April 19, 2018 It’s tax season 2018, and the CRA is hard at work processing slips. Tax laws are always changing and if you’re not fully informed about them, it can be easy to make mistakes that can either cost you avoidable additional headaches.
Do you need to file your taxes this year?
If you are a Canadian resident, the answer is yes. You are liable to pay income tax not just on any income earned in Canada, but on any world wide income. Be aware though that being a Canadian resident is not the same as being a Canadian citizen, and being a Canadian citizen doesn’t necessarily mean that you are a Canadian resident. A person’s status as a resident depends on several factors, including amount of time spent in Canada, whether the person has relatives in Canada, bank accounts, certain business and social ties, and other factors which are explained in greater detail here (https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html). Those that have recently become legal Canadian residents are still liable to report their income, but only on the part of the year in which they became residents.
Do non-residents have to file their taxes?
On certain circumstances, yes. If a person is not a Canadian resident and visits Canada for less than 183 days in a year, and were to work and earn income from a Canadian source, they are subject to pay income tax, though not necessarily need to file their taxes. They are only subject to taxation on any income earned from a Canadian source. Even if you are a Canadian citizen, if you spend more than 183 days a year abroad, you could lose your status as a resident for tax purposes.
Anyone who spends more than 183 days in Canada may be considered a Canadian resident, and be subject to not just income tax from Canadian sources, but also from worldwide income earned that year.
Among some of the most common kinds of income they need to reported are income earned from a Canadian job, income from a business transaction carried in Canada, taxable aspects of a scholarship, fellowship, research grant, or taxable capital gains on the sell of Canadian real estate.
What tax credits should be aware of if I live in Ontario?
Depending on your circumstances, you could qualify for several tax credits, and possibly even get some money back. The good news for student is that they have access to a number of them. If you have a government student loan, you could potentially claim any interest paid on it, and deduct it from your taxes. Moving from one city to another can get expensive, so you’ll be happy to know that it’s also possible to claim any moving expenses if you choose relocate at least 40 km closer to your school. If you have children, and you or your spouse or common law partner need to use the services of a child care center, you could deduct those expenses from your taxes. Finally, you could potentially deduct income taxes from any income generating job held during your school cycle.
For household expenses you can take advantage of the Ontario Trillium Benefit. It combines three tax credits: the Ontario Sales Tax Credit, the Ontario Energy and Property Tax Credit, and the Northern Ontario Energy Credit. For the Ontario Sales Tax Credit, you could get up to $301 for each member of your family living with you. For the Ontario Energy and Property Tax credit, you could get up to $1,043 for non-seniors and up to $1,187 for seniors in order to help with
sales and property taxes as well as with energy costs. If you live in Northern Ontario, specifically in Algoma, Cochrane, Kenora, Manitoulin, Nipissing, Parry Sound, Rainy River, Sudbury, Thunder Bay and Timiskaming, and you’re 18 years of age or older, you can take advantage of the Northern Ontario Energy Credit, which can cover up to $151 for single people and $232 for families in order to cover those even higher heating costs.
Seniors can also take advantage of the Ontario Seniors´ Public Transit Tax Credit to help with public transport costs, the Senior Homeowners’ Property Tax Grant which can grant up to $500 to cover property taxes, and the Guaranteed Annual Income System, in which if you receive a pension, you can get an additional $83 per month.
Parents can also use the Ontario Child Benefit, which can cover you with up to $117 a month per child under the age of 18.
Were there any big changes in tax law this year that I should be aware of?
If you’re a small business owner, you’ll be happy to know that the government lowered that small business tax to 10 percent this year, and we expect that it will go down to 9 percent in January 1st, 2019. Members of the Canadian Armed forces will also be happy to know that their military salaries will now be exempt from federal taxes, as a way to recognize their service and sacrifice.
Unfortunately, the Children’s Fitness and Arts Tax Credit will no longer be available this tax season, which means that parents and guardians won’t be able to claim tax credits from extra curricular activities such as art classes, musical instrument lessons, and sports. Also the federal education and textbook tax credits were eliminated as of January 2018. It does not however eliminate any unused education and textbook credits carried over from past years.
In conclusion, Ontario tax law is obviously a complex topic that is constantly changing. In order to stay on top of things and benefit as much as possible from it, and in order to keep up with your tax responsibilities, your best bet is to be well informed and connected with a qualified group of experts. We at Barakat Accounting Services will be happy to guide you through all the legalese and explain things in a plain and easy to understand way, and leave you with no questions.