Canadian 2018 Income Tax Season: Your Questions Answered

FILE YOUR NEXT INCOME TAX RETURN WITH CONFIDENCE

As we welcome another tax year I thought it would be fitting to get to know what’s new for the 2018 income tax season in Canada. The last thing any Canadian tax payer wants to find out is that an expense is no longer being offered as you prepare to file your income tax return.

This has happened to us but this year we took control and made sure we knew the answers that would affect our family and our income tax returns.

Expectations and reality are two different things with income tax in Canada which is why I did not hesitate to bring in the professionals to have your 2018 income tax questions answered. I was fortunate enough to have the opportunity to ask UFile resident tax expert Gerry Vittoratos your most important 2018 Income Tax questions.

Earlier this month I asked you, the fans of Canadian Budget Binder if you had any income tax questions you for Gerry so we could get answers to the most important questions YOU have. Below are your questions all answered by Gerry along with information from Canada Revenue.

Everyone ALWAYS asks this question, so here’s the answer.

When is my 2017 income tax return due?

Generally, your return for 2017 has to be filed on or before April 30, 2018.

If you do not file your return on time (see exception to the due date of your return), your goods and services tax/harmonized sales tax (including any related provincial credits), Canada child benefit payments (including related provincial or territorial payments), and old age security benefit payments may be delayed or stopped.

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, your return is considered on time if we receive it or it is postmarked on the next business day. For more information, see Important dates for Individuals.

If you are filing for a deceased person the due date may be different. For more information, see Guide T4011, Preparing Returns for Deceased Persons. Source: Government of Canada Website

But first, let’s get to the meat of this 2018 income tax question/answer session to find out what Gerry has to say to the questions you asked him.

Could you explain the WITB credit, and any increases for 2017 taxation year?

The Working Income Tax Benefit (WITB) credit is given to low-income workers or self-employed individuals as an incentive to continue working, and to help them with their finances.

The credit is refundable, which means that even if you have no federal tax to pay, you can still claim the credit as a refund.

The major increases to this credit will come in the 2019 tax year. The maximum amount of credit will be increased by over 2%, and the income ceiling – the income amount beyond which the credit is eliminated – will be increasing from $19,000 to over $24,000 for a single person, and from $29,000 to over $36,000 for a couple.

What are the new Income Tax Changes for 2018?

New: Canada Caregiver Amount

The Canada caregiver amount has replaced the family caregiver amount, the amount for infirm dependants age 18 or older (line 306), and the caregiver amount (line 315 on your CRA tax software).

If you are the caregiver of infirm dependents, you may be entitled to claim an amount of $2,150 in the calculation of certain credits, like eligible dependent and the spousal amount.

Depending on the income of your infirm dependent, you may also be entitled to claim an amount up to a maximum of $6,883.

New: Medical Expenses

If you’re trying to have a baby, new help has arrived for aspiring parents who can now claim pregnancy assistance expenses. Individuals who need medical intervention to conceive a child are eligible to claim the same expenses as individuals with medical infertility.

New: Disability Tax Credit Certification

New for this year, nurses have been added to the list of medical practitioners who can certify eligibility of a person for the Disability Tax Credit. The credit itself hasn’t changed, but these new changes will hopefully reduce wait times for those seeking certification.

New: Carbon Tax

On line 449 of your Standard Tax Forms the new climate incentive has been added. This is where you can claim for compensation for lack of carbon pricing in Ontario, New Brunswick, Saskatchewan and Manitoba. For more info-How to get money back for Carbon Pricing

What credits do most folks miss when filing their income tax?

One deduction many Canadians often miss is moving expenses. Not many people realize that the CRA allows you to deduct expenses you incurred to move closer to your new workplace or university.

Of course, there are conditions – the biggest being that the move allows you to be 40 KM closer to your new workplace or university. For many Canadians, the 40KM condition is not hard to meet if they move from a rural area to an urban area, or vice-versa.

You would also be surprised by what, according to the Income Tax Act, is considered an eligible medical expense. The list is exhaustive, and worth going through for certain taxpayers.

For example, sufferers of Celiac disease can claim, as a medical expense, the difference in price between gluten-free and regular food. Also, fees paid for services by medical practitioners, such as audiologist, dentist, medical doctor, medical practitioner, nurse, occupational therapist, optometrist, pharmacist, physiotherapist, psychologist, or speech-language pathologist are also eligible as a medical expense.

Missing out on the carry-forward amounts they have “banked” in their tax return, such as unused capital/business losses from prior years, unused tuition and donation amounts etc… All of these amounts that are unused can be used in future years against their tax payable.

Unfortunately, most taxpayers are not aware that they have these amounts in their files that can be used. There are two ways of finding out if you have these carry-forward amounts: on your notice of assessment, or by signing up to the My Account portal of the CRA.

Were any credits eliminated and why?

Eliminated: Federal Education and Textbook Amounts

The credit for post-secondary students’ education and textbooks has been eliminated in 2017. Instead of adding education and textbook expenses to your overall tuition amount, eligibility criteria for the tuition amount has been enhanced to include occupational skills training that isn’t at the post-secondary level. This is good news for people taking courses that haven’t traditionally qualified for credits.

Eliminated: Federal Children’s Fitness and Arts Amounts

These credits allowed you to claim fees paid for signing up your children under 15 to fitness and arts programs. The maximum claimable amounts were reduced in 2016 and have been completely eliminated for 2017.

Eliminated: Federal Public Transit Amount

If you take the bus, subway or streetcar, this is the final year to claim a public transit credit – but for part of the year only. You can claim your monthly bus and subway passes that were bought before June 30, 2017. Any fees paid as of July 1, 2017, are not eligible due to the phasing out of this credit.

What credits can home-based businesses apply for when completing an income tax refund?

These expenses are prorated based on the portion of the home you use for conducting your business. This portion must be used exclusively to earn business income; and on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business.

For those who set up shop at home, the CRA acknowledges “home office” expenses as a business deduction on your tax return. This means you can get tax credits for using part of your home as an office space.

Deductible expenses include real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs. Not all types of businesses can deduct all types of expenses, so take some time to understand the limits that apply to your business. Of course, your deductible home office expenses are limited to the space you’re using for business so you’ll need to determine the parts of your home you need to use to work.

What is the best way to declare income from a small online business earning under $10k a year?

There is no “best” way – you simply must declare it! You must declare the income as business income, however, the good news is, since it is considered as business income, you can deduct expenses off that income to lower the amount you will be taxed on.

What is the File My Return program and who is eligible?

For the 2018 tax‑filing season, the Canada Revenue Agency (CRA) is launching a new service for the 2018 tax‑filing season to help individuals with low or fixed income do their taxes. File my Return will be available for eligible individuals who have low income or a fixed income whose situations remain unchanged from year to year.

With the new File my Return service, eligible individuals will be able to file their income tax and benefit returns simply by giving some personal information and answering a series of short questions through an automated phone service.

How will you know if you’re eligible for File My Return? Individuals who are entitled to the service will receive an invitation letter, which will give them all the information they will need to use the automated service.

What is the best way to file an income tax return?

The best way is by electronically filing your tax return either yourself using Netfile with a consumer tax software such as UFile, or through EFile with a tax preparer. Mailing in your tax return increases substantially the processing time, which means more of a wait for your refund!

Is it easy to file an income tax return by yourself?

Most taxpayers have very simple returns with information that does not change drastically from one year to the next. For these taxpayers, they can easily produce their tax returns using a consumer software like UFile, which has a guided interview system to complete the return.

What happens if your spouse passes away?

All assets, such as pension plans, stocks or mutual funds, and real estate, held by the deceased individual are deemed to be disposed as of the day of death. If these assets are transferred to the widow, whether directly or through a spousal trust, they transfer tax-free.

However, if these assets, or portions of them, are transferred to anybody but the spouse (any trust other than a spousal trust, children), they will be considered taxable income on the final return of the deceased.

As far as the tax return is concerned, a final return must be produced for the deceased. There is a possibility of additional returns, such as a rights and things return, to produce depending on when the final income amounts of the deceased are received.

The widow(er) can still claim their deceased spouse as a dependent (spousal amount credit) in the year of death if the income is low enough.

Are there any new 2018 income tax credits for seniors?

There are several:

• Age Amount: This is a non-refundable tax credit based on the age of the taxpayer. Are you 65 or over? You get the credit! The amount of the credit can go up to $1,083 (15% of $7,225) depending on income.
• Pension income amount: Another non-refundable tax credit based on eligible pension income (RRSP, RRIF, RPP. CPP and OAS are not included) received by the taxpayer. The amount of the credit depends on the amount of eligible pension income, up to a ceiling of $2,000. The amount of the credit is $300 (15% of $2,000).
• Pension income splitting: This is not a credit, but rather a deduction for the spouse transferring eligible pension income to the other spouse. This deduction allows a higher income earner to split their eligible pension income with their lower earning spouse. The tax savings come from the fact that the lower earning spouse is in a lower tax bracket, therefore the income that is transferred is taxed at a lower rate.

What happens if you don’t file your income taxes?

If you owe money to the government, and you don’t file by the deadline of April 30^th, the government will impose penalties on the amount you owe. Missing the deadline means that you’ll be immediately charged 5% of the amount owing – plus 1% for every additional month you are late.

It’s important to remember that the amount owing is also due by the filing deadline. If the deadline passes, and you still owe money, you’ll have to pay interest not only on the amount owing, but also on any penalties you incur. For those taxpayers who owe money, it’s important to pay on time, every time.

Free UFILE Software and UFILE Discount Code

Along with answers above to the most asked 2018 income tax questions on CBB UFile has offered all fans a 15% discount on their software by using the code: UFILECBB15. PLUS, 2 lucky CBB readers will have the chance to WIN Free UFile codes so you can complete your 2017 income tax return free!

Discussion Question: How important is it to you that you get an income tax refund and what ways do you try to limit your refund by investing your money other ways?

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