Canadian Tax Tips
SPLITTING PENSION INCOME
Under these rules you can split your pension income when you and your spouse or common-law partner file your income tax returns. This tax rule allow eligible taxpayers to allocate up to half of their eligible pension income (income that qualifies for the pension income tax credit) to their lower-earning spouse or common-law partner. Election can be made by filling form T1032.
SHARES SELLING DEADLINE
In order for capital losses to be realized for the current year, deadline to sell Canadian stocks is Dec 24th and Dec 26th for US stocks. This is because CRA considers the settlement date rather than the trasnaction or trade date.
SALE OF PRINCIPAL RESIDENCE
Capital gain on the sale of principal residence is tax free. In the same fashion the mortgage interest on principal residence is not tax deductible. However, it can be deductible in few cases (consult your accountant).
HOME OFFICE EXPENSE
If you are self employed or in other certain cases (consult your accountant) you can claim your home office to offset your business income or employment income. You can claim heat, hydro, insurance, mortgage interest, property taxes and minor repairs based on your office area in proportion to total home area.
Canadian resident shareholders are eligible to claim a lifetime captial gains exemption on a sale of shares of a small business corporation that meet certain criteria. For 2021, lifetime capital gain exemption is about $892,218 on the disposition of qualified small business corporation shares.
CANADIAN FILM AND VIDEO PRODUCTION
The government provides a refundable Canadian Film and Video Production tax credit of 25% of labour costs when producing Canadian films. This program is not available to individuals but, if you have a qualified Canadian corporation, you may be eligible to invest and receive this credit.
AUTOMOBILE STANDBY CHARGE
As the owner/manager, you use a car that belongs to the corporation, you may be required to include a taxable benefit (standby charge) in your income when you complete T4.
PERSONAL SERVICE BUSINESS INCOME
Also known as incorporated employee. If the corporation falls under PSB, it is not eligible for the small business deduction limit and recently federal tax rate is also increased. There are also some severe restrictions on expenses it can claim compared with other corporations.
SALARY AND DIVIDEND MIX
We can help to determine the preferred mix of salary and dividend for you and your family members to minimize