FINA200_L4_ReadingUpdates

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Concordia University *

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200

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Finance

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Jun 12, 2024

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pdf

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Uploaded by ProfessorFlamingo4335

1 © May not be copied or duplicated without the permission of the owner. FINA 200 Personal Finance Lesson 04: Using Tax Concepts for Planning Chapter 4 Textbook Updates by Nadine Parla and Penny Ellison Textbook Update Section: Background on Taxes Topic: Taxes Paid on Earned Income PDF version Page 80 Instalment Taxes Individuals who are self-employed or who earn taxable income for which no taxes are withheld and remitted (e.g. Canadian dividends) will likely be required to pay quarterly tax instalments. Based on the T1 General Income Tax and Benefit Return filed by April 30 th for the prior income tax year, the CRA will calculate and advise the taxpayer of the quarterly tax instalments (due September and December of the current year), with the latter two instalments made in the upcoming tax year (March and June) based on the return of the current year. Should the taxpayer feel the required instalments are too high, he/she can estimate the level of instalment taxes for the current year based on the taxable income of the prior calendar year or the current year. Continuing the example above, the taxpayer could estimate 2021 instalment taxes based on either 2020 or 2021 taxable income. Textbook Update Section: Background on Taxes Topic: Taxes Paid on Capital Assets PDF version Page 81 Capital Assets A capital asset has a useful life greater than a year. A capital asset does not necessarily generate income. For example, a plot of land is a capital asset, but its ownership will not necessarily generate any income. The disposition of a capital asset may result in a capital gain (if sold at a higher price) or a capital loss (if sold at a lower price). Dispositions include sales, gifts or transfers. In the case of an inheritance, it is the deceased who has disposed or transferred the asset to the beneficiary and therefore the deceased who is liable for any capital gains tax due. ©

2 © May not be copied or duplicated without the permission of the owner. Textbook Update Section: Do You Have to File a Return? Topic: Do You Have to File a Return? PDF version Page 82 Note that if you are self-employed you will have to contribute to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and therefore must file a return. Note also that the education and textbook amounts are no longer available as non- refundable tax credits, but the carry forward of amounts from prior years when these were eligible tax credits is still possible. Textbook Update Section: Step 3: Calculate Net Income Topic: Step 3: Calculate Net Income PDF version Page 90 Moving Expense Deduction Students who move 40 km or more to attend post-secondary education on a full-time basis can deduct moving expenses against taxable employment income earned in the new location, or any scholarship or award income that is taxable. Moving expenses incurred moving back home can be deducted against taxable income earned there. Textbook Update Section: Step 3: Calculate Net Income Topic: Step 3: Calculate Net Income PDF version Page 90 Deduction for CPP or QPP Enhanced Contributions on Employment Income As of January 1, 2019, Canadians started to contribute more to the Canada Pension Plan (CPP). This change, known as the CPP enhancement, was designed to help increase retirement income for working Canadians and their families. Increases in the contribution rate will continue until 2023 (or 2024 if your income exceeds an earnings ceiling). Once mature, the CPP enhancement will increase the maximum CPP retirement pension by about 50%. It will also increase the survivor and disability pensions. Similar enhancements were made to the Quebec Pension Plan (QPP).

3 © May not be copied or duplicated without the permission of the owner. Starting simultaneously in 2019, you can claim a deduction for the enhanced contributions on CPP and QPP pensionable earnings you contributed through your employment income (line 22215 on the T1 General Return). Textbook Update Section: Tax Credits Topic: Tax Credits PDF version Page 92 The tax rate applicable to the federal tax bracket “Over $150,473 up to $214,368” should be 29% and not 29.22%. The Tax Amount of $1,146 in Exhibit 4.6 relates to the Age Amount. It is not on the correct line. Textbook Update Section: Tax Credits Topic: Age Amount PDF version Page 93 Example In the Example, please note that the clawback applicable to the Age Amount is based on net income, not taxable income. Textbook Update Section: Tax Credits Topic: Transferable Tax Credits PDF version Page 95 Tax Credits Eligible for Carry Forward Please note that eligible medical amounts can only be carried forward to the upcoming taxation year as long as all expenses claimed in that upcoming year fall within a 12- month period. For example, if you incur a $5,000 medical expense in November 2019, but do not wish to claim it on your 2019 income tax return, you can carry it forward to your 2020 return by claiming all eligible medical expenses from November 2019 to October 2020 on your 2020 income tax return, assuming such expenses have not been claimed in the past.

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