Answers Archive

Re: Incorporating my business

Hello, yes, it may be too early to incorporate your business. There are two key benefits for when you do incorporate your business: the first is limited liability for shareholders and the second is opportunities for tax deferral. If you incorporate your business too early, you may not even benefit in those two categories. Depending … Continue reading

Re: Accrual vs Cash accounting methods

Hi Sofie, in most cases, you will need to use the accrual method of accounting to report your business income. With this method you have to report your income in the fiscal period that you earn it. You also have to deduct expenses in the fiscal period you incur them, whether you paid them in … Continue reading

Re: Tax status

Hi Lakshmi, No. Your husband will not be liable for Canadian tax simply due to your newly established Canadian residency. However, I would ensure that you be careful not to implicate him on anything in Canada. For example, if you are to purchase a home in Canada, he shouldn’t be on title. If you are … Continue reading

Re: Is UN income taxable in Canada?

The income derived from the United Nations is not taxable in Canada. However, you must report it on your annual tax return on Line 104. Then, the UN income will be deducted on line 256.

Re: Optimization of tax situation for 34 year old male?

Hello, If you are putting $300 per month against your student debt, it will take a long time to get it paid off. If you add an extra $4,500 a year against it, it will take about four years to get it done. If you suspend or significantly lower your debt repayment, the interest costs … Continue reading

Re: Investing and banking for non-residents?

Hello, As a non-resident, you can contribute to your RRSP to the extent that you have room available. However, since you are not earning any Canadian income, the RRSP contribution cannot be deducted on your tax return. You are not allowed to contribute to a TFSA. If you do, you’ll face 1% penalties on the … Continue reading

Re: Canadians with an RRSP moving to USA

Hi Rudy, the first thing you should do is to leave the RRSP intact. There will be a significant tax hit if you decide to close your RRSP before leaving the country. If you withdraw all of the funds in the RRSP, it will be fully taxable in the year that you leave. The second … Continue reading

Re: Canadian business with a branch in the UK

Hello Hugh, Canada offers foreign tax credits that you can claim on your corporate tax return. You must calculate foreign tax credits for business and non-business (ex. Interest, dividends) income separately. The foreign tax credit is the lower of the Canadian tax rate and UK tax rate. The Canadian income tax rate is 15.5% on … Continue reading

Re: Do I have to pay capital gains?

Hello When you converted your home from a rental property to your primary residence in 2008, there would have been a deemed sale. This sale would have occurred at the market value of the house at the time of conversion. This presents a problem because you never reported the deemed sale on your personal tax … Continue reading

Re: Tuition credit carryover?

Hello. Congratulations on finishing medical school! The federal tuition credits will not be affected. However, your provincial tuition credits will. They will carry forward, but the change is in their effectiveness. The BC tax rate is 5.06% for credits, in comparison to Alberta’s which is 10%. Unfortunately, the tax credits are now worth less. The … Continue reading

Re: Tax deductions for musicians?

Hi Taegen, yes, you are allowed to claim a deduction for the cost of any maintenance, rental or insurance on the instruments. Also, if you own the instruments, you are entitled to claim capital cost allowance on said instruments. Keep in mind that your total deductions cannot exceed your employment income as a musician.

Re: What province should I register under?

Hello, Unfortunately, you cannot “register” as a citizen of a province. Your income tax depends on where you home is on December 31. If Alberta is now your home and will continue to be for the rest of the year, then you will pay Alberta provincial income tax for 2014. Also, you should apply for … Continue reading

Re: Best way to save for my child’s education?

Hello Felipe, I would recommend that you open a Registered Education Savings Plan (RESP) to start saving for your children’s future education. Here are a few reasons why an RESP is beneficial for saving money: • It offers 100% guaranteed tax-free compounding inside the plan • There are no annual tax filings and it is … Continue reading

Re: Splitting income when purchasing a house

Hi, the best way to handle this situation would be for you to pay for most, if not all of the household expenses. This will free up your fiancée’s income for investments. If you want, you can even pay your fiancée’s income taxes for the investments. Since she will be making less than you, she … Continue reading

Re: How should a trust allocate income from an apartment building to family members?

Hi, here is how I would handle this situation. Since James is required to take his tuition credit into account before claiming the dividend tax credit, it would not be efficient to allocate dividend income to him. It would be more beneficial to give him non-dividend income to ensure credits are not lost. Non-dividend income … Continue reading

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