50 tax-filing tips for the 2017 tax year Deadline: Midnight, Monday, April 30, 2018

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1 Bulletin tax-filing tips for the 2017 tax year Deadline: Midnight, Monday, April 30, 2018 Let s face it: Tax-filing season is not a time of joy and celebration that is unless you re the Canada Revenue Agency (CRA), or someone who makes a living preparing tax returns. While we must each pay our fair share, we re still entitled to legally arrange our affairs to minimize tax. Doing so effectively means taking time-to-plan, and now that it s time-to-report, here are 50 tips to help you claim all the deductions and benefits you re entitled to receive. Doug Carroll BBA JD LLM(Tax) CFP TEP Practice Lead Tax, Estate & Financial Planning First-time filers 1. Deadline & late penalties 2. My Account with CRA 3. Getting help getting started 4. Looking forward to a refund 5. Tax-filing and tax planning Students 16. Textbook & education amount 17. Tuition expenses 18. Transfers to parents 19. Moving expense, public transit 20. RESP - Registered savings Disability needs 31. Disability tax credit 32. T2201 certificate 33. Caregiver credits 34. Disability supports 35. RDSP Registered savings Parents 6. Canada child benefit 7. Child disability benefit 8. Working income tax benefit 9. Child care expenses 10. Adoption expenses Homeowners 21. Principal residence exemption 22. Home buyers' credit 23. RRSP home buyers' plan 24. GST/HST new home rebate 25. Home accessibility credit Self-employed 36. Filing deadline 37. Paying by instalments 38. Home office and utilities 39. Automotive log 40. Keeping records Spouses 11. Filing together 12. Spouse credit 13. Spouse attribution rules 14. Spousal loans 15. Separation Seniors & retirees 26. Pension income splitting 27. Pension credit 28. Age credit 29. GST/HST credit 30. Medical expenses Investors 41. Fees & interest 42. Dividends 43. Capital gains 44. Superficial losses 45. Tracking ACB Executors & estates 46. Terminal return deadline 47. Multiple returns 48. Deemed dispositions 49. Rollovers 50. Clearance certificate Including 2017 reference tables: Combined Federal-Ontario rates Commonly claimed tax credits Speak to your Meridian Wealth Advisor for perspective on these important issues Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 1 of 12

2 FIRST-TIME FILERS Filing your taxes for the first time can be an intimidating prospect, whether you re new to Canada, or have simply moved into your income earning years. Be assured that there are both government resources and many capable professionals you can consult. These five tips cover fundamental filing knowledge to get you going. 1. Deadline & late penalties CRA began accepting 2017 personal tax returns on Monday, February 26, You must file by midnight Monday, April 30, Late-filed returns face a penalty of at least 5% of any tax owing, and interest on overdue tax, currently set at 6%. Bottom line: file on time. 2. My Account with CRA The online portal to communicate with CRA is your individualized, secure My Account. Once registered, you can submit or change current and past returns, track your refund, establish direct deposit, and monitor retirement plan limits and other tax-related benefits. 3. Getting help getting started CRA keeps a list of certified tax-filing software on its website, and will auto-fill parts of your return when you use that certified software. For those at low income, free tax preparation is available through CRA s Community Volunteer Income Tax Program. 4. Looking forward to a refund You get a refund when more tax was withheld during the year than you actually owe. This is often because you made RRSP contributions your employer didn t know about. When you file online, CRA can usually direct deposit your refund within 8 business days. 5. Tax planning Filing your tax return is about reporting last year. It s not tax planning because you can t plan the past. Still, this is a good time to consider what you may have missed out on and where opportunities lie, so you can better plan the coming year and your future beyond. New to Canada? Learn about taxes and benefits and follow the most current links. << Outline Parents >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 2 of 12

3 PARENTS Being a parent brings great joy and great responsibility, but raising children can put a financial strain on you and the whole family. CRA uses the information collected in the tax system to determine eligibility for a variety of family-related financial supports. So, taxfiling is not just about paying-up, but also about lining-up that public assistance. 6. Canada child benefit (CCB) The CCB is a tax-free monthly benefit of up to $6,400 for children under 6, and $5,400 for children from 6 to 17. Eligibility is based on family net income with your reported income this filing season determining the eligible amounts to be paid from July 2018 to June Child disability benefit (CDB) The CDB is a tax-free benefit of up to $2,730 for children under the age of 18 who have a severe and prolonged impairment in physical and mental function. The CDB is paid to families eligible for the CCB, so longs as the child qualifies for the disability tax credit. 8. Working income tax benefit (WITB) The WITB is a refundable tax credit (meaning it is paid to you even if you don t owe taxes) designed to encourage low-income workers to enter and remain in the workforce. Payments are based on family net income and number of dependants in the family. 9. Child care expenses You may deduct child care expense incurred to allow you to earn income, carry on a business, go to school or conduct research. Generally these expenses must be claimed by the lower income spouse. Tuition/education, leisure and recreation costs do not qualify. 10. Adoption expenses You can claim a credit for many of the costs related to adopting a child, including adoption agency fees, court/administrative costs, and travel. The eligible time period can range from the ministry application date through to when the child begins living with you. Child and family benefits and follow the most current links. << First-time filers Spouses >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 3 of 12

4 SPOUSES Our income tax system is based on each individual being a tax filer, or what is known technically as the taxable unit. Practically though, it could impose undue burden or unintended benefits if spousal relationships were ignored. Accordingly, there are a variety of mechanisms designed to acknowledge and account for this reality. 11. Filing together You must let CRA know whether you have a spouse (legally married) or common law partner (CLP). CLP applies if you are currently in a conjugal relationship that has lasted 12 continuous months, or you live and have a child together by birth or adoption. 12. Spouse credit You can claim this credit if you supported a spouse or CLP. The full credit is available if net income is zero, and the amount of the credit is reduced proportionately for net income up to the maximum reference amount of $11,635 in Spouse attribution rules If you transfer property to your spouse, investment income is generally attributed to you, requiring that you report it on your return. If your spouse instead earns business income or gave you something of equal fair market value in return, attribution will not apply. 14. Spousal loans Using a spousal loan, the borrowing spouse records the investment income without attribution applying. The borrower pays interest at the CRA prescribed rate (currently 2%, adjusted quarterly), which is a deduction to him/her, but income to the lender. 15. Separation If you were living and filing as common-law, you must be separated 90 days to be considered separated on December 31, If you were legally married, it is sufficient to be legally separated (under family law) at year-end, without the 90-day requirement. Has your marital status changed? and follow the most current links. << Parents Students >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 4 of 12

5 STUDENTS A good education lays the foundation for your life s interests and your livelihood ahead. As parents and their student-children know though, it can be quite costly. By educating yourself on government support directly, and about how private sources and expenses are treated, you can get some relief so you can focus on your studies. 16. Textbook & education credits A longstanding component of the tax support to students, the textbook and education credits ended in However, if you have unused education amounts from prior years, they can be carried forward to claim on your 2017 and subsequent tax returns. 17. Tuition expenses Qualifying educational institutions issue a tax certificate for you to claim eligible tuition fees. Examination fees to allow you to practice a profession or trade also qualify. Any amounts reimbursed to you or your parent by an employer are not eligible. 18. Transfers to parents You must claim all tuition fees in the current year until it reduces your tax payable to zero. You may then transfer up to $5,000 to a spouse/clp, parent or grandparent for use in the current year, or carry forward the remaining amount to use in a future year yourself. 19. Moving expenses, public transit If you moved for full-time post-secondary study, you may deduct moving expenses, but only against scholarships, fellowships and grants included in your income. The public transit credit has been eliminated, but you may claim amounts for January to June, RESP Registered education saving plan Contributions to registered education savings plans aren t deductible, but matching grants up to $500 per year can provide a nice savings boost. Unused grant room may be carried forward, but can be lost if you wait too long, so look into RESPs early in your child s life. Students, what you need to know this tax season and follow the most current links. << Spouses Homeowners >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 5 of 12

6 HOMEOWNERS Putting a roof over your family s head is a fundamental need. For most of us, it is our largest lifetime purchase and among our largest year-to-year costs, particularly when you include maintenance. There are a number of tax breaks accorded to homeowners, mostly focusing on the year of acquisition or sale. 21. Principal residence exemption Beginning at the end in a sense, when you sell your principal residence there is no tax on its gain in value. Since 2016, you must report those dispositions on your tax return in the year of sale. There is still no tax on the gain, but penalties apply if you are late to report. 22. Home buyers credit As a first-time home buyer, you may qualify for a tax credit worth up to $5,000. You are first-time if you didn t live in a home owned by you or your spouse in any of the four preceding years. If you claim the disability tax credit, you do not have to be first-time. 23. RRSP home buyers plan (HBP) The HBP allows you to withdraw up to $25,000 from your RRSP to purchase a home. You have 15 years to pay it back into your RRSP. As with the home buyers credit, you must be a first-time purchaser, but again this does not apply if you claim the disability tax credit. 24. GST/HST new home rebate If you bought a new home from a builder, you may be able claim a portion of the GST/HST charged to you. Alternatively, if you built or made substantial renovations to your primary residence, you may also be entitled to a rebate on GST/HST paid. 25. Home accessibility credit For someone 65 years of age and over who is eligible for the disability tax credit, this tax credit is calculated on up to $10,000 of annual expenses required to make a dwelling more accessible. It may be claimed by that person or possibly by an eligible caregiver. Income tax information if you bought or sold a home and follow the most current links. << Students Seniors & retirees >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 6 of 12

7 SENIORS & RETIREES There are no tax breaks just for accumulating years or actually, there are See the age credit below. Seriously though, as you move into your later years and begin to draw off a lifetime of savings, you need to be conscious of where you can find tax efficiencies. Fortunately, the system has a number of features to help seniors and retirees manage. 26. Pension income splitting You may split up to half your annual income from a registered pension plan (RPP) or registered retirement income fund (RRIF) with a lower income spouse or common-law partner (CLP). For RRIF you usually must be 65 or over, but for RPP it applies at any age. 27. Pension credit You may be able to claim a tax credit on your first $2,000 of eligible pension income from a registered annuity, RPP or RRIF. If you have used pension-splitting (see above) with your spouse or CLP, he/she may be able to claim the pension credit on those amounts. 28. Age credit If you were 65 or over at the end of 2017, both the Federal and Ontario governments have an age credit you may claim. Combined, these credits are worth as much as $617 in reduced taxes, but the credit begins to be clawed-back as income goes past $36, Goods and services tax / harmonized sales tax (GST/HST) credit The GST/HST credit is a tax-free quarterly-paid amount intended to offset GST/HST paid by people of modest income. As you enter retirement, your income may reduce to the point where you receive some or more of this. Clawback begins at income of $36, Medical expenses The medical expense credit is open to all, but as we age we tend to have more frequent and larger medical costs. This credit can be based on any 12-month period ending in the tax year, so examine when costs were incurred to decide how best to make your claim. Seniors: Ready to do your taxes? and follow the most current links. << Homeowners Disability needs >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 7 of 12

8 DISABILITY NEEDS Having a disability can present obstacles that others in our society do not face. This is true in the daily life of a person with a disability, and in many unavoidable costs the person and family may have to incur to manage their condition and participate in the community. A wide variety of tax measures are in place to ease these financial challenges. 31. Disability tax credit (DTC) The purpose of the DTC is to provide tax relief to someone with a severe and prolonged impairment. No accounting is required for how the reduced taxes are used. For 2017, you may receive up to $1,632 from the Federal and Ontario governments combined. 32. T2201 certificate To qualify for the DTC, you must have a medical practitioner complete CRA Form T2201 and submit it to CRA. An application may be made at any time of year, not just with your tax return. It may take some months to get a response from CRA hopefully an approval. 33. Caregiver credits If you provide caregiving to someone with a physical or mental impairment, you may be able to claim tax credits worth $600 or more. The person you care for may be your spouse or common-law partner, a child or grandchild, a parent, a sibling or certain close relatives. 34. Disability supports deduction If you have a physical or mental impairment and had to incur expenses to allow you to work, go to school or do research under a grant, you may be entitled to a deduction for that. This is not transferrable, so only the person with the disability may claim it. 35. RDSP Registered disability saving plan Contributions to an RDSP aren t deductible, but matching grants can be as much as 300% of personal contributions. The beneficiary must be qualified for the DTC. Income in the RDSP is tax-sheltered, and eventually taxed to the beneficiary when withdrawn. Tax measures for persons with disabilities and follow the most current links. << Seniors & retirees Self-employed >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 8 of 12

9 SELF-EMPLOYED Being self-employed can be a way to pursue your personal dreams while exercising control over your financial destiny. For some, it s the only way. But even if you go it alone, you always have CRA as the tax authority along for the ride. To make sure you only share what you must with this somewhat silent partner, pay attention to these important items. 36. Filing deadline Not the same as tax payment due date The tax return filing deadline is Friday, June 15, 2018 if you were self-employed in This is the same deadline for your spouse/common-law partner (CLP). However, remember that you must pay any tax owing by the Monday, April 30, 2018 deadline. 37. Paying by instalment If you earn income on which no/insufficient tax has been withheld, you will likely have to pay tax instalments in future. For Ontario, you will be obligated if your net tax owing is over $3,000. Instalments are due the 15 th of March, June, September and December. 38. Home office & utilities You may be able to deduct expenses for business use of your home, including utilities, property tax, mortgage interest and capital cost allowance (depreciation in tax terms). Use a reasonable basis such as the percentage of work space divided by total home area. 39. Automotive log You can deduct expenses for the percentage of your automobile mileage used to earn business income. This includes licensing, fuel, oil, insurance, maintenance and interest on money borrowed to buy a vehicle. You must keep a logbook in order to make this claim. 40. Keeping records Keeping good business records is not just good practice; it is a legal requirement for you to support your income and expense claims. You do not send any records when you file your tax return, but you must produce them if the CRA asks to see them later. Small businesses and self-employed income and follow the most current links. << Disability needs Investors >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 9 of 12

10 INVESTORS Among the costs of managing an investment portfolio, taxes can reduce your returns by as much as half if you re not careful. You can alleviate this impact with the foreknowledge of how, when and to what those taxes will apply. Good recordkeeping is critical when it comes to proving your claims if called to account, so keep these key items in mind. 41. Fees & interest You may deduct fees for investment advice in non-registered accounts. Advice for RRSPs, RRIFs or TFSAs is not deductible, nor is financial planning or tax planning advice. Interest on money borrowed to earn non-registered income is normally deductible. 42. Dividends Foreign dividends are fully taxable, but Canadian dividends are taxed at effective rates up to 24% lower. By the way, if you claim your spouse as a dependant, you can claim both spouses Canadian dividends yourself if it increases your spousal credit amount. 43. Capital gains & losses Capital gains are not taxed year-to-year, but instead are taxed on disposition (usually a sale), and only half of the gain is taxable. If you have capital losses in a year, you can apply them against capital gains this year, 3 years back, or any time in future. 44. Superficial losses Be careful if you realized a capital loss then quickly got back into the market. If you, your spouse (including RRSP/RRIF), your trust or corporation acquired the same security within 30 days either side of your transaction, the loss is denied/added back to the ACB. 45. Tracking adjusted cost base (ACB) You must track your ACB on non-registered investments so you can correctly report capital gains on eventual dispositions. Remember that reinvested dividends increase your ACB and any return of capital (not to be confused with a capital gain) decreases your ACB. What s new for capital gains? and follow the most current links. << Self-employed Executors & estates >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 10 of 12

11 EXECUTORS & ESTATES Coping with a death is difficult, and it doesn t help that the old saying about death and taxes has dual application when it comes to an estate. Even so, there are actually ways that the system allows tax on death to be saved or at least delayed, including some steps an executor can take post-mortem that the person could not have done while living. 46. Terminal return deadline The April deadline usually applies, except that the executor has six months from the date of death if it was in November or December. The return of a surviving spouse/commonlaw partner (CLP) can also use this date, but any tax owing is due at the April deadline. 47. Multiple returns In addition to the familiar personal tax return, up to 3 more optional returns may be filed, for rights and things, partner or proprietor and graduated rate estate. Some tax credits may be claimed on more than one return, while other credits must be split among them. 48. Deemed dispositions On death, a person s property is deemed disposed (even though there is no actual sale), which can result in capital gains or losses. As well, registered accounts are brought into income at death. Together, these effects can trigger significant taxes on death. 49. Tax-deferred rollovers Both capital property and registered accounts may roll tax-deferred to a spouse/clp. Many registered accounts may also roll to some dependants if desired. The executor may be able to reduce tax by electing which and how much of these items to roll, and to whom. 50. Clearance certificate An executor must pay all the deceased s final tax obligations (out of the deceased s assets). The executor can be personally liable if this is not fulfilled. To protect him/herself, the executor can request a CRA tax clearance certificate before distributing to beneficiaries. What to do when someone has died and follow the most current links. << Investors Reference >> Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 11 of 12

12 Reference tables: Combined FEDERAL-ONTARIO rates 2017 Income Regular Capital Canadian dividends from income* gains Eligible Ineligible 10, % 2.53% 0.00% 0.89% 11, % 10.03% 0.00% 6.13% 42, % 12.08% 0.00% 10.93% 45, % 14.83% 7.56% 17.36% 74, % 15.74% 8.91% 19.51% 84, % 16.95% 12.24% 22.33% 87, % 18.95% 17.79% 27.03% 91, % 21.70% 25.38% 33.46% 142, % 23.20% 29.52% 36.97% 150, % 23.98% 31.67% 38.80% 202, % 25.98% 37.19% 43.48% 220, % 26.76% 39.34% 45.30% * Employment, retirement/pension, interest, foreign, royalties Commonly claimed tax credits 2017 FEDERAL Most credits at low rate 15% Amount Value ONTARIO Most credits at low rate 5.05% Amount Value Basic personal amount 11,635 1,745 Basic personal amount 10, Spouse/partner, eligible dependant 11,635 1,745 Spouse/partner, eligible dependant 8, Age (Phase-out at 36,430) 7,225 1,084 Age (Phase-out at 36,969) 4, Pension income amount 2, Pension income 1, Disability amount for self 8,113 1,217 Disability 8, > Disability supplement 4, > Disability supplement 4, Medical expense, above lesser of 2,268 calculated Medical expense, above lesser of 2,302 calculated 3% of net income or: 3% of net income or: Canada caregiver amount Medical expense of dependant 12, > Spouse or eligible child under 18 2, Caregiver amount 4, > Dependant(s) age 18 or older 6,883 1,032 Infirm dependant 4, Political contributions: 75% to 400, 1, Political contributions: 75% to 3,026 1,330 50% to 750, 33% to 1, , 50% to 1,330, 33% to 3,026 Donations to charity ($200/$over) 15% 29%,33% Donations to charity ($200/$over) 5.05% 11.16% GST/HST Jul'17-Jun'18 ( adult max) 280 > Community food (farmers) 25.00% Tuition fees paid actual calculated Education FT/PT (per month) 547/ / 8 CPP premiums paid 2, Transfer limit tuition/education 7, EI premiums paid Employment 1, Credit transfers allowed from spouse/common law partner: Age, pension; from Sp/CLP or dependant: Tuition to 5,000, disability. Most credits are non-refundable, calculated on lesser of taxpayer actual amount and set maximum in Amount column. Speak to your Meridian Wealth Advisor for perspective on these important issues Copyright 2018 Meridian Credit Union. All rights reserved. Not intended as legal, accounting, tax or specific investment advice Page 12 of 12