The Seasonís Top 10 Tax Questions
VANCOUVER - The Chartered Accountants of BC have prepared a list of answers to
10 common questions being asked by individuals during the current tax season.
Question #1: I moved for work in 2001, can I claim expenses?
Answer: If you moved in 2001 to work or carry on business in a
new location, you may claim certain moving expenses up to the amount of your
income from your new work location. To be eligible, your new residence must
be at least 40 kilometres closer to your new work place and you may not claim
any expenses your employer paid on your behalf. Expenses that your employer
has reimbursed you or expenses that you have received an allowance for are not
deductible unless the reimbursement or the allowance is included in calculating
You may claim mover's transportation, storage charges, personal transportation
costs for you and your family, and lodging and meals for up to 15 days near
your former or new residence.
Plus, if you sold your old residence, you can claim the costs of selling that
residence as well as legal fees and property transfer taxes in connection with
the purchase of your new residence. If you move for work, look into deductions
when you file your return.
Question #2: Can I transfer tax credits to my spouse?
Answer: Yes you can. Transferable credits are the age credit, disability
credit, pension income credit, and spouse's education and tuition fee credits.
If you are able to reduce your tax payable to zero without using all the available
credits, you should transfer some of these unused credits to your spouse's return.
Commencing with the 2000 taxation year, you can also claim the unused portion
of a disability credit for a disabled brother, sister, aunt, uncle, niece or
nephew who either resides with you in a self contained domestic establishment
or is dependent on you by reason of infirmity.
Don't let your credits go to waste.
Question #3: I turned 65 last year. What are the implications for my taxes?
Answer: If you were 65 years of age or older in 2001, then you may be
eligible for some tax breaks.
You may be eligible to claim a tax credit depending on your income level for
being 65 years of age or older. You can also claim another tax credit of up
to $1,000 of "qualified pension income."
Qualified pension income includes payments you receive from superannuation or
pension plans, the income element of annuity payments and RRSP annuities or
payments from registered retirement income funds.
The pension credit is also available to individuals under age 65 on life annuity
payments from superannuation or pension plans and on certain annuity payments
arising by virtue of the death of a spouse.
The maximum age credit occurs at net incomes of approximately $26,941 or less
and declines to zero if the net income rises to approximately $51,068. If you
are a senior citizen, consult the advice of a chartered accountant to find out
which tax breaks you're eligible for.
Question #4: When are child care expenses deductible?
Answer: Child care expenses are deductible if they are incurred to enable
you to earn employment or business income, or if you are a full time student
in certain educational programs, including high school. This could apply whether
you are single or married.
Expenses such as baby-sitting fees, nursery costs, day-care costs, and payments
for lodging at a boarding school or camp may be deductible for dependent children
under 16 years of age. As well, the same deductions can be made for older children
dependant because of mental or physical infirmity. The deduction in most cases
must be claimed by the parent or supporting person with the lower income, and
is limited to maximum amounts.
To claim, you must complete Form T778, Calculation Child Care Expenses Deduction
with your 2001 income tax return.
Question #5: What are the tax implications of renting a room in our house?
Answer: If you rent a room or a floor in your home, or the other half
of your duplex, you can deduct the expenses connected with earning that income.
These expenses may include a portion of property taxes, mortgage interest, repairs,
insurance, light, heat and water.
You cannot deduct any mortgage principal payments. Claiming depreciation where
allowable could affect the status of your home for the principal residence exemption.
Seek the advice of a professional when considering deducting depreciation and
other deductions involved with rentals.
Question #6: I moved to Canada in 2001. Do I have to report foreign income?
Answer: If you immigrated to Canada during 2001, you may not have to
include 2001 income earned outside of Canada before you became a resident.
However, you do have to include income earned outside the country while residing
Worldwide income must be reported but you may claim a tax credit against your
Canadian taxes for taxes payable to a foreign country on the same income.
For more information on foreign income claims, Canada Customs & Revenue
Agency publishes a pamphlet outlining the income tax rules for immigrants. You
can pick up your copy at your local tax services office, or on the Internet
Question #7: What tax credits are available for higher education?
Answer: Planning at tax time can help you and your parents afford the
increasing costs of higher education.
Students are entitled to claim a combined federal and B.C. tax credit of about
23 per cent of tuition fees paid to a post-secondary or certified institution,
and a combined federal and B.C. education credit of $79 per month for full time
attendance at such an institution (or $23 per month for qualifying part-time
attendance). Tuition fees must exceed $100 per institution to be eligible. Tuition
fees also include mandatory fees for athletics and health services, additional
fees for computer services, laboratory and library services, and similar services,
but not student association fees.
Tax credits that are not used by the student can be claimed by the student's
spouse or supporting parent or grandparent, up to approximately $1,165, depending
on the student's income and deductible credits. Otherwise, students can claim
the tax credits in future years. However, if you carry forward an amount, you
will not be able to transfer it to anyone.
If you receive scholarships, bursaries or fellowships, the first $3,000 is normally
Question #8: What are the tax implications for maintenance and child support?
Answer: Maintenance support, child support, and child custody can affect
your 2001 tax return. Family break-ups have various tax implications that should
be considered. Parents with custody of the children may claim "equivalent
to married personal credit" for one of their children providing certain
conditions are met.
Maintenance and certain child support made to your former spouse may be deductible
to you, and may be taxable to your spouse, but only if paid as a result of a
decree or written agreement and if paid on a periodic basis.
Child support paid as a result of decrees or agreements made after April 1997
will not be deductible to you or taxable to your spouse. This non-deductible,
non-taxable child support applies to pre-May 1997 agreements, if they are varied
or if both spouses elect. If you received or paid alimony or maintenance in
2001, you should talk to your tax advisor.
If you claim a deduction for child support, you will not be able to claim personal
tax credits in respect to that child. Look into deductions and credits applicable
to you for your return.
Question #9: Do tips from work have to be counted as income on my tax
Answer: Waiters, waitresses and other people who earn regular income
from tips and gratuities should keep a diary of the amounts they receive. Just
because the money is in cash and records may not be kept doesn't mean Canada
Customs & Revenue Agency will forget about it.
Although you don't have to send a diary in with your tax return, you should
have one available for examination to back your figures up. If you receive lower-than-average
tips, a diary can prevent an unfair assessment.
Question #10: Are union dues deductible?
Answer: Yes. If you pay trade union or professional organization dues,
hang on to your receipts or proof of payment because they are deductible. With
the exception of your T4 slip, do not include your receipts with your return.
However, you should keep them in case Canada Customs & Revenue Agency asks
to see them.
Look into deductions associated with your union and professional memberships
for your 2001 return.
Information for Tax Tips is provided as a public service by the Chartered Accountants
of British Columbia. Tax Tips are available here.