1. Taxable Income and Tax Payable Individuals

2. Three Income Computations
Division B- net income for tax purposes .subsection 3(1)
Division C- taxable income Sections
Division E- tax liability Sections

3. Division C Order of Div C deductions Sec 110.110.2,111,110.6 and 110.7
Sec 110- employee stock options, charitable donations of employee stock option shares. Shares received under a deferred profit sharing plan, home relocation loans, workers compensation, social assistance, treaty and international organization exemptions and vows of perpetual poverty.

4. Employee Stock Options
Sec 110(1)(d) allow for you to deduct ½ of the benefit included in income.
110(1)(d) applies to all shares.
For the deduction to apply ,three conditions must be met.
1)the shares are qualifying shares(common shares).
2)the option price was not discounted from the FMV of the shares at the time the option was granted.
The taxpayer is at arm’s length with the corporation.
TAXABLR BENEFIT DIFFERENCE BETWEEN THE OPTION PRICE PAID AND THE FMV OF THE SHARES FROM EXERCISING THE STOCK OPTION.

5. Employee Stock Options Cont
110(1)(d.1) applies only to shares of a CCPC.
The shares must have held for at least two years(unless taxpayer has died).
If you qualify for both deductions only one may be claimed.
110(1)(d.3) provides a deduction of half of any benefit relating to shares received on the withdrawal from a DPSP.
If a taxpayer donates securities acquired under a stock option to a charity within 30 days after acquisition ¼ of the taxable benefit amount may be deducted.
SEE EXAMPLE

6. Home Relocation Loans to Employees
248(1) definition.
A loan received by an individual, or the individual's spouse or common law partner where.
The employee has commenced employment at a new work location in Canada and because of that has moved to a new residence which is at least 40 km closer to the new work location.
The loan was used to acquire a dwelling for the taxpayer’s habitation.
80.4 taxable benefit from low interest loans.

7. Home Relocation Loans to Employees Cont
110(1)(j) a deduction is allowed based on the interest benefit included in income on the first $25,000 borrowed and applies for a 5 year period.
Lesser of.
Benefit x prescribed rate at the time.
$25,000 x prescribed rate at the time.
SEE EXAMPLE

8. Other Deductions Line 250. Workers compensation. Social assistance.
Income from prescribed international organization.( Un).
Federal supplements.
A person who is a member of a religious order who has taken a vow of perpetual poverty can deduct all of their earned income and any superannuating or pension benefits that have been paid to their religious order.

9. Losses and Loss carryovers
Sec 111
Non capital losses
Farm losses
Allowable capital losses

10. Non-capital Losses
Losses from office or employment, business and property.
Allowable business investment losses.
Can be deducted against other income to the extent that a negative balance does not exist.
Current year losses are not discretionary.
Carry back 3 years and forward 20 years.
Loss carryovers are permissive, only need to claim enough of loss to bring tax payable to zero.

11. Farming Losses
Regular farm losses may be used against income in the current year or carried back 3 years and forward 20 years.
Taxpayers whose chief source of income is not farming but still have a reasonable expectation of profit are restricted under subsection 31(1).
Restricted farm loss is the lesser of.
The actual loss and.
$2,500 plus half of the next $30,000 of losses for a year to a maximum $17,500.

12. Farming Cont
Farm losses in excess of $32,500 become restricted farm losses and may not be utilized during the year.
Restricted farm losses have a carry back period of 3 years and a carry forward of 20 years.
Deductible against farm income only.

13. Hobby Farm No reasonable expectation of profit.
Losses are considered to be a personal or living expense and not deductible.

14. Allowable Capital Losses
The disposition of capital property for an amount that is less than cost.
Must be applied against taxable capital gains in the year under 3(b).
Any portion remaining converts to a net capital loss which can be carried back 3 years and forward forever to be applied against taxable capital gains only.
Net capital losses exclude listed personal property and personal use property.

15. Proper Loss Utilization
Order of deductibility on loss carryovers is important to consider.
Loss carryover from prior years of different types of loses are not required to be applied in any specific order.
Paragraph 111(3)(b) requires that the earliest loss of each type be used first.
Use losses up that are going to expire first.
Taxable capital gains occur less frequently.

16. Capital Gains Deduction
$800,000 deduction on shares of a CCPC.
$800,000 deduction on qualified farm property.
Real property, used in a farming business in Canada by either the taxpayer, spouse or common law partner, a child or a parent, a corporation which is a family farm corporation or a family farm partnership.
Share capital in a family farm partnership.
Eligible capital property used in a farming business in Canada.

17. Calculating the CGD
Three amounts determine if any CGD is available in the taxation year.
Annual gains limit.
Cumulative gains limit.
Cumulative net investment loss.

18. Annual Gains Limit Lesser of
Gains from dispositions of capital property minus allowable capital losses in excess of ABIL.S and
The amount that would be determined for (a) if the only gains and losses were from QFP and QSBC shares
Minus net capital losses( of other years ) claimed
Minus allowable business investment losses
See example

19. The Cumulative Gains Limit
Sum of all taxable capital gains eligible for the CGD after 1984.
Minus net capital losses utilized after 1984.
Minus allowable business investment losses claimed after 1984.
Minus all CGDs claimed after 1984.
Minus cumulative net investment losses accumulated after 1987.

20. Cumulative Net Investment Loss
CNIL compensates for the inequity of being able to shelter capital gains while also allowing non-capital losses realized on the underlying property.
This adjustment reduces the CGD down by any losses or investment expenses claimed.
Look for rental property disposed of before 1994 were losses were claimed and $100,000 exemption used.
If investment expenses exceed the taxable capital gain no CGD is allowed.

21. CNIL Cont
The CNIL account balance is cumulative investment expenses minus cumulative investment income calculated at the end of each taxation year after 1987.
Investment expenses include- interest, investment counseling fees, rental losses, capital losses of other years applied to capital gains ineligible for the CGD.
Investment income include- interest, dividend income, rental income and taxable capital gains ineligible for the CGD.
See example

22. Northern Residence Deduction
Must live in a remote area designated as one of the prescribed zones.
Intermediate zone.
Remote zone.
Live there for more than 6 consecutive months either beginning or ending in the year.
Form T2222.
8.25 day in zone A
4.125 day in zone B

23. Taxes Payable Federal tax rates Up to $43,953 15.00%
Over $136, %

24. Non Refundable Tax Credits
Credits have the same value to all taxpayers
15.00% x all your non refundable tax credits
Not a deduction but a tax credit
Not used up they are lost
Maximize these credits for tax planning
Specific order in calculating non refundable tax credits

25. Ordering Provision
118(1)- married, equivalent-to-married,child,single,dependant,and caregiver tax credits
118(2)-age credit
118.7 –Employment Insurance and CPP plan credits
118(3)- pension credit
118(10)- Canada employment credit
adoption expense credit
public transit passes credit

26. Cont 118.03-childrens fitness tax credit
mental or physical impairment credit
unused tuition,education,and textbook credits carry forward
118.5-tuition fee credit
118.6-education credit
118.9-transfer of unused tuition fee,education,and textbook credits
118.8-transfer of unused spouses' credits
medical expense credit

27. cont 118.1- charitable gifts credit
credit for interest on student loans
121 –dividend tax credit

28. Personal and Dependent Credits
Basic tax credit of $11,138 at 15% = $1,671
Spousal amount is 15% of $11,138
Income in excess of $11,138 no credit allowed. Reduced dollar for dollar up to 11,138.

29. Personal and Dependent Credits
Must be in a conjugal relationship throughout the 12 month period.
Supports his or her spouse.

30. Personal and Dependent Credits
The individuals are not living separate and apart do to marriage breakdown.
When a person is married or residing with a common-law partner at December 31, it is the income of the spouse or common law partner for the year, and not just the income while married/residing, which effects the tax credit base amount.
When the spouse/partners are not residing with each other at December 31 because of marriage breakdown, only the income for the period of the year before the marriage breakdown is taken into account in the calculation.

31. Personal and Dependent Credits
An individual cannot claim a spouse or common-law partner tax credit for more than one spouse ,
Nor claim the eligible dependant amount in the same year

32. Child amount
$2255 x 15% or $338. for each child under the age of 18 at the end of the year.
$4313x15% for those you are claiming the family care giver amount for
Where the child resides together with the child’s parents throughout the year, either of those parents may claim the credit. In other cases, the credit is claimable in respect of a child by the parent who is eligible to claim the wholly dependent person credit for the year in respect of a child(or who would be eligible if that child were the parents only child)

33. Eligible Dependant Amount
Available to a individual who is single, separated or divorced, or not in a common-law relationship at any time in the year and during that time supports a qualified dependant.
The taxpayer must either alone or jointly with one or more other persons, maintain a self-contained domestic establishment which they reside, and support a person who is.
1 resident in Canada(except in the case of a child).
2 wholly dependant on the taxpayer for support.

34. Eligible Dependant Amount
3 related to the taxpayer, and.
A) under 18.
B)over 18 and dependant because of a mental or physical infirmity.
C) the taxpayer’s parent or grandparent.
Calculated on the same basis as spousal amount.
Taxpayer may not claim both spousal and dependant amount.
Cannot be claimed by other supporting person.

35. Infirm Dependant 18 or Older
Credit of 4, x 15%= $988 reduced dollar for dollar by the dependants income between $6,589 and $13,196
A dependant for the purpose of this credit is defined as your or your spouse/common law partner’s child or grandchild, or your/ your spouse’s parent,grandparent,brother,sister,aunt,uncle,niece or nephew, resident in Canada.
Cannot be a dependant of anyone else for the eligible dependent tax credit.
Family care giver mount of 2058

36. Caregiver Credit
Credit of 4530 x 15%= $680 reduced dollar for dollar on income between $15,472 and 20,002
Claimed for a person who is.
18 years of age or over in the year.
The taxpayer’s child or grandchild, or resident in Canada and is the parent,grandparent,brother sister, aunt, uncle, nephew or niece of the taxpayer or spouse.
In the case of a parent or grandparent, is 65 years of age or older, or in all other cases dependent on the taxpayer because of a physical or mental infirmity.
CAANOT BE CLAIMED IF THE ELIGIBLE DEPENDANT TAX CREDIT OR INFIRM TAX CREDIT HAS Been CLAIMED. CAM BE SPLIT AS LONG AS YOU DO NOT EXCEED THE MAXIMUM x 15 PERCENT.

37. Other Credits
Age credit 65 or over allowed 15% of 6916 or $1037. Reduced by 15% of income between $34,873 and $80,980.
CPP and EI premiums paid in the year up to the maximum limits. $ and $913.68
Pension income tax credit of 15% on pension income other than from CPP/OAS or GIS. Maximum amount is $2,000.
If 65 or older pension income includes superannuation,RRSP or DPSP,RRIF payments and general annuities.
If not 65 pension income includes only annuities from superannuation, or any other mentioned payments received due to the death of a spouse.

38. Other Credits Employment credit is 15% of the lesser of
Employment income or $1,127
Adoption expense tax credit
Lesser of expenses incurred during the adoption period or $15,000 15%
Child fitness tax credit
Amount paid in the year for a child under the age of 16 at any time in the year for programs of prescribed physical activity.
Max $ per eligible child

39. Credit for Mental or Physical Impairment
Disability tax credit is 15% of $7,766
A supplement amount of $4,530 for 2014 is available for each disabled child under the age of 18 at the end of the year. This is reduced down by the total of child care and attendant care expenses, paid in the year and deducted over $2,654. To qualify these conditions must be met.
1) severe and prolonged mental or physical impairment.
1011

40. Credit for Mental or Physical Impairment
2 )the effects of the impairment are such that the ability to perform a basic activity of daily living is markedly restricted.
3) the impairment has been certified by a doctor.
4)form T2201 disability tax credit is filed with CRA.

41. Credit for Mental or Physical Impairment
5) no amount for remuneration of an attendant or care in a nursing home has been claimed as a medical expense.(Except under the$10,000 maximum provision).
Prolonged impairment is one that is reasonably expected to last for a continuous period of at least 12 months.
Where a individual who qualifies for the disability tax credit does not have enough income to utilize the tax credit, it may be transferred (see 118.3(2) for transfer restrictions).

42. Tuition Credit
Available for taxpayer enrolled in post secondary institution.
15% of tuition paid and must exceed $100.
Based on tuition paid in the calendar year.
Out of Canada tuition fees qualify for the credit if the school is a university and the course is at least 13 weeks long and leads to degree.

43. Education Tax Credit Available for both full and part time attendance.
$400 for each month of full time attendance.
$120 for each part time attendance.
Form T22O2 is the form used and filled out by the educational institution indicating the number of qualifying months.
Maximum of $5,000 can be transferred to a parent ,spouse or grandparent.

44. Textbook Credit
For 2006 and on individuals who qualify for the education tax credit will be entitled to claim a textbook tax credit for the year equal to 15% of the following.
$65 for each month of full time attendance.
$20 for each month of part-time attendance.
Can be carried forward to future years or transferred to parents, grandparents, spouses or common-law partners.

45. Medical Expenses
Tax credit for medical expenses in excess of the lesser of $2,171 or 3% of net income.
Include payments to medical doctors, dentists and other health practitioners.
Payments for prescription drugs eyeglasses, health care premiums.

46. Donations
Donations made to a registered charity or the crown are eligible for a 15% tax credit on the first $200 of donations and 29% on any amount over $200.
Any donations not claimed in the year can be carried forward for up to 5 years.
Maximum donations that are eligible for the tax credit is set at 75% of the taxpayers net income.
100% in year of death.

47. Donations First time Donor’s Super Credit(FDSC)
Starting in the 2013 taxation year, the budget proposes to introduce a temporary non-refundable FDSC that will supplement the CDTC for individuals. This new credit effectively adds 25% to the rates used in the calculation of the CDTC for up to $1,000 of monetary donations. As a result, a first-time donor will be allowed a 40% federal credit for donations of $200 or less, and a 54% federal credit for the portion of donations over $200 but not exceeding $1,000.

48. Donations
For the 2013 taxation year, an individual will be considered a first-time donor if neither the individual nor the individual’s spouse or common-law partner has claimed the CDTC in any of the five preceding tax years. The new credit can be claimed once from the 2013 to 2018 taxation years

49. Political Donations
Contributions made to registered political parties and to candidates in a federal election qualify for a tax credit of 75% of the first $400, 50% of the next $350 and 331/3% of any additional amount.
Maximum tax credit is $650.