressing their resistance to new rules imposing very high tax burden on such private corporation.

Let us look at them as to what are those proposed changes. These changes were in three major areas as follows:

1. Income sprinkling in the private corporation.
2. Holding of passive investment in such private corporation.
3. Converting Private Corporation’s regular income into Capital Gains ( since Capital Gains are taxed at a lower rate)

Income Sprinkling In the Private Corporation: (Salary and Dividends Paid) Rules for Minor and Major Family Members:

Salary:

Currently, if the private corporation pays reasonable salary to the family members, the same is allowed:

• If the salary paid is reasonable.

Proposed Rule:

Salary paid to children over 25 years of age will be taxed at the maximum marginal tax rates, unless:

• The salary paid is reasonable and
•  It is equivalent to the Fair Market Value of services rendered.

Salary paid to children of 18-24 years of age will be taxed at the maximum marginal tax rates unless:

• The salary paid is reasonable and
• Is equivalent to the Fair Market Value of services rendered
• Children must be engaged on a regular, continuous and substantial basis in the activities of the corporation.

Dividend Payment:

Currently, if the private corporation pays Dividend to the family members as shareholders, the same is allowed.

Proposed Rule:

Dividend paid to children over 25 years of age will be allowed:

• If the same is paid at the Market Rate of Return

 Dividend paid to children of 18-24 years of age will be allowed at the prescribed interest rate which is 1% p.a.

Example Scenario:

• Steven (24) receives the Dividend of $100,000 from his father’s corporation because he is the preferred shareholder of the corporation.
• Steven also receives the salary of $30,000 when the market value of his services is $50,000,the calculation will be done as under:

Total Dividend Paid	$100,000
Less: Child being 24, Dividend allowed is at 1% pa on $100,000	< 1,000>
Less: Fair market of services rendered $50K-Salary paid of $30K	< 20,000>
Tax at Maximum Marginal rate on unreasonable dividend	$80,000

Action Required:

Consider making the dividend payments to the adult shareholders who do not contribute to your corporation.

Life Time Capital Gains Exemption on Sale of Small Business Corporation Shares:

Currently if the children are the shareholders, then each child is entitled to Life Time Capital Gains Exemption on the disposition of such shares. The maximum deduction allowed is $835,716 ($1 Million for Qualified Farm Property or Qualified Fishing Property)

However, going forward, no life time capital gains exemption will be allowed if the shareholder child is under the age of 18 years and if such shares are included for taxing the split income as shown above.

Also, it is proposed that there will be no life time capital gains exemption for non-arm’s length dispositions of a small business corporation shares.

Latest News:

Somewhere around October 20, 2017, Finance Minister Bill Morneau and the agricultural minister Lawrence Mac-Aulay made the announcement that the current government would not go ahead for implementing this part of their proposal since it would create difficulty for Family Farm to pass on the same to the next generation.

Passive Income Generated in the Private Corporation:

It was proposed in the new rules as regards the income generated by private corporation that it be taxed at a much higher rate by eliminating the tax that can be refunded in case if such private corporation pays dividend to its shareholder.

Latest News:

The Finance Minister has announced somewhere at the end of the third week of October that Government will not levy additional tax as indicated above up to a limit of $50,000 income from passive investments considering 5% per annum return on an investment of $1 million in a private corporation.   

At around same time it was also announced that the small business corporation’s Federal Rate of tax would be reduced from 10.5 % as at present to 9% giving out some more tax relief to private corporations which are the back bone of The Canadian economy.

It would be interesting to see how the above private corporation tax changes are finally crystalized and implemented. It is expected that these changes will be passed at the end of this November.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Whether you are Employed or Independent Contractor (Self-Employed)?

Many a times the question arises whether you are employed or self-employed. The reason behind this distinction is because of the difference in its tax treatment. Employed person have limited scope and ability to claim the expenses against employment income. Self-employed has a wider scope in claiming the expenses deduction.

Difference in the tax treatment between employed and self-employed:

Payroll Tax Deduction:

If you are employed, deduction of Canada Pension plan (CPP) and Employment Insurance (EI) premium are made and there are no such deductions for the self-employed.

Payroll deductions are made with reference to the gross income for salaried tax payers and self-employed pay CPP only on the net income from business (i.e. Gross Revenue-expenses).Also, Self –employed pay double the CPP deduction i.e. employee and employer part.

EI Deduction:

Salaried employees have the advantage of claiming EI benefit when they are willing and able to do the job but cannot find the same due to being laid off from their current jobs.

Self-employed do not enjoy this advantage.

How to determine whether you are employed or self-employed:

Canada Revenue Agency has outlined following factors to in their publication (RC 4110- “Employee or Self-Employed?) in determining the above distinction.

Tools and Equipment:

Normally, an employee is supplied by his employer the tools of the trade required to perform the necessary job function. In case of self-employed contractors tools and equipment are brought by themselves to discharge their function/tasks.

Control and Direction:

If you are an employee, you have a control and direction from your employer with regard to the manner and the time limit within which the task needs to be performed.

Self-employed contractors determine, by and large their own methodology and completing the assigned task. A deadline or the time limit is specified upon the contractors with little control on the manner in which the task needs to be performed. Besides this, self-employed can appoint their own employee without the employer’s permission. In case of employment, employee needs to obtain prior permission before appointing anyone.

Chance of Profit or Risk of Loss:

If you are self-employed you are your own boss and solely responsible for any loss and likewise share the profit that you make out of your own activity. Employee although many a times will share profit of the employer to a limited extent are never called upon to share the loss made by the employer.

There are some other factors such as Integration of your activity with that of the employer’s etc.in deciding the above distinction.

In case where there a very thin line of difference, following factors must be looked into in deciding whether you are an employee or self-employed.

Ø  Whether you work the sets numbers of hours per day

Ø  Manner in which you can finish the given task or assignment

Ø  Whether you are a member of the group life, drug and dental plan of the employer

Ø  Whether you carry your own insurance in completing the assigned task

Ø  Whether you are paid without submitting the time sheet and whether you are having an outstanding receivables

Ø  Whether you bring in your own tools and equipment to finish the work

Ø  Manner of direction and control provided by the employer

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Tax Planning Through Corporate Owned Life Insurance

Corporate owned life insurance policy as the name suggest, is a policy owned by the corporation. Corporate owned life insurance policy is a measure of tax planning mostly by the private family owned corporation.

Normally, under a life insurance policy there could be three different people/entity. The first one is the owner of the Life insurance policy who owns the policy. Second one is the life insured whose life is insured under a policy and third one is the beneficiary of the policy nominated. Beneficiary is the one who is designated to receive the proceeds upon death of the life insured.

Treatment of Life Insurance Policy Premiums Paid:

Life insurance premiums paid by life insured or the corporation for that matter is not tax deductible except under the following three circumstances:

1)      When the life insurance policy is placed as a collateral.

2)      When the Life insurance policy is donated to the Registered Charity.

3)      When the Life insurance premiums paid are under a registered plan.

However, there is a wonderful tax planning available through corporate owned life policy as under:

What is involved?

Private Corporation can take out the life insurance policy on the life of the owner-shareholder or the key person of the company and the beneficiary nominated should be the corporation. This is because if the corporation is not designated to be the beneficiary of the policy, but instead the beneficiary is the family member of the owner of the corporation, it will be treated as the taxable benefit to the shareholder and taxed accordingly in the hands of the owner-shareholder. When the beneficiary is the corporation, it does not give rise to any benefit in the hands of the owner-shareholder. However, the premiums paid by the corporation is not tax deductible.

Although the premiums paid by the corporation are not tax deductible, it has a tax advantage compared to individual shareholder paying the premiums in his individual capacity.

Let us take an example, if the corporation is paying every month, $100 per month on the life policy of its owner-shareholder, the total pre-taxed annual cost of the insurance premiums will be $100 X 12=$1,200/0.85=$1,411.76, considering 15% tax rate for the small business corporation on its first $500,000 of taxable income. However, if the same premiums are paid by the owner-shareholder in his individual capacity, then the pre-taxed cost of the premiums will be much higher depending upon the marginal tax bracket of the owner-shareholder. Assuming that the tax rate for owner-shareholder is 40%, the effective cost of the premiums on the pre-taxed basis will be $100 X 12=$1200/0.60=$2,000.

As you observe it could be more beneficial to take out the insurance policy through privately owned corporation.

Death Benefits- its Tax Treatment and Capital Dividend Account:

As regards the payment of proceeds of the life insurance policy upon death is absolutely tax free, which is considered a great advantage.

Now the death benefits paid will be paid out to the corporation upon the death of the owner-shareholder and it will be tax free.

The death benefit paid out to the corporation minus the Adjusted Cost Base (ACB) under the tax rules forms part of a Capital Dividend Account from where the money can be distributed tax-free to its shareholder.

This way, the ultimately the proceeds payable upon the death can be drawn tax free by the family members of the owner of the corporation and effective cost of the premiums paid could be much lower without creating any tax disadvantage to its shareholder.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Spousal RRSP and Its Withdrawal-Tax Treatment

As we all know, we can make contribution to a Spousal RRSP and take a deduction on our tax return. Spousal RRSP is the one where contributor is the tax payer and the annuitant (i.e.one who receives the benefit of the funds) is the spouse of the contributor. Contribution to the Spousal RRSP uses up contributor’s RRSP limit.

However, it is important to note the tax implications of the withdrawal from Spousal RRSP. If there

Is a withdrawal made by the spouse of the contributor within first three years of its contribution, it is treated as an income of the contributor and the withdrawal made after three years is treated as an income of the income of the spouse. This provides us with an excellent tax planning opportunity in the sense that contributor can avail of the higher tax break due to his higher marginal tax rate and spouse can pay lower taxes due to her low marginal tax break.

However, here is the caution note for such withdrawal. When there is a withdrawal from Spousal RRSP,

the question that arises is how to ascertain as to out of which funds the spousal RRSP withdrawal is made. Canada Revenue Agency will treat the withdrawal being made from the latest Spousal RRSP contribution.

As a result, if you made any contribution to the spousal RRSP three years before its withdrawal, it will be 

added as an income of the contributor and not the spouse and can have significant tax liability on your tax return.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Principal Residence Sale

If you sold any of your Principal Residence in the year 2016, you need to report the same on the tax return for the year 2016. The Capital Gains arising on the sale of your Principal Residence is of course not taxable but however, a disclosure is required on the Income Tax Return for the year 2016.

If you fail to comply with the new disclosure requirements of Canada Revenue Agency rule there could be a penalty up to $8,000

The rules are not that very simple at times and therefore it is best to see a tax professional in this regards

Disclaimer:

Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Canada Revenue Agency (CRA) Payment Options Become Easy

As we all know, when we owe the taxes on the Individual tax return we have time up to April 30 to pay this amount.

Couple of options are there to pay to CRA

1)      Pay online to CRA by visiting CRA website and clicking on the Online Services Option or

2)      Pay to CRA in the codified payment form which we get upon filing our Income Tax Option or

3)      Send the cheque in favour of Canada Revenue Agency.

Starting this year, CRA has started another convenient option of payment when you go to registered E-filer for filing your Income Tax Return. You can provide the details of your bank account, Institution Number and Branch Number to E-filers so that the same can be included on your Income Tax Return. You can mention any desired date of payment on or before April 30to avoid any late payment charges. However, the date that you mention for taking out the funds from your bank account has to be at least five business days forward to be honoured by CRA.

This is a great facility especially, when you file your income tax return in the last date and April 30 is nearing.

Please remember that this facility is only for Individual Income Tax Return as of now.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

Sale of Principal Residence-Changes In Tax Rule, Disclosure And its Tax Treatment

Under the current rules of Income Tax in Canada, if you dispose of your principal residence, the capital gains that you earn is tax free. Your principal residence could be your detached, semi-detached home, town house, condominium, bungalow, trailer boat or any other mobile home where you ordinarily live. You can choose only one home as your principal residence per year. In case if you own more than one residential property as your residence, you will have to make your choice of principal residence per year.

In case of a married taxpayer, you and your spouse have to choose only one home as a principal residence.

Let us illustrate with the help of one example, you have bought your principal residence in the year 2005 and you lived there until tax year 2013 in which you buy another residential property and lived there for some time before you disposed off the second property in 2016.

Choosing your first residence as your Principal Residence for all the tax years:

Under the circumstances, you have a choice of either treating the first residential property (which was bought in the year 2005) as your principal residence for the tax year 2005 to 2016 and pay the capital gains tax on the second residential property that you disposed off

Or

Choosing your second residence as your Principal Residence for all the tax years:

Consider your second residential property (bought in 2013) as your principal residence and not pay any capital gains tax at the time of its disposition. However, it should be noted that your first residence will not be considered as principal residence for the years 2014, 2015 and 2016.The capital gains tax will be payable at the time of disposition of your first residence.

Change in the Tax Rules:

1)      Until now there is no requirement to disclose if you sale your principal residence during the year. Now, if you sale such a residence, it will have to be disclosed along with the exemption on Schedule 3. This applies after sale of your principal residence on or after October 02, 2016

2)      Also, you should note that if you use part of your principal residence for producing income e.g. when you rent out your basement or whole residence or when you use if to claim home office expenses, you may have to pay capital gains tax on the part of your home that was utilized for claim of home office expenses or income producing.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.

New Home Accessibility Tax Credit (Schedule 12)

New Non-refundable Credit

For 2016 and subsequent years, a qualifying individual or an eligible individual can claim a non-refundable tax credit for eligible expenses incurred for work performed or goods acquired for a qualifying renovation.

The Maximum Amount of Credit:

The maximum amount of eligible expenses that can be claimed for an eligible dwelling is $10,000 ($20,000 in the case of involuntary separation) per year for a qualifying individual resulting in a non-refundable tax credit of $1,500 ($10,000X15%).

Where there is more than one qualifying individual for an eligible dwelling, the total expenses claimed by a qualifying and all eligible individuals for a year cannot be more than $10,000.

The claim can be split between the qualifying individuals and eligible individuals. If they cannot agree on what amount each person can claim, the CRA will determine the amounts.

Who is Qualifying Individual?

A qualifying individual is someone who is eligible to claim the disability tax credit at any time in the year or and individual who is 65 years of age or older at the end of the year.

An eligible individual includes the spouse, common law partner and supporting relatives of a qualifying individual. A supporting relative is an individual that has claimed the amount for an eligible dependant (Line 305), credit for an infirm dependant (line 306) or caregiver amount (line 315).

What is Eligible Dwelling?

An eligible dwelling is a housing unit located in Canada and it must be a principal residence of the qualifying individual at any time in the tax year. In cases, where a qualifying individual has more than one principal residence, the total of all the eligible expenses cannot exceed $10,000 for the purpose of this credit.

What is Qualifying Renovation?

A qualifying renovation is a renovation or alteration that is of an enduring nature and an integral part of eligible dwelling.

The renovation must allow the qualifying individual to gain access to or to be mobile or functional within the dwelling or reduce the risk of harm to the qualifying individual within the dwelling or gaining access to the dwelling.

Generally, the item that is bought and that becomes a permanent part of your dwelling house is not eligible for this credit.

The eligible renovation can be either done by the outside professionals like electricians, plumbers, fitters, carpenters, architects and can qualify for the purpose of this credit or it can be done by the taxpayer himself. If this is the case then value of all the materials and items bought for the purpose shall qualify for the credit but not the notional value of the labour.

Separate Schedule 12:

A separate Schedule 12 has been prescribed for its calculation.  

Disclaimer:

Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.