Personal Income Tax Alice Yi XU November 2010

Outline Basic INFO why/when/what/who/how Tax Calculation Formula Income Deduction/credits Things you may want to know Tips to pay less tax/get more refund RRSP and RESP About your kid(s)

Why file the tax return? Get refund $$$$! Get GST/HST Government benefits Keep good tax-record Official documents -Notice of Assessment Examples  2005 November $400 Alberta Resource Rebate Cheque  2008 February $100 for 2006 and $100 for 2007 BC Climate Action Dividend Payment  2010 June $300 for single $1000 for family Ontario HST Rebate

When to file? Once a year Deadline April 30 th if you owe money June 15 th if you are self-employed Regular jobSelf-employed File jointly Deadline: June 15 th What if I ’ m LATE? CRA charges 1.5% per month of interest!

Who can to file? /Who must file? Canadian residents Citizens and PRs who live in Canada Students and workers who stay in Canada Dual-residents, deemed residents, etc. When you get letter request from CRA When you owe money to CRA When you want to apply for refund/tax benefit, etc.

How to file? Paper file Online – CRA website Efile Software $10-40/year Tax professional/Accountant $ TELE-File

What documents? All slips that have a “ T ” T4,T4E, T4A, T3, T5, T2202, etc. RRSPs Miscellaneous TTC/GoTrain Pass UCCB RC62 Medical bills/ Prescription Drugs Receipts for donation/gift, home renovation, children fitness classes, student loans, child care, union dues, moving expenses, security options, etc.

Calculation Total Income deductions Net Income deductions Taxable Income Bracket20~40% Tax you should PAY Credit you earn Tax you paid Extra Tax you should PAY you get refund

Income What is NOT income? Gifts/inheritance Lottery/gambling winnings Accident victim compensation Strike pay CCTB (not UCCB) Principle home capital gain Working income tax benefit GST/HST/Tax refund Salary paid by international organizations (UN) Income of Reserved First Nations RCMP pension and certain civil/military pensions What is income? Employment income Commissions Self-employ earnings Tips Capital gains Rental income Dividends OAS/Pension/RRSP UCCB Interest and more …

Calculation Total Income deductions Net Income deductions Taxable Income Bracket20~40% Tax you should PAY Credit you earn Tax you paid Extra Tax you should PAY you get refund

Deductions RPP and RRSP Union dues and professional dues Child care expense Moving expense Carrying charges and interest expense

Calculation Total Income deductions Net Income deductions Taxable Income Bracket20~40% Tax you should PAY Credit you earn Tax you paid Extra Tax you should PAY you get refund

Tax Bracket (2009) Federal Tax 15% < $40,726 22% $40,726-$81,452 26% $81,452-$126,264 29% >$126,264 Ontario Tax 6.05% <$36, % $36,848-$73, % >$73,698 $30K Tax: 4,497*2=$8,994 $60K $0 Tax: $11,517

Calculation Total Income deductions Net Income deductions Taxable Income Bracket20~40% Tax you should PAY Credit you earn Tax you paid Extra Tax you should PAY you get refund

Credits Basic amount $10,320 Spousal amount $10,320-NI Employment amount $1,044 CPP/EI $2,850 Child amount $2,089per child Child fitness <$500 Tuition Age amount $6,408 Caregiver $4195 Medical expense -3%Net Income, <$2,011 Disability $7,196 1 st time home buyer $5,000 Home renovation $ Donation 1 st $300 *15% ($$$-300) *29% Public transit Interest on student loans Transfer credit from spouse Transfer tuition from child $5,000

Calculation Total Income deductions Net Income deductions Taxable Income Bracket20~40% Tax you should PAY Credit you earn Tax you paid Extra Tax you should PAY you get refund

RRSP vs RESP Registered Retirement Savings Plan (RRSP) Reduce your current year tax, must pay tax when you cash out Different investments: cash/bond/mutual funds/GIC Have a limitation of maximum amount 18% of your income Use your room to buy for you/your spouse Registered Education Savings Plan (RESP) No relation to your tax return Family plan/specific plan You can buy up to $4000/year, $50000 lifetime Government match 20% of your contribution, up to $500 per year, and $7200 lifetime, additional match for lower income family.

About your kid(s) Canada Child Tax Benefit (CCTB) NOT taxable Related to family net income (0-$280) Universal Child Care Benefit (UCCB) Taxable $100/month/child up to age-6 Child care expenses Lower income spouse claim, unless he/she is in school/hospital/jail/separated Limited to certain amount (T778) Child fitness classes Up to $500/year/child Attribution rule (18 years old)

Tips to get more refund $$$ From January 1 st, save all your tax-related slips in an envelope (Self-employed, save all your receipts based on T2125) TFSA Take advantage of spouse transferral Claim your deduction in a smart way Donations/interest on student loans – 5years Medical expenses- 1year Mutual fund-capital gain/loss realize or not Avoid owing CRA/Pay installment when necessary

Questions??? CRA personal CRA business CRA GST/HST CRA CCTB&UCCB