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8 changes you should know for the 2019 tax season

The new year always brings changes. We join fitness classes to change our bodies. We clean our homes of clutter to clear our minds. And we make new resolutions to change our lives. There are some changes we have no control over, however, and that’s changes to income tax laws.

What may have been a credit or deduction last year may not be so this year. It’s always important to know what the changes are so you can take advantage of the ones that pertain to you. Knowing what you can and can’t claim is the first step to proper tax planning. TAXplan has put together a list of 8 changes to the tax laws that may have the most affect on your 2018 tax return.

1. Medical Expenses and service animals

While you were able to claim medical expenses in the past this year Canadians suffering from severe mental disorders will be able to claim the cost of caring for a service animal. If your service animal has been specially trained to help you cope with severe mental impairment you will be able to claim expenses such as costs to maintain your service animal, veterinary expenses and food. To find out if you qualify ask a TAXplan TAXpro for more details.

2. The Climate Action Incentive

New for residents of New Brunswick, Ontario, Manitoba and Saskatchewan is the Climate Action Incentive tax credit.  Starting April 2019 residents of these provinces will be charged a federal carbon tax called a “fuel charge”. You’ll see the added tax when you fill up for car fuel or added to your home heating bill. So if you live in these provinces you will receive an added incentive of $598 in Saskatchewan, $248 in New Brunswick, $300 in Ontario and $336 in Manitoba. Your TAXplan TAXpro can fill you in on the details and will make sure you receive the credit if you are eligible.

3. Canada Child Benefits now available to “Foreign Born Status Indians”

“Foreign-born status Indians” (individuals that reside in Canada and are Indians under the Indian Act but are neither Canadian citizens nor permanent residents) are now allowed to retroactively apply for CCB for the 2005 taxation year through to June 30, 2016.

4. New changes for parents!

The 2018 federal budget has made changes to the Employment Insurance (EI) parental sharing benefit that allows parents to take up to five additional weeks of time off, starting in March 2019 after the birth or adoption of a child. To be eligible you must be a parent with a child born or placed for adoption on or after March 17, 2019 and both new parents must share the time at home with the new baby. To learn more contact a TAXplan TAXpro for details.

5. Accelerated Capital Cost Allowance Rates

If you’re a business owner this will affect you. Changes to CCA takes effect for purchases of equipment made on or after November 21, 2018 and before 2024 and will affect the amount claimed on the 2018 tax return. Initially business owners were only able to claim 50% of the cost in the year of purchase but now with the new “accelerated investment incentive”150% of the normal CCA rate can be claimed. That’s 3 times the original amount!

6. Elimination of the home relocation loan

As per changes that were proposed in the 2017 federal budget, the home relocation loan deduction will be eliminated as of 2018.

7. Reduction of the small business corporate tax rate

More good news for small business owners: the small business corporate tax rate was reduced from 10.5% to 10% effective for 2018 with a further reduction to 9% for 2019!

And lastly:

8. Retirement income security benefits for veterans now qualify for pension splitting.

This will be retroactive to 2015. If you’re a veteran receiving retirement income security benefits you will now be eligible for pension splitting. The cap on the amount that can be split is $103,056 for 2018.

There you have it….TAXplan’s list of the top 8 changes to the tax act that will likely have an affect on the average Canadian. To learn more about changes to the tax laws for this year visit the Canada Revenue Agency website or contact a TAXplan TAXpro for details.

A Closer Look at the T1 General Income Tax Statement

Does it ever feel like the statements, schedules, and forms involved in your annual income tax return will never end? With so many forms, it can all be very confusing, especially if you don’t really understand how it works.

In this post we’ll help you understand your general tax return… But as you’ll see in the information that follows, there’s a lot of take in. Our recommendation? We advise skipping this cumbersome DIY process and instead filing your taxes the easy way–using the TAXplan app. As you read on, you’ll start to see the appeal of using an app that connects you with a tax professional rather than trying to do it yourself.

Either way, whether you’re planning to file your taxes yourself or to work with a TAXpro, having a basic understanding of how it all works can go a long way in reducing the stress of the annual filing requirements.

General Income Tax Return

By now you’ve probably started to receive some of your T-statements and “for income tax purposes” papers in the mail. Keep everything handy and well organized as you prepare to file your 2016 taxes. When using the TAXplan app, you can photograph your documents as you go so that they’ll be ready for you to file.

Your annual return, sometimes referred to as a T1 General (T1), is the summary sheet of all of the calculations that make up your final tax results. The T1 uses numbers from the forms and schedules included in the income tax package.

Here’s a brief overview of the different sections you’ll find on your T1, and where the information comes from.

Note: the actual T1 does not have headings of “Section 1, Section 2, etc.”. These titles have been used to better explain the flow of the statement.

Section 1 – Personal Information

First things first. Whether you’re using an app or filing your taxes the old fashioned way, it all starts out with your personal information; name, address, birthdate, social insurance number (SIN), and if you’re married or living common–law, you’ll also need to provide your partner’s personal information.

Section 2 – Questions

The next order of business comes from Elections Canada. If you’re filing on paper, there are two rectangular boxes with yes and no questions, and these are followed by one question about your ownership of foreign property. On paper these boxes can sometimes be overlooked so make sure you don’t miss them.

Section 3 – Total Income

Now we get into the meat and potatoes of your tax information–or the Tofurky and stuffing, so to speak. Here’s where you’ll start to provide the numbers from everything that you’ve earned throughout the year. You’ll use the information from your T-4 slips, T-3 slips, any other employment amounts, Canada Pension Plan (CPP) benefits, Old Age Security (OAS), and self-employment income statements. Common amounts include:

  • Employment Income (T4s)
  • Investment Income (Schedule 4);
  • Rental Income;
  • Taxable Capital Gains (Schedule 3);
  • RRSP Income (T4 RSP); and
  • Self-employment income (T2125).

Once you’ve entered all of the applicable information, the sum will be included on Line 150 – Total Income.

Section 4 – Net Income

Next up are the deductions. These are included to reduce your annual income level… which is a good thing from a tax perspective! Common amounts include:

  • RRSP deductions;
  • Annual dues (union and professional);
  • Child care expenses;
  • Moving expenses;
  • Interest Expense (Schedule 4); and
  • CPP deductions (Schedule 8).

These amounts are subtracted directly from your Line 150 – Total Income amount. The difference is entered onto Line 236 and is referred to as your Net Income.

Section 5 – Taxable Income

Here we get into unique deductions that don’t necessarily apply to everyone. Common amounts include:

  • Employee home relocation loan deduction;
  • Net capital losses of other years; and
  • Capital gains deduction.

These are summed and subtracted from Line 236. This new amount is referred to as your Taxable Income, Line 260. This is the number used to calculate Federal Taxes on Schedule 1 and Provincial or Territorial Tax on Form 428.

Section 6 – Total Payable

Now we get into the less pleasant news; taxes and contributions you have owing for the year. These are calculated using Line 260 – Taxable Income, and like most of the other amounts.

  • Net Federal Tax (Schedule 1);
  • CPP contributions on self-employment and other earnings (Schedule 8);
  • Employment Insurance (EI) premium payable on self-employment (Schedule 13);
  • Any social benefits repayment (calculated in the Federal Worksheet); and
  • Provincial or Territorial Tax (Form 428).

Your Total Payable amount will be found on Line 435, the number used to help determine your annual bottom line. Boo hoo.

Section 7 – Total Credits

How about some good news? This is the section where it’s great to see some big numbers to offset your Total Payable amount. Here you’ll find all applicable credits; some are the result of taxes you paid throughout the year.

  • Income tax deducted throughout the year;
  • CPP overpayment;
  • EI overpayment;
  • Working Income Tax Benefit (WITB) (Schedule 6);
  • Tax paid by instalments; and
  • Provincial or Territorial Credits (Form 479).

Add these together entering the number on Line 482, and you’ll have your Total Credits amount which is subtracted from your Line 435 – Total Payable to determine your refund or amount owing. Fingers crossed!

Bottom Line

Once you’ve entered all of your numbers into the correct schedules or forms and are finished the calculations, the bottom line result will either be a negative or positive number. Negative means you’re getting money back! While positive, on the other hand, means that you need to submit payment with your 2016 tax return. Bummer.

Note: There’s an opportunity at the end to provide changes to your direct deposit account, and if you’re getting money back, who doesn’t love the speed of direct deposit?

Signing Off

No matter if you completed your taxes yourself or if you had the help of a professional, you’re responsible for the authenticity of the information. At the very bottom of the T1 you’ll need to sign on the line and include the date.

Taxes can still be pretty complex. With so many numbers, forms, and schedules, it’s easy to miss an important tax credit that can reduce the amount of tax that you have to pay. Remember, you can have your taxes processed by a professional at a reasonable price, all from the comfort of your laptop, smartphone, or tablet. The TAXplan app connects you with a TAXpro who can take care of the legwork for you. If you’re looking for a convenient and reliable way to file your 2016 return, click here to start filing your income tax with TAXplan.