Selling real estate in Canada is not only about finding a buyer and getting the transaction done rather it is a more complex process. To avoid potential traps and enhance financial gains it is utmost important that tricky tax effects are clearly understood. It is essential that the tax landscape and its intricacies are well understood whether you are selling your residence, an investment property, or a vacant land. In this thorough guide, we will dive into the world of real estate taxation in Canada while focusing on in-depth insights and practical approaches so that wise decisions can be made while selling a property.
When selling price exceeds the adjusted cost base while selling an asset such as real estate, stocks, or other investments, capital gains tax in Canada becomes applicable. This tax is imposed on real estate specifically when an increase in value of that property occurs over time.
Property's adjusted cost base (ACB) is subtracted from the selling price to calculate the capital gains. Expenses spent on maintaining and repairing the property are also included in the original purchase price. These expenses may include legal fees, real estate commissions, and costs related to renovations or improvements that increase the property's value.
It's important to differentiate between improvements and repairs when it comes to enhancements. Improvements are enhancements that add value to the property such as washroom renovations or adding a deck. Whereas repairs are maintenance tasks that keep things in running condition such as fixing a leaky faucet or repairing a broken window. Though both have costs involved, improvements have an impact on adjusted cost base of the property for capital gains tax.
The principal residence exemption is a valuable advantage that Canadian homeowners can benefit from while selling their primary residence. Capital gains are not included in taxation when benefiting from principal residence exemption under certain conditions.
Property must be entitled as the taxpayer’s principal residence for every single year of possession to qualify for the principal residence exemption. Keep in mind that only one property can be labelled as principal residence for a specific year.
By taking advantage of the principal residence exemption, homeowners can reduce their tax numbers significantly. However, to maximize tax savings and optimize financial outcomes its important to ensure compliance with the eligibility criteria and measure capital gains correctly.
It is crucial for individuals to understand the tax liabilities while selling properties such as rental units or vacation home. The sale of investment properties increases capital gains tax manifolds when the profit is calculated. This impacts the seller’s net proceeds. Sellers may even face the depreciation costs recurrence that was once claimed on the property which will further complicate things in terms of taxation. This is why tax planning strategies should be an integral part of everyone’s life. Implementing these strategies such as timing the sale to optimize tax benefits or utilizing available deductions can yield maximum financial returns for investors and minimize payable taxes.
Understanding how capital gains tax applies to transactions while selling a property is crucial as it can have a significant tax impact. Any capital gains acquired from the sale on their income tax return from selling an investment property are to be reported. The capital gain is calculated by subtracting the property’s adjusted cost base (ACB) from the selling price. Not only the purchase price but any expenses spent on maintaining or improving the property are also included in the ACB. Depreciation costs claimed previously on the property can also be imposed on the sellers while selling the property. By understanding these intricacies of tax implications while selling an investment property, sellers can make informed decisions and minimize their taxes.
Different tax rules apply to investment properties than primary residencies which is why it is essential that sellers pay attention to tax implications before putting their property on sale. Primary residences may qualify for principal residence exemption, but investment properties are subject to capital gains on any profit incurred from the sale. On top of this, sellers may be required to pay the depreciation costs once leveraged which further increases the tax liabilities. This is where accountants in Canada come in handy. They may implement tax planning strategies and help sellers utilize available deductions which will ultimately maximize financial returns for investors.
The decrease in value of a property over time due to wear and tear is referred to as depreciation. Property owners in Canada can claim these depreciation expenses through the Capital Cost Allowance (CCA) for income tax purposes. Property owners are allowed by the CCA to deduct a portion of the property’s cost from their taxable income every year.
It is crucial to understand that when selling the property, any depreciation claimed under the CCA can be included in the property owner’s income for the year of sale. This depreciation cost will be taxed at regular income tax rates of that specific time. The depreciation costs should be calculated accurately before selling the property to avoid any unwanted surprises at the time of sale.
Certain real estate transactions may be subject to GST or HST, particularly the sale of new or substantially renovated residential properties. While this tax can add to the overall cost of the transaction, understanding the exemptions and rebates available is essential for minimizing tax burdens. Sellers of primary residences may qualify for exemptions or rebates, providing relief from GST or HST liabilities. Understanding the complexities of GST/HST regulations requires careful attention to detail and proactive tax planning to optimize financial outcomes.
Fulfilling reporting requirements is a critical aspect of selling real estate in Canada, ensuring compliance with tax laws and regulations. Sellers must accurately report capital gains or losses on their income tax returns and, if applicable, submit additional forms such as the T2091 (Principal Residence Information) form to claim the principal residence exemption. Adhering to reporting obligations minimizes the risk of penalties or audits and provides peace of mind for sellers during the transaction process.
Engaging in strategic tax planning before selling real estate is essential for optimizing financial outcomes and maximizing tax savings. Consulting with a tax advisor or accountant can provide valuable insights into tax-saving strategies tailored to the seller's specific circumstances. Tax-deferred exchanges, structuring transactions to maximize deductions, and leveraging available tax credits are just a few examples of strategies that sellers can employ to minimize tax liabilities and enhance their financial position. By proactively managing tax implications, sellers can achieve favorable financial outcomes and maximize their net proceeds from real estate transactions.
Seeking professional guidance from a qualified tax advisor or accountant is highly advisable as taxes in real estate are quite complex. These professionals can offer personalized advice tailored to the seller's unique situation, providing clarity and expertise throughout the process. By using their knowledge and experience, sellers can understand the complexities of real estate taxation with confidence. This helps in making informed decisions to optimize financial outcomes and achieve desired objectives.
In conclusion, selling real estate in Canada involves directing a complex web of tax regulations and considerations. Understanding the complexities of real estate taxation, leveraging tax-saving strategies, and seeking professional guidance are essential for maximizing financial outcomes and minimizing tax liabilities. Whether selling a primary residence or an investment property, sellers can empower themselves with knowledge and expertise to navigate the complexities of real estate taxation effectively. By taking a proactive approach to tax planning and compliance, sellers can optimize their financial position and achieve their goals in the Canadian real estate market.
If you need help completing and filing your return, meet with a tax professional at Filing Taxes. We take the time to listen and strategically analyze your complete financial picture to deliver tax planning that fits your life today and tomorrow. Our team will work with you to help you understand the solutions available to you and chart the best path forward.
To learn more feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page
Cryptocurrencies are all the rage these days and they’re quickly becoming a popular investment in Canada. It is extremely important to keep track of all cryptocurrency trades to remain onside with the Canada Revenue Agency (CRA).
The CRA views cryptocurrency as a commodity for tax purposes, therefore, cryptocurrency trading may result in tax implications to be reported on the tax return. The CRA assigns the responsibility of tracking and reporting this income solely to the taxpayer.
Handling cryptocurrency taxes in Canada can feel like a fast-paced game on the ice, just like a hockey player navigating a puck through defenders. Our Canada Crypto Tax Guide covers everything you need to know including crypto capital gains, crypto income, how to calculate your crypto taxes, and how to report your crypto to the CRA, ahead of the April 30 tax deadline - let's go!
Is Crypto Taxable in Canada?
Yes. The Canada Revenue Agency (CRA) is clear that crypto is subject to tax. The Canada Revenue Agency (CRA) treats cryptocurrency as property, gains from which are taxed either as business income or capital gains under income tax rates.
Transacting in crypto can face either capital gains tax, typically applicable to occasional investors, or business income tax, for those conducting crypto business activities. Each of these categories has distinct tax rates and reporting stipulations, making differentiation vital.
Common Transactions that Result in Tax Consequences:
The above is not an exhaustive list, however, if you have completed any type of transaction above, it is highly likely you have triggered a taxable event that must be reported on your tax return.
This is further supported when we consider how volatile cryptocurrency can be and how fast values change after purchase. Depending on your situation the taxable event will be treated as a capital gain/loss or business income/loss.
Tax consequences will occur for transactions where your cost base of the cryptocurrency is greater than or less than the disposition value.
How is Cryptocurrency Taxed in Canada?
Cryptocurrency isn't seen as a fiat currency in Canada. Instead, it's viewed as a commodity, which is a capital property - like a stock or a rental property. This means it's either subject to Income Tax or Capital Gains Tax.
How to Know Whether Your Crypto Will be Taxed as Income or a Capital Gain?
It all comes down to whether your investment is seen as business income or a capital gain. Let's break it down.
The CRA states that they decide on whether you have business income or capital gains on a case-by-case basis. They also state that an individual transaction may be considered business income, while other transactions by the same investor may be considered a capital gain. All this to say, it's not too clear what precisely the CRA considers business income.
They do have some guidance on this. The CRA states the following are common signs that you may have business income or capital gain.
The more active you are in crypto trading and the more profit you make increases the likelihood of your crypto profits being considered business income as opposed to capital gains. You should speak to an experienced crypto tax accountant in Toronto for bespoke advice on your investments and their subsequent taxation, but we can look at the general rules on how business income and capital gains from crypto are taxed in Canada.
Business Income Tax
Crypto transactions that are conducted as part of a business or professional activity are subject to business income tax. In such cases, the entire profit generated is considered taxable income. Business income tax rates may differ from the capital gains tax rates.
What Falls Under Business Activities?
To determine whether crypto transactions constitute a business activity, the CRA considers factors such as:
Sometimes, an individual transaction may be considered business income, while other transactions by the same investor may be considered a capital gain. There are many crypto transactions that could be considered income by the CRA - including disposing of your crypto if you're trading regularly and at scale. One of the simplest ways to think about it is anytime you're seen to be 'earning' crypto - this could be seen as business income and subject to Income Tax instead.
Examples of crypto transactions that could be considered business income include:
Remember if you're selling and swapping crypto at scale - like a day trader - then your profits could be considered business income, not capital gains. The CRA is pretty behind the curve when it comes to the tax treatment of crypto in Canada, but we can safely assume that based on their business income guidance, most DeFi transactions would be considered business income as you're conducting transactions for a commercial reason. Examples of DeFi transactions that would be viewed as income and subject to Income Tax include:
There are also many play-to-earn platforms and other similar engage-to-earn platforms that have sprung up in the crypto space in recent years. The rewards you receive from these could also be considered business income and subject to Income Tax. Examples include:
As we said above, the CRA hasn't released specific guidance on most crypto transactions beyond basic dispositions just yet. However, as their guidance for what is considered business income includes conducting activities for commercial reasons - it is quite likely all DeFi transactions would be considered business income and subject to Income Tax. Of course, it is advisable to speak to an experienced tax accountant in Toronto for your crypto investments.
Tax Implications for Professional Traders
Professional or day traders in crypto are subject to business income tax. In this scenario, 100% of the profits from cryptocurrency trading are taxed as business income based on their fair market value at the time of receipt.
Reporting and Compliance
Business crypto transactions that are subject to income tax should be reported with Form T2125.
Crypto Capital Gains Tax in Canada
You'll have a crypto capital gain or loss any time you sell, swap, spend, or gift your crypto - so you need to know how to calculate crypto gains.
A capital gain or loss is the difference in value from when you bought or otherwise acquired your crypto to when you disposed of it by selling it, swapping it, spending it, or gifting it. If you've made a profit from the difference in value - you'll have a capital gain. If you've made a loss from the difference in value - you'll have a capital loss.
Because cryptocurrency is viewed as a capital asset, when you dispose of it by selling it, swapping it, spending it, or gifting it - you'll owe Capital Gains Tax on any profit you make. Crypto transactions which are considered a disposition in Canada include:
To calculate capital gains, the following key components must be considered:
Taxable Portion of Capital Gains
If your crypto is taxed as a capital gain, you'll only pay Capital Gains Tax on half of any profits of a crypto transaction. In Canada, only 50% of the capital gains are taxable. This means that if an individual realizes a capital gain of $10,000 from a crypto transaction, they will include only $5,000 (50% of the gain) in their taxable income for the year.
Marginal Tax Rate
The taxable portion of capital gains is added to an individual's total income for the tax year. The applicable marginal tax rate is then applied to this combined income to determine the actual tax owed. Canada employs a progressive tax system, meaning that the rate at which capital gains are taxed depends on an individual's total income.
Reporting and Compliance
Individuals must report their capital gains from crypto transactions on their annual income tax return. Schedule 3 - Capital Gains is used to calculate and report these gains. Accurate record-keeping is vital, as the CRA may request supporting documentation in case of an audit. Details such as transaction dates, amounts, and counterparties should be meticulously recorded.
Cryptocurrency Tax Breaks in Canada
You can use the following tax breaks to further minimize your crypto tax liability.
Crypto capital losses
You won't pay any Capital Gains Tax on any capital losses from crypto. But don't just write these off as a bad time - utilize them to reduce your tax bill.
You can offset your capital losses against your capital gains for the tax year to reduce your overall tax bill.
The 50% rule for capital gains equally applies to your capital losses. This means you can only offset half your net capital loss in a given tax year. If you've done this and you still have more losses, you may carry this figure forward to future financial years to offset future gains. Similarly, if you have no capital gains in a year, you can carry forward half your capital losses to offset against future gains.
If you wish to carry your current year’s net capital losses into a prior tax year, you can use Form T1A - Request for Loss Carryback.
If you wish to carry over a previous year’s net capital loss into the current year, you can claim it on line 25300 of your tax return.
Tax on Lost or Stolen Crypto
The CRA has not released specific guidance stating whether you can claim lost or stolen crypto as a capital loss.
However, they do allow taxpayers to deduct capital losses due to the theft of other capital property. As crypto is considered to be capital property under Canadian law - you may be able to claim a capital loss for stolen crypto.
Is Any Crypto Tax-Free in Canada?
Some specific crypto transactions are tax-free in Canada. Crypto transactions that trigger no taxable event in Canada:
When is the Deadline for Reporting Crypto Taxes in Canada?
In Canada, the tax year runs from January 1 to December 31. You should report all of the taxable transactions during the year on your tax return.
Typically, the deadline for reporting your taxes to the CRA is April 30 after the end of the tax year. You don't have to leave it until the last minute, taxpayers can begin submitting tax returns from the end of February.
Similarly, your payment will be considered made on time if it is received by the CRA, or processed at a Canadian financial institution, on or before April 30, 2024.
If you're self-employed you have until the 15th of June 2024, but it's important to note that the payment deadline is still the 30 April.
How to file crypto taxes with CRA paper forms
Filing by post? Experienced tax accountants in Toronto can still help you file your crypto taxes. Just follow these steps.
Crypto Compliance and Record-Keeping records will the CRA want?
Compliance with crypto tax regulations is critical to avoid potential penalties and audits by the CRA. To ensure compliance, individuals should:
What Happens if You Don’t Report Crypto Tax?
The CRA doesn’t take to tax evasion or fraud kindly. Not reporting or under-reporting your crypto gains and income you can face heavy fines and imprisonment.
Canada Crypto Tax Filing Forms for 2024
Here’s a look at common crypto tax filing forms in Canada for 2024.
What to do if Haven’t Reported Crypto Taxes in Previous Years?
If you haven’t reported your cryptocurrency gains and income in previous tax years, you can apply for a correction through the Voluntary Disclosures program.
If your application is approved, you will be required to pay taxes plus interest. However, you will receive prosecution relief, and potentially penalty relief and partial interest relief.
How We Can Help with Your Crypto Taxes in Canada
If you need assistance to calculate your Canada crypto tax, look no further than Filing Taxes. We are a full-service crypto tax accounting firm in Toronto.
We take the challenges out of your crypto tax Canada filing and guarantee both accuracy and thoroughness. And if you have questions or doubts about your crypto tax in Canada, our experts will be glad to assist.
With our team of expert accountants in Toronto reporting your Canada crypto taxes has never been easier.
Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
Capital dividends are a special type of dividend that Canadian-controlled private corporations ( CCPC ) can pay to their shareholders on a tax-free basis. The Canada Revenue Agency ( CRA ) uses the capital dividend account ( CDA ) to keep track of the capital dividends that are available to shareholders on a tax-free basis. Capital dividends were created to improve the integration in the Canadian tax system, specifically, capital gains incurred within a corporation will have a similar impact on shareholders as if the shareholders earned the capital gains at a personal level. The tax law relating to capital dividends is complex and our CPA – CA accounting firm based in Edmonton should be consulted if you need further information or wish to claim these types of dividends as we often deal with income tax-related advice to our clients. In this blog post, we will address the most common types of transactions that impact the CDA balance. Our next blog post will include information on less common transactions when tax-free capital dividends can be paid, and additional CDA considerations.
The most common way to increase the CDA balance is through the gain on the sale of capital property (stocks, land, bonds, etc.). A capital gain occurs when the proceeds received on the sale of capital property are higher than the cost of the property, taking into consideration any costs relating to the sale, such as broker and legal fees. Only 50% of a capital gain is added to the CDA balance, which represents the non-taxable portion of the gain. The other 50% of the gain is considered taxable and is included in taxable income for the year. See Year 1 in the example below.
It is important to note that, inversely, losses on the disposal of capital property can decrease the CDA balance. 50% of the capital loss is netted against the capital gain additions and can reduce the CDA balance. Losses on a capital property cannot create a negative CDA balance; rather, the non-deductible portion of the losses is accrued until there are enough non-taxable portions of the capital gains to offset the losses. See Year 2 in the example below.
For the taxable portion of the capital losses, the remaining 50% of the taxable capital loss is applied to the current year's taxable capital gains. If there are no taxable capital gains to apply the taxable capital loss to, the taxable capital losses can be carried forward for future use or carried back 3 years to set against taxable capital gains.
Sales of depreciable capital assets can be more complicated from a CDA perspective as, more often than not, the depreciable property does not increase in value and, therefore, there is normally no capital gain or loss. In those rare cases where the depreciable property does increase in value, complex rules come into play to ensure the correct capital gain versus recapture on depreciation is calculated correctly. As these issues are complex, taxpayers should consult with their tax accountant, preferably one that has a CPA (Chartered Professional Accountant) or CA (Chartered Accountant) designation. Our CPA–CA accounting firm based in Edmonton is highly experienced in income tax matters and would be pleased to assist you in these matters.
Example
For our example, please consider that the corporation is owned by a single individual shareholder, had no other activity for each year, and that the CDA balance starts at zero in Year 1.
Year 1
A stock with a cost base of $100,000 was sold for $500,000, resulting in a capital gain of $400,000. 50% of the capital gain is included in income for tax purposes, and the other 50% of the capital gain is allocated to the CDA balance. The taxable income for the year is $200,000. The closing CDA balance for the year is $200,000. The corporation can pay a $200,000 capital dividend to its shareholder without the shareholder having to pay personal taxes. In our example, the corporation does not pay a capital dividend to its shareholders in Year 1.
Year 2
Land with a cost base of $600,000 was sold for $100,000, resulting in a capital loss of $500,000. Of the $250,000 taxable loss, $200,000 would be carried back to Year 1 and the remaining $50,000 taxable capital loss would be carried forward. The other 50% of the capital loss is allocated to the CDA balance. There would be no taxable income in Year 2 and the CDA balance would be nil as losses on a capital property do not create a negative CDA balance. There is, however, $50,000 in losses accrued ($200,000 gain from Year 1 less $250,000 loss in Year 2) that needs to be offset to bring the CDA balance above nil.
Final Words
Our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
While capital gains are subject to tax, capital losses are deductible by the same token. But do you know that, with some caveats, you can carry your capital losses forward to offset taxes on capital gains in the future? One step at a time, let’s go through what counts as a capital loss and how you can benefit from it.
What may be considered a capital loss as per the CRA?
When you dispose of a capital property for less than your adjusted cost base (ACB, i.e., the cost of a property and the expenses to acquire it.), the money you lose from the disposition is considered a capital loss.
Common examples of capital property include but are not limited to real estate, precious metals, artwork, intellectual property such as patents or trademarks, or financial products such as shares or bunds. In a nutshell, capital property can be both tangible, such as motor vehicles or land, and intangible, such as intellectual properties or financial assets. That said, it’s important to demarcate listed personal property (LPP) for tax purposes. While an LPP is considered capital property, the loss incurred from the disposition of an LPP is not deductible given that the CRA considers it a personal loss other than a capital loss. Please be advised that cases vary between individuals, and you may need to file a ruling to determine whether the painting on the wall in your hallway is capital property or LPP.
Can I deduct any income with capital losses?
Unfortunately, no. With capital losses, you can only deduct capital losses when they result in a net gain. Such incomes as salary or dividends are not considered capital gains and whose taxes are not deductible. In general, you can use the capital losses to deduct capital gains generated in the same year. However, if the gains are derisory – which might be the case for many businesses that have tried to keep their heads above water throughout the nightmare of 2020 – losses will accrue to net capital losses, a notional account from which you can avail to deduct future gains.
How do I carry my losses forward?
Enter the number of your capital losses as a deduction on line 25300 of your income tax return (T1). Please note the inclusion rate for the year when the loss was incurred; that is, the percentage of the capital gain in your income. For example, if you have generated a capital gain of $100,000 in a year when the inclusion rate is 50%, $50,000 of the gain needs to be added to your personal income for tax purposes. Likewise, if you have incurred a gross loss of $100,000, the eligible amount for you to carry forward is also $50,000. Please be reminded that inclusion rates vary in different years. To ensure the accuracy of your claim, do check with the CRA on the rate for the year when a loss occurs.
Where do I find the balance of my capital losses?
It may take a while for you and your business to bounce back from setbacks, but kudos to your tenacity. That said, how to be sure of the number of losses from past years? Here are two ways you can stay on top of all the eligible claims. First off, you can find all the eligible losses in your latest notice of assessment. In addition, you may find the information in your CRA My Account. Once you have logged in, find the Tax Returns tab at the top of the page and click on Carryover Amounts.
Is there a time limit to claim my capital losses?
Rest assured, capital losses can be carried forward indefinitely. Any loss today is a gain tomorrow. Remember this silver lining, and buck up! You’ve got this! If you need further assistance, give us a holler, and we’ll take it from there.
Where to Find the best Capital Gains Tax Accountant Near Me?
There are online directories comprising lists of several tax advisors. You can shortlist a tax accountant for advice on capital gain tax by considering the following:
If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
This is actually a common question, and it’s really important that you do it right. How do you do this, depends on various factors with your pre-existing business, as well as your new holding company.
You can surely transfer an existing business to a newly incorporated holding company on a tax-free basis by implementing a Section 85 Rollover.
There are few reasons that compel people to convert their pre-existing business to a new holding company. One of the primary reasons is that the business has grown. This alone can be a significant reason to switch the business to a new holding company.
There are a number of things to consider when looking at switching your pre-existing business to a new holding company. Below are the commonly asked questions from our clients when they reach out considering what is involved in making the transition to an incorporated company.
Can I use the same business name?
Yes, you can use the same business name as you are currently using, you just need to add a legal ending to the business name from these six options:
It is good to know in advance from an accountant about this kind of stuff so in the future you don't have to face problems or difficulties.
What other information is required to Incorporate?
Can a new person be added to the incorporation?
Yes, you can. If you wish to add someone as a director to the incorporation who was initially not part of your pre-existing business, now is the perfect time to add them. A crucial time for your company, so to get the knowledge from an accounting firm that what you are going to face.
In which categories of incorporation, we offer our services?
What changes are required after completing the incorporation?
We are here to assist you to make the process of converting a pre-existing business to a new holding company a seamless and, easy process where we move with you step by step through the incorporation process. We need more information about your business and its existing setup to guide you in more detail. If you need any further information and you are still uncertain about incorporating your small business, our experienced and professional team at Filing taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer:
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting firms and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
If you are a member of a trade union or professional organization, you can deduct certain types of union contributions or professional membership dues from your income tax applications.
The amount of union fees you can claim is listed in box 44 of your T4 tickets or receipts and includes any GST/HST you have paid. You can claim these amounts as a tax deduction on line 21200 in your tax return.
If you are the primary beneficiary of the union contributions and your company pays them on your behalf, you are not entitled to a tax deduction, and you may have to pay taxes on this benefit.
There are different types of trade union and professional membership dues that you can deduct when filing taxes. You can claim your work-related contributions that you have paid or paid on your behalf and that have been included as part of your income during the year.
The CRA allows you to charge the following types of fees on your tax return:
It is important not to apply for the trade union tax deduction more than once. Your employer can show a trade union tax deduction on your T4 tax document, and you can also receive a tax document from the professional association or organization to which the contributions relate.
Make sure the amounts match and request them only once. The dual application of union taxes can result in a revaluation notice and possible fines and interest due. If you are still unsure about the process, you can get in touch with an accounting expert so he can tell you everything.
You should also keep in mind that if you are going to hire an accountant for your work, you should ask him/her for the bookkeeping tasks because mostly accountants handle these things and that is why they are called an accounting firm.
By the close of February, each employer must issue employees with earned income tickets from the previous fiscal year. The amount of union contributions eligible for tax deduction is shown on the T4 slip in box 44. You can apply for a tax deduction on line 21200 of your tax return, and if your employer is a registered GST/HST, you may be able to request a reimbursement of part of the union contributions.
You cannot claim a tax deduction for start-up expenses, licenses, special estimates, or fees unrelated to the company's operating costs. As an affiliate of a pension fund, you can no longer apply for a tax deduction for the payment of membership dues.
Prior to 2018, an employee who had previously paid taxes could be deducted as unpaid expenses for company employees if the total amount of contributions plus some various deferred expenses reached a certain level. The employee then deducted the contributions if he was able to write down the deductions.
On the occasion that an employee requests a deduction for professional membership or union contributions, some additional considerations arise. In general, although a particular job title need not be a condition of an employee's position for that member of staff to claim a deduction for related professional contributions, the CRA requires that there be some link between the employment and the association professional in question.
In some cases, the employer is willing to pay the cost of the employee's professional contributions as part of an employee benefit package. In this instance, the employer's payment of these contributions is not shown on the employee's T4 as a taxable benefit; the employee cannot claim a deduction for those costs. However, if the worker suffers a taxable advantage, he can, on line 212 of the return, request the deduction of any taxes or allowable taxes paid.
If you are required to pay professional membership dues as a condition of employment and your employer pays or reimburses them to you, you cannot claim a tax deduction on your earned income. Depending on who your primary recipient is, there may be a tax advantage for you. For example, if you are the primary beneficiary and your employer pays your contributions, you will have a tax benefit due.
The amount of the taxable benefit is indicated on the T4 slip in box 14 (employee income) or in code 40 (in the Additional Information section) of the T4 slip.
Whether you make an appointment with one of our experienced tax professionals or choose one of our online tax registration products, you can rely on us to help you determine if you can claim tax deductions.
Well, the first thing is don’t panic. There could be various reasons why a person wouldn’t have paid their taxes. You could owe a significant amount of money and not be able to afford to repay, business hardship, life threatening illness, paying taxes might have slipped out of mind due to any reason, you may not have filed your taxes at all. In any circumstance, if you owe a tax debt to the Canada Revenue Agency (CRA), this problem won’t just disappear.
Millions of Canadians file their tax returns late – and if you are one of them just get started with your tax filing. The longer you wait to come clean, the harder the CRA will hit you with penalties and interest payments, and the likelihood of the CRA seeing your avoidance as tax evasion increases. The CRA may not have contacted you yet, but it doesn’t mean it will never.
Late filing charges and penalties begin as soon as you miss the tax deadline (typically April 30 each year, for most Canadians) there is an automatic late filing penalty of 5 percent of tax owing. For each month you do not file, you are charged another one percent.
In case you did pay your taxes but less than the tax amount you actually owe, the CRA will charge the interest amount daily on the amount owing. These interests and penalties add up faster, which is why the only escape to harsh catch by CRA on late filing is to resolve your tax situation sooner than later. This is a very difficult issue to face so it is best to contact an accountant in advance.
If you have failed to file your income tax returns, GST/HST returns, or corporate T2 returns for several years, there is a remedy for it, even when many years have transpired. If the CRA has not contacted you regarding your late filings, you may be eligible for the Voluntary Disclosure Program. It is a tax amnesty program, which will allow CRA to waive some or all of the penalties and some of the interest levied. We can help you determine your eligibility for this program and submit your application.
It should be noted that this program may be utilized by a taxpayer only once in their lifetime (barring any other exceptional circumstances). This option does not apply to everyone and it does not reduce the overall amount that you owe. You are bound to show proof that you were unable to file or pay your taxes on time to apply for this program.
You may also be eligible to arrange a payment plan with CRA. However, to negotiate a payment plan with CRA, you have to provide many details about your financial situation, including your income, your debts, your expenses, and your assets. Using this information, the CRA will decide whether to offer you a payment plan and if yes, how much you will need to pay each month.
It is important to consider that CRA will not ever accept less than you owed to it. It will want its money first and prioritize it over your other financial obligations. For example, the CRA may instruct you to only pay the minimum balance on your credit card to apply additional money to your tax debt. This will shoot up your costs, as credit card interest rates are typically quite high.
Before you take any steps to deal with back taxes, it is important the services of a financial professional who understands Canadian income tax. With years of experience in corporate and personal tax law, Filing Taxes is your premier partner for all your tax needs in becoming up to date with your tax filing obligations and mitigating penalties through amnesty applications. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Capital gain is the profit earned on the sale of a ‘capital asset’. Canadian Revenue Agency (CRA) defines securities in the form of shares, investment properties, bonds, and stocks as well as real estate as “capital assets''. Capital gain results when the selling price of an asset exceeds its purchase price.
Investments yield income when they are held and create capital gains when sold. We pay income tax on the income generated by investments and pay capital gain tax when investments are sold at a profit. CRA requires the following amounts to calculate any capital gains:
(i) Proceeds of the disposal: The selling price of the capital asset.
(ii) Adjusted cost base (ACB): How much is originally paid for the capital asset.
(iii) Outlays and expenses: Costs deemed necessary before selling, for example, fixing-up expenses, finder’s fee, commissions, broker’s fee, surveyor’s fee, legal fees, transfer taxes, and advertising costs.
If you still don't understand how to calculate tax you can contact an accountant.
Capital gains can be of two types: realized and unrealized.
(i) A realized gain occurs when a capital asset is sold at a level that exceeds its book value.
(ii) An unrealized gain is a potential profit resulting from an investment. This is a paper gain, reflecting an increase in capital investment’s value but has not yet triggered a taxable event, as the capital asset is yet to be sold.
Capital gains are taxed only when they are realized. Realized capital gains are further classified as long-term and short-term.
(i) Long-term capital gains are derived from assets that are held for more than one year before they are disposed of.
(ii) Short-term capital gains are derived from assets that are held for a year or less.
Capital gain tax rates depend on how long the seller owned or held the capital asset. You cannot earn any benefit from any special tax rate on short-term capital gains. Instead, these profits are usually taxed at the same rate as your ordinary income. Long-term capital gains are taxed at a lower rate than short-term gains. This tax policy is adopted to encourage investors to hold assets subject to capital gains for more than a year. A lower tax rate on long-term investment is an incentive given to invest in the economy-building companies rather than aiming to generate quick profits.
CRA’s tax laws surrounding capital gains taxes are more complicated than generally presumed by tax filers. In Canada, if you make money off a capital asset, you pay capital gains tax on it. You cannot play tips or tricks or exploit the loopholes in tax laws to avoid your tax liability on capital gains. Here you need to take on board a capital gain tax accountant to help you legally, and effectively mitigate the tax impact on capital gains.
Every tax type has different requirements, rules, and thresholds, finding all this data can create confusion and errors. The best course of action to make this job less stressful would be to consult a capital gain tax accountant or a reputable accounting firm. Doing this will keep more of your capital gains for yourself. There are plenty of ways to defer, reduce or even avoid capital gain tax. Tax accountant’s professional advice can prove these investment returns to be the most tax-friendly investment returns. They can help you determine what works best in your specific situation. You can also check out on an any accounting firm which will handle both of your work accounting and bookkeeping.
There are online directories comprising lists of several tax advisors. You can shortlist a tax accountant for advice on capital gain tax considering the following:
If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer:
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
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