by Meiz Madjoub
We are already inching into 2019 and will deviate from our on going discussion on the Topic of insurance and devote my last article of the year on preparation for your tax return and planning.
As you know, taxes for the year ending December 31, 2018 needs to be filed by April 30, 2019 and if any tax is owed, it must be paid by April 30, 2019. Except for self employed professionals who must file their taxes by June 15, 2019, although all taxes owed must be paid by the April 30, 2019 deadline.
As you get ready to file your taxes, please remember the following.
- RRSP contributions made up to the first 60 days of next year can be used for this year. As such you have till March 1, 2019 to ensure your contributions count.
If you borrowed from your RRSP under the first time home buyers plan, be sure to contribute the repayment amount otherwise the amount deemed to be repaid, will be added to your earned income and tax paid on it.
- Tax Free Savings Account (TFSA). If you withdrew from your TFSA in 2018, that amount is re-instated in addition to your current year contribution. The maximum available for 2019 if you have never made any contribution is $63,500.
- Investment Expenses: Interest on money borrowed to invest and paid in 2018 can be claimed on your 2018 taxes.
- Loans to split incomes: A common tax practice is to lend funds to a spouse or family member so as to have investment income taxed in the hands of a family member in a lower tax bracket than yours. Interest rate must be at least a prescribed rate and the interest is paid by the year end for that family member to claim that interest as a deduction and for the lender to include it in their taxes as investment income.
- Convert RRSP to RRIF by age 71– If you turned 71 in 2018 you would have turned your RRSP to RRIF and started receiving income. If you received any income in 2018, this must be claimed.
- Registered Education Savings Plan (RESP)- For beneficiaries of an RESP, if you have unused carry-forward room, you can receive up to $1,000 of CESG annually with a $7,200 lifetime limit up to and including the year the beneficiary turned 17. If you have less than 7 years before the beneficiary turn 17 and haven’t maximized your RESP, consider making a contribution before the calendar year in which they turn 18.
- Interest on Student Loans: Remember to claim the tax credits in 2018 for the amount of interest paid by December 31, 2018. Also the education credit for tuition , etc, can be claimed by the student and up to $5,000 can be transferred to the spouse or parent.
- Medical Expenses: A tax credit for medical expenses can be claimed when your total expenses are in excess of 3% of your net income which in 2018 is $2302. If you have unclaimed expenses prior to 2018, you should look into it as eligible expenses are those paid during a 12 month period ending in 2018.
- Charitable Donations: There are donation credits for both levels of government and this can be a significant savings of up to 50% of your contribution. Donations less than $200 attract 15% credit while anything over $200 up to $1,000 gets you 29% and there’s provision to claim prior years that were not claimed.
- Moving Expenses: If you have moved and established a new home to be employed or start a business, you can claim eligible expense from your employment or self employment from income earned at your new location. There are some details you need to know and which expense to claim, please contact your advisor.
- Adoption Expenses: As a parent, you can claim eligible adoption expenses related to the adoption for a child under the age of 18 to a maximum of $15,670, certain conditions apply.
- Keep a record of expenses: If you plan to deduct business expenses for your business for the 2018 taxation year, you need to make sure the amounts are reasonable and that you have proper documentation to back up any claimed expenses. Failure to do so can lead to big problems with CRA. These may be disallowed and you can end up spending a lot of time justifying it. Travel log must be kept if you plan to claim your vehicle expenses. Similarly, if you plan to claim meals or entertainment as an expense, you need to keep proper documentation.
- Declaration of Condition of Employment: Form T2200 which is issued by your employer when some or all of your income is commissions. Be very careful on the expenses that you claim as CRA will only allow those expenses that your employer deem you have to expensed and you’re not reimbursed. Furthermore, ensure your expenses are backed by invoices and receipts and a travel log.
- Claiming the principal residence exemption: If you sold your principle resident and bought another one, be sure to advise your tax preparer as there are new requirements to follow to be eligible for the tax free capital gain.
- Review capital gains and losses: Going over your portfolios to identify investments that have achieved significant gains or losses is a good idea to do in the latter part of the year. Selling investments with capital losses before year end allows you to offset capital gains realized elsewhere within a portfolio. Net capital losses that aren’t used for the 2018 tax year can be carried back three years or carried forward to any future taxation year to offset net capital gains. If a decision to sell an investment that has experienced a significant loss already has been made, accelerating that decision and selling in 2018 may make sense to take advantage of the tax-planning opportunity. December 27th is the last day for trading so that it can be settled by December 31st.
We certainly hope although not exhaustive, but we have provided you with some guidelines to file your personal tax return. No attempt has been made here to look into Sole Proprietor, partnerships or incorporated businesses. Please see your tax practitioners if in doubt.
About the writer
Meiz Majdoub, B.Comm, is a financial professional with over 30 years of experience and is accredited with a CLU, CH.F.C. He is also a member of the Conference for Advance Underwriters (CALU). and the Estate Planning Council Of Ottawa. He has helped individuals, organizations and corporations attain their goals in the areas of Financial & Estate Planning, Insurance, Living Benefits and Employee/ Group Benefits. He can be reached at: 613-749-4007, or firstname.lastname@example.org.