We hope that this newsletter finds you & your family well as the holidays & beginning of a new year are fast approaching.
As we approach the close of another year, we would like to not only remind you of some things to consider prior to Dec 31, but also to update you on some of what the new year brings. For each of the topics below, we’ve listed the top points. If you would like more information about any of the topics, please call, email, or book a meeting.
Donations & Gifts – If you or your spouse or common-law partner made a gift of money or other property to certain institutions, you may be able to claim non-refundable tax credits on your income tax return. – Only registered Canadian charities or other qualified donation recipients can issue official donation receipts qualifying for charitable tax credits. You can’t claim a charitable tax credit or deduction without an official receipt, ask if there are circumstances where a receipt will not be issued. – You can claim 15% on the first $200 of your contributions and then 29% on the rest (up to 75% of your net income)- You can save all your donation receipts (up to 5 years) and claim them in a future year, provided you haven’t already claimed them, to receive a higher tax credit (or any of the next 10 years for a gift of ecologically sensitive land made after February10, 2014). – You must claim tax credits for gifts you carried forward from a previous year before you can claim tax credits in the current year. If you are claiming a carry forward, keep a record of the portion of the eligible amount you are claiming this year, and the amount you are carrying forward.- There are corresponding provincial credits which vary depending on the province- For a list of all qualified donees refer to the CRA’s website.
Where do Snowmen keep their money?
Claiming Medical Expenses – To claim eligible medical expenses, a valid receipt is required. For a complete list of allowable medical expense claims, please go to CRA’s website. Some medical expense deductibility varies based on your province of residence as of December 31st, not the date on which the service was performed.
New 2023 – Canada Dental Care Plan Eligibility: If you are over 70 years old, you may receive a letter by March 2024 with instructions on how to apply. : If you’re between 65 & 69, you can apply online beginning in May 2024.: Adults with a valid DTC & children under 18 can apply starting in June 2024. If you have more than 1eligible child, you can apply for them individually or all together. Program limits: Employers & plan administrators will issueT4 and T4a slips for employees & family members eligible to access dental insurance or coverage including health spending & wellness accounts.: Coverage for uninsured Canadians with adjusted family net income of less than $90,000.(This information is current as of December 20, 2023 and may be subject to change as CRA begins implementation)
In a snowbank!
First Home Savings Account (FHSA) – This is not the same as the First Time Home Buyers Program: An FHSA is a tax-free savings account designed to help future homeowners save for the purchase of a qualifying first home in Canada. It combines some of the advantages of both TFSA and RRSP accounts. Eligibility: At least 18 but not older than 71 on Dec 31of the year: A resident of Canada : A first-time home buyer, the definition is slightly different for this program. Program limits: FHSA participation room in the year that you open the account is $8,000 : Lifetime FHSA limit of $40,000: You can transfer directly between your RRSP and FHSA – conditions apply: As with other programs, there are consequences of overcontributing.: Contributions are tax deductible, transfers from your RRSP are not!
Registered Education Savings Plan (RESP)– A RESP is a tax deferred savings plan with a designated beneficiary, which allows you to put money aside for your children’s, grandchildren’s or other friend or relative’s post secondary education. The money deposited into the RESP account grows tax free, plus it is supplemented by government grants equal to between 20 % &40% of your annual contributions. Eligibility : A resident of Canada : Must have a valid social insurance number: Pursuing a post-secondary education at a vocational, CEGEP, or University: you have until the end of the 35th year after the RESP was first opened to use the funds (40 years with DTC) – conditions apply Program limits: No annual contribution limit, but a maximum lifetime limit of $50,000.: Some plans have minimum required contributions, make certain you read the fine print.: Family plans can have multiple beneficiaries, subject to government & plan rules. The withdrawal amount is potentially taxable in the students hands – depending on their tax situation. If you or your child has withdrawn funds from their RESP, they should receive a T4A slip for that withdrawal that needs to be reported on the students income taxes. The penally for not reporting that income is 20% of the withdrawal amount. In many cases the student has low income, as well as tuition credits, that reduce any tax liability. However, if the student is also working part time, or if their tuition is paid in a separate calendar year, a tax liability can be incurred.
Registered Disability Savings Plan (RDSP) – A registered disability savings plan (RDSP) is a long-term savings plan intended to help an individual who is approved to receive the disability tax credit (DTC) to save for their long-term financial security. Eligibility : To be eligible, you must meet all 4 of the following criteria: A resident of Canada : Must have a valid social insurance number: Must open RDSP before December 31st of the year you turn 59: Have a valid Disability tax certificate Program limits: No annual contribution limit, but a maximum lifetime limit of $200,000.: Unlike a RESP or TFSA, you can only be the beneficiary of one RDSP plan: Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59.: In addition, you must wait 10 years from the date of the government’s last contribution to make a withdrawal without penalty. In most cases, the government makes its last contribution before your turn 50, if you make your first withdrawal at 60, it will be penalty free
In Alberta, any money held in an RDSP & money taken out of an RDSP are fully exempt from determining eligibility for provincial disability benefits. Make certain to check with the beneficiary’s province of residence regarding the income inclusion, as not all provinces have the same rules. On the federal side, the Canada Child Tax Benefit, GST credit, OAS & EI programs are not affected by RDSP payments.
Registered Retirement Savings Plans (RRSP) – An RRSP is a retirement savings plan to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan. Eligibility : No minimum age requirement, the maximum age is 71: A resident of Canada : Must have a valid social insurance number: Must have employment income& file your income taxes: Account can be opened by you or a parent/guardian (if under 18)
Program limits : New 2023 The contribution rules for an RRSP are income dependent, effective January 1, 2024, the contribution limit is the lesser of $31,560 or 18% of your 2023 earned income.
: At age 71, you much close your RRSP account & use the funds to purchase an annuity, convert it to a RRIF or collapse it, withdrawing all funds from the account.: Tax penalties apply for withdrawals before you retire of 10 to 30% withholds by the plan administrator & remitted directly to CRA. (HBP plan exemption applies)
You & your spouse are eligible to withdraw up to $25,000 from each of your RRSPs to make a down payment on your first home, as part of the Home Buyers Plan (HBP). Making the annual government specified repayments over the allowed 15-year repayment program will keep the withdrawal tax-free. You are also allowed to borrow up to $20,000 over the course of your lifetime for the purpose of education & re training as part of the Lifelong Learning Plan (LLP). The annual maximum withdrawal amount is$10,000 & borrowed amounts must be repaid back into your RRSP within 10years. All other funds taken out of your RRSP are taxed as regular income in the year withdrawn.
Bursaries & Scholarships – Scholarships are awarded based on academic merits, such as achieving a certain grade point average. Bursaries are granted on the specific financial need criteria set by the grantor.- New 2023 – The taxability of scholarships, bursaries & grants is dependent partly on if you are a qualifying student. For the 2023 & 2024 school year, the government has increased the max student grant by 40% from pre-pandemic levels. Eligibility : The loan amount that a borrower can receive from $210 to $300 per week of study. As of April 1, 2023, no interest will be charged on Canada Student Loans & Canada Apprentice Loans.: The government has removed the credit screening requirement for mature student applicants, aged 22years or older, applying for the first time.: The maximum forgivable Canada Student Loans Loan for family doctors & nurses working in rural communities will increase by 50%, starting in 2023. The federal government is expanding the list of eligible professionals & updating the loan forgiveness to include all communities with populations of 30,000 or less.
What is Santa’s tax status?
Automobile Allowance ( Mileage) Rates- If you use a motor vehicle or a passenger vehicle for business and personal use, you can deduct only the part of the expenses that you paid to earn income. To support the amount you can deduct, keep a record of the total kilometers you drive and the kilometers you drive to earn income, as well as copies of all receipts.- New 2023– The mileage rates are: : $0.68 per kilometer for the first 5,000 kilometers driven : $0.62 per kilometer driven after that: Keep in mind, if you’re driving in the Northwest Territories, Yukon, and Nunavut, there is an additional $0.04 per kilometer allowed for travel.: There are additional rules & restrictions depending on the cost, type, &ownership of the vehicle.: Please remember that your commute from home to work does not constitute business mileage
If you would like further information about any of these, please give us a call, send an email or drop in to see us. We close for the holidays December 22nd at noon. and will be back in the office December 28th & 29th, then reopen for 2024 on January 3 at 8:30 am.
We want to wish each of you the very best of the season & for the coming new year. Cindy, Brenda, Bernadette, Meghan & The office dogs (Darby, Odie, Kona, Luna & Delta)