Tax Time Observations
Hello All,
Given my immersion in tax season, and since this is at its core a financial newsletter (despite my occasional meanderings), I thought it might be useful to address some common questions and issues:
If you are married or in a common law relationship, you must reflect this status on your tax return. This does not change how you report your income and deductions/credits on your tax return as for the most part your tax return is separate from that of your partner. It does however impact some credits and benefits such as the GST credit, child benefits and who can claim childcare expenses. On the plus side, if your spouse does not earn income you can claim them as a dependent and you can combine donations and medical expenses and apply them to spouse where you will receive the maximum benefit.
If you purchased a home in 2022, make sure to claim the $10k first time home buyers credit, if eligible. If you bought the home with a spouse then you either can split it or one spouse can claim the full amount.
Evaluate your medical expenses for the year by looking looking at the list of allowable expenses to see what is eligible as it may cover more expenses than you think. Tax software will calculate the claim, if any, and optimize it with a spouse.
If you are self employed, claim expenses to which you are entitled and be mindful of expenses that are specifically not allowed.
Although you do not have to send in slips and receipts when you efile your tax return, keep them on hand in case of audit (for at least 7 years). With donations, make sure you are claiming the correct amount and that you have an official donation slip (and not just a receipt).
If you make a mistake on your tax return, wait for the notice of assessment as often CRA (or RQ) will correct the mistake. If they do not, you can file an amended return after you have received the notice.
If you sold your house, you must complete a tax form even though there is no capital gain or loss on the sale (assuming the property was used as your primary home and there wasn’t a rental component). If there was a portion of the house that you rented, you must calculate this and report a capital gain or loss on sale.
Gains or income earned in your TFSA and RRSP portfolios are not taxable and do not have to be reported on your tax return. However, activity on other investment portfolios do have to be reported including dividends, interest, foreign income and gains/losses on sales.
This is a smattering of questions I have received. If you aren’t sure about the tax treatment of something, the CRA website provides a lot of detailed information. Additionally, there often articles that specifically address grey areas which you can find with a well worded search query. Calling CRA with any doubts that you might have is also useful (just be prepared to wait).
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