Take Transit & Get a Deduction on Your Income Taxes

This past summer, I increased my 11 year old daughters independence.  She attended a local daycamp at which my husband dropped her off in the morning, but then I had her independently take the city bus home from camp.  I got home from work around the same time that she got home from camp on the city bus.  She has taken the bus with me many times, and knows how the bus system works and knew the bus route ahead of time.  No transfers, just a direct route. 

She LOVED it.  She loved having the independence of doing it on her own.

In order to do this without having to find the correct amount of change every morning, I bought her a monthly bus pass for the month of July.  I had hoped that I would have time to teach her how to get to the library as well, but unfortunately I didn't have have a chance to teach her this route.

As a result of buying the bus pass, I can now claim that expense as a deduction on my taxes this year.

Does anyone in your household take the bus, train or ferry to work or school on a regular basis?

You can claim a deduction on your income tax for Public Transit Amount (line 364 on your income tax return) if you have any of :

1) a monthly pass
2) a series of shorter passes that show that you took public transportation for at least 20 days in any 28 day period
3) an electronic payment card (like Presto) used for at least 32 one way trips in any 31 day period

The passes can be for yourself, spouse or kids under 19 years of age.

Does your teen buy passes to get to their part time job? Do you take the GO Train to work?  Remember to keep your receipts to claim this fabulous deduction!

Crowdfunding: Canadian tax implications

Crowdfunding has become extremely popular over the last number of years.  Let the public know what you want to do, and if they believe in your project, they will contribute amounts that although small from one person, overall add up to significant amounts of money.

Crowdfunding has allowed many individuals and small companies to raise capital money for projects that they were unable to get loans or other financing deals for.

Unfortunately, the overall perception of crowdfunding money has been that it is "free" money to simply put towards the outlined project.

Canada Revenue Agency put out an interpretation bulletin this week stating that money that comes from crowdfunding is considered income, and therefore is taxable.

If crowdfunding is in your future, keep this in mind, and consult your local tax preparer or accountant to look at how this will financially affect your future project.

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?

Canada Learning Bond - Are Your Children Eligible?

I wrote about The Canada Learning Bond once before, back in 2008.  It was pretty new back then, having started in 2006. In 2006, only 4.7% of those eligible applied for this FREE money for their children's RESP.  By 2008, it had increased slightly, to 16.3%, and by 2011 had increased to 24.4%. 

You can see the totals of the participation rates broken down by province here.

At less than 25% of those eligible participating in the program, the program is still highly unknown.

I think post secondary education is important, so as a tax preparer, this year I am going to try to emphasize this program to my clients who are eligible for it.

Directly from the HRSDC website, the Canada Learning Bond is:

Introduced in 2005, the Canada Learning Bond (CLB) targets low-income families and provides them with a financial incentive to save. Upon applying, the CLB is given to all children who have an RESP account and are eligible to receive the National Child Benefit Supplement (NCBS) in addition to the Canada Child Tax Benefit, commonly known as “family allowance.” The CLB does not require any contributions from parents and is deposited directly into the child’s RESP. Specifically, the Government of Canada provides an initial CLB of $500 to children born after December 31, 2003 plus an additional $100 per year until age 15 and up to a maximum of $2,000.

So...if you receive the National Child Benefit Supplement, your children are eligible for this! Head to your local bank and ask to open an RESP for your children and have them apply for the Canada Learning Bond for you.  The first year you do so, each child will receive $500, and each year after that you still qualify they will receive another $100.

Tell me:  Have you done this already? Are you planning to?  How can you go wrong!?