Are Contest Wins Taxable In Canada?

Are Contest Wins Taxable in Canada?

In Canada, anything you win through a contest is NOT taxable!  You do not have to claim it as income on your income tax.  However, if you earn money, and invest it, the interest you earn on the principal are taxable, unless you invest in a Tax Free Savings Account (TFSA).  

Increase Your Income Through Contests!

You probably won't win straight up cash (but you might!), but you can win gift cards, products and experiences!  These "extras" are a great way to increase your income, especially if the prize is for something you would have already spent money on!  You can then allocate that money to somewhere else in your budget.  

You can also win for things that are above and beyond what your normal spending habits would entail.  For example, I have won tickets to concerts (eg one of favorite Canadian jazz bands Manteca) and sporting events (eg FIFA U19 when it was in Toronto) that I love to attend, but can't justify spending money on regularly.

But...I Never Win Anything.

So many people don't enter contests because they assume that they won't win anything.  But you CAN'T win anything if you don't enter!  So enter! Enter contests for that have prizes of things that you would use or would like. (Or that you know someone who would use the prize!)  Don't enter for things that you don't want.  Leave those contests to be entered by those who will actually appreciate the prize if they win!

What Have You Won? What Would You Like to Win?

What have you won?  I want to know! Tomorrow I will share with you a list of things that I have won in the last six months. 

Tax Withheld on RRSP Withdrawals

If you are in Canada, and are at a point where you need or want to withdraw money from your RRSP, please ensure that you are familiar with the rules of withdrawing it.

I've had a few income tax clients over the last couple of years who have been surprised to owe money on their income tax.  The primary reason these particular clients owed money was because they withdrew money from their RRSP's but the bank/financial institution did not withhold enough tax on the withdrawal for their financial situation.

Minimum Tax Withheld on Withdrawals

The minimum tax that is withheld is dictated by Canada Revenue Agency.
If you take $5000 or less out, they withhold 10% in taxes.
If you take between $5000.01 and $15000 out, they withhold 20% in taxes.
If you take more than $15000 out, they withhold 30% in taxes.

(Note: These are the numbers for all of Canada, except Quebec, which withholds slightly more.)

Add to Income

The amount that is withdrawn gets added to your income tax as income.  If you have other income from other sources (employment, investments, etc.), it is quite possible you are will need to have more money withheld for taxes! Or, alternatively, ensure that you are saving the money that you will owe on taxes in something that is earning you a bit of interest in the meantime.

Be Aware. Know Your Circumstances.

As long as you are aware of your circumstances, there will be no problem! You will make sure that either the bank or yourself withholds enough taxes so that you are not surprised come income tax filing time.

The problem is if you are not aware, and all of a sudden you realize that you owe a bunch of money as a result of withdrawing money from your RRSP's and you weren't aware that this would happen.

No one likes finding out that they owe money to the government.

Have you been surprised to owe money when filing your taxes?

Have You Made the Most of Your Benefit Plan?

Have you thought about your benefit plan at work recently? Most benefit plans run on a calendar year, which means the benefits you can use in one year end on December 31.  Even though we are only at the end of October, the end of the year will come quickly!

I am extremely fortunate to work for an agency that still provides health benefits to their permanent employees who work more than 24 hours/week.  Ideally, I would love to work 16 or 20, but I work 25 hours a week with this employer in order to maintain access to the benefit plan.

I realize that not everyone has access to a benefit plan, but if you do, you should make sure you are using it!

By using your benefits, you could be using services like:

• Accupuncture
• Chiropractor
• Dentist
• Glasses or Contacts
• Massage
• Naturopathy
• Nutritionist
• Optical Services
• Orthodontist
• Orthotics
• Personal Counselling
• Prescription Drugs

If you pay into your benefit plan from your earnings, make sure to claim this amount as a medical expense on your income taxes.  Sometimes the amount is listed on your T4 slip, and sometimes it is on your last paystub for the year.  Also, for any services that are not 100% covered, the portion that you pay that is not covered can also be considered a medical expense. 

I've already booked monthly massages for November and December in order to make use of my benefit plan.  Take a look into the details of yours, and make sure you are using them!

New Baby? Make Sure Your Income Taxes Are Done!

Are you expecting a cute new baby in your life or have a newborn?  Are your income taxes all complete and submitted?

You might be wondering what the connection between these two questions is!

The Canada Child Tax Benefit (CCTB)  is a payment from the Federal Government to help families with the costs of raising children.  The majority of Canadians are eligible for this program, but you MUST FILE YOUR TAX RETURN TO RECEIVE THEM!

Separate sub-programs that are also included in this payment are the:

1) National Child Benefit Supplement (NCBS) for lower income families

2) Child Disability Benefit (CDB) for families with children who are disabled and qualify for the Disability Credit.

Also, each province may have programs as well.  In Ontario, there is the Ontario Child Benefit (OCB).

Ok, lets get to what everyone wants to know.

How Much Money Will I Get??


Using the online calculators using 2011 net income, and assuming your children don't have disabilities, here we go.  For children age 6 or under you will also receive $100/month for the Universal Child Care Benefit (UCCB), and your amounts will be slightly adjusted from these, as these figures are not including the calculations if you received UCCB in 2011. The amounts include CCTB, NCBS, and Ontario Child Benefit. 

These amounts are for people in Ontario.

Net family income of $100 000/yr will receive$21.59/month for 1 child,   $ 43.18 for 2 children.
Net family income of $ 80 000/yr will receive $54.92/month for 1 child,  $109.85 for 2 children.
Net family income of $ 60 000/yr will receive $88.26/month for 1 child,  $176.52 for 2 children.
Net family income of $ 50 000/yr will receive $104.92/month for 1 child, $209.85 for 2 children.
Net family income of $ 40 000/yr will receive $144.60/month for 1 child, $335.95 for 2 children.
Net family income of $ 30 000/yr will receive $271.27/month for 1 child, $594.27 for 2 children.
Net family income of  < $ 20 000/yr will receive $390.15/month for 1 child, $759.40 for 2 children.

To get an estimate of your own situation, go to the CRA calculators.


File Your Taxes!

You cannot receive this money unless you have filed your income tax return.  If you havn't filed for a few years and are eligible for these payments, you can go back up to 10 years and file and you will still receive the payments owed to you.

Overnight Summer Camp - You Can't Claim it All

I loved overnight summer camp as a kid.  It was the highlight of my year to go to camp for two weeks each summer. The camp I loved was pricey, in the Muskoka region of Ontario. I requested the "going to camp" experience each year instead of receiving birthday and Christmas gifts. (Ok, I still received some gifts, but smaller ones!)

My daughter started going to overnight camp last summer.  She also loves it!  But did you realize that you can't claim all of those overnight camp fees as childcare costs on your income taxes?

Camp IS childcare for our family during the summer, as it is for many others.  We use a combination of daycamps and a week of overnight camp.  All daycamp fees can be claimed, no matter the price, but there is a maximum on the amount you can claim for overnight camp.  This maximum amount is in need of being raised to a more realistic current amount.

The daycamp at the local university that my daughter looks forward to each year is approximately $200/week.  This can be claimed, no questions asked.  Even if it was $500/week it could be claimed, no questions asked.

However, for overnight camp for the 2011 tax year:

"The maximum you can claim for expenses that relate to a stay in a
boarding school (other than education costs) or an overnight camp
(including an overnight sports school) is $175 per week for a child
included on line 1 in Part B, $250 per week for a child included on
line 2, and $100 per week for a child included on line 3."

Line 1 equates to children 7 years and younger.
Line 2 equates to children under 17 who qualify for disability tax credit
Line 3 equates to children between 8 and 17 years old, or over 18 who qualify for disability tax credit.

For most "camp aged" children this means you can only claim $100 for the week of overnight camp, instead of the $200 that I pay for daycamp.

I decided to take a look back to see when this amount was last updated.

2001 (10 years ago).  Same amounts as 2011
1999 (12 years ago).  Same amount as 2011, with no disability option.
1998. (13 years ago)

"You can claim payments made to: individuals providing Child care services; day nursery schools and daycare centres; educational institutions for the part of the fees that relate to Child care services; day camps and day sports schools; and boarding schools, overnight sports schools, or camps where lodging is involved."

WAIT.  HOLD IT!!  What was that?? My parents could claim the full cost of overnight camp as a tax deduction for child care, but we can't?  UGH.

I get it, I do.  It's because the whole thing is lumped together as the upper class sending their kids to boarding school, and why should the upper class get a tax break for something that others can't afford.  I'm not disagreeing with that.

What I do think is that the rates need to updated.  That $100/week amount for children between 8 and 18 needs to be raised to $150 or $200/week.  There are absolutely no daycare providers in my area that would charge only $100 for full time daycare for one week, even for a school age child (infant and preschool spots typically charge more than school age to begin with). I've heard from friends that typical school age rates here (and I am NOT in a large city where rates can be much higher) are $30/day, or $150/week.

Will you join me in writing to your MP regarding raising the amount you can claim on your taxes for overnight camp to match what you would pay for daycare or daycamp?