Employment – Related Personal Tax Tips
Non-cash gifts and awards with a total value of $500 or less annually may not be taxable personally. Ask your employer about this option.
You must pay 2011 interest on employee loans on or before January 30, 2012.
Elections to defer payment of tax on stock option benefits until the shares are sold are no longer allowed. Also, employers are now required to withhold and remit income tax relating to the taxable benefit realized when public company options are exercised.
Claim your entitlement to home-office expenses: your employer must complete Form T2200.
Ensure you claim the cost of public transit on your return. There is fine print to be considered here.
Regarding your vehicle, it may pay to repay your employer for some of the personal-use percentage of your actual operating costs. You can reduce or eliminate the standby charge benefit by reducing your access to the vehicle and, again, by avoiding personal driving.
Investment – Related Personal Tax Issues
RRSPs allow immediate tax deductions while having your savings earn income tax free until retirement when funds are withdrawn. The 2001 contribution deadline is March 1 2012: you should always contribute to your RRSP as early as possible to gain the benefits of additional compounding. For 2011 you can claim a contribution of up to 18% of income earned from employment or business, up to a maximum of $15,500.
You are allowed to have an excess contribution up to $2,000.00 without it paying the 1% per month special tax. However, you may use unused room this year if you did not contribute the maximum in a previous year. You could consider making RRSP contributions when you have surplus funds, even when you cannot use the deduction. This way, the capital will start to grow on a tax-deferred basis, and you will be able to can claim the deduction in any future year.
Spousal RRSPs are effective when one spouse has little or no income. This is when you make a contribution to your spouse's RRSP. They will belong to the spouse when withdrawn. This is a form “retirement income splitting” because you will have split up the contributions and also the withdrawals, thus reducing taxes substantially.
While it can be prudent to borrow in order to make RRSP contributions, be aware that interest on such loans is not deductible.
You are allowed to make a tax-free withdrawal from your RRSP to finance full-time education for yourself, your spouse or your common-law partner. You may withdraw up to $10,000 in a calendar year and up to $20,000 in total.
RESPs are another important tax reduction and savings program. Make sure that you get the maximum lifetime Canada Education Savings Grant (CESG) of $7,200.
TFSA contributions, yet another tax-reduced savings program, are not deductible, but nor are withdrawals and income taxed. Canadians over 18 may contribute to a TFSA. If you must withdraw funds, do so before year-end as that room is added to your contribution room for the following year.
Home Buyers' Plan and incentives are still available for first-time home buyers. You may withdraw up to $25,000 from RRSPs to buy a home and without paying the tax. You may also be eligible to claim the First-time Home Buyers' Tax Credit of up to $750.
Capital gains earned can always be offset by selling investments where you have losses. If you have little or no other income, or have capital losses to use up, consider reporting capital gains before year-end by selling an investment that has gone up in value, and then reinvesting the proceeds - it may be the same investment.
Family Related Deductions and Tax Credits
Child-care expenses such as boarding school and camp fees qualify for the child-care deduction
Universal Child-Care Benefit (UCCB) and Canada Child Tax Benefit (CCTB) apply under certain situations and funds invested in trust for your children will not be taxable to you.
Children's fitness and arts tax credit are two separate federal non-refundable tax credits on up to $500 each of fees paid per child under the age of 16 for eligible programs.
Education and textbook tax credits can be claimed for post-secondary school either full or part time.
Unused and unclaimed tax credits for education, tuition or textbooks can be transferred to your spouse, parent or grandparent if you are unable to use them. The carry-forward period is generally indefinite for unclaimed education, tuition and textbook credits and five years for unclaimed student loan interest.
Moving expenses may be deductible if you moved to attend school or moved from school to work or back home.
