This is the time of year when my job gets particularly tricky. Everyone is getting ready to file their 2018 income tax returns, collecting those last recalcitrant T3 slips and T5013s. But that’s accounting for last year, not planning for the future.
At the same time, the governments’ recent Budgets introduced a series of small changes for the future, that can help low income earners and news readers, penalize executives of large companies, and reward folks who can donate important cultural property.
At our office, our days are currently being taken up by calls and emails from accountants who have misplaced the income tax slips and other reports that we so conscientiously sent to them in February and early March. The good news is that they’re too busy right now to read my article this week, so I can get away with saying things like that, on behalf of investment advisors everywhere. But…
Let’s focus on a few choice items from the recent federal Budget.
Guaranteed Income Supplement (GIS)
Old Age Security payments are made to people age 65 and over who have lived in Canada for at least 10 years since age 18. The GIS is a variable amount of extra income paid to people with incomes (other than OAS) below the threshold of $18,240. The maximum supplement is $898 per month, gradually reducing to zero at the $18,240 threshold income level.
An exception is made for employment income, and Budget 2019 increases the exemption from $3,500 per year to $5,000 per year, with a new 50% exemption on an additional $10,000 of employment income. It also now includes self-employment income in the exemption. These changes allow low income seniors to earn more income with less of a negative offset to their GIS payments.
CPP - enrolment in the Canada Pension Plan will now be automatic when people reach the age of 70. It turns out as many as 40,000 Canadians are currently missing out on benefits because they have not applied. This change is effective in 2020.
First-Time Home Buyers Plan - this allows people to withdraw money tax-free from their RRSP to help buy their first home. The Budget increased the withdrawal amount to $35,000 per person ($70,000 per couple), from the previous $25,000. If the money is paid back in equal instalments over 15 years, no taxes are assessed.
Canada Training Benefit - this will take time, but it allows people between 25 and 65, with incomes between $10,000 and $150,000, to accumulate $250 per year in credits that they can use toward tuition for future training courses.
Digital subscription fees to online news sources will qualify for a 15% credit on up to $500 of subscription costs, worth up to $75 in your pocket.
Donations of cultural property - you do not have to report a capital gain when you sell or donate certified Canadian cultural property to an institution or public authority designated by the Minister of Canadian Heritage. New in this budget is the removal of the requirement for an item to be of “national importance”, since this term was thrown into question by a recent court case.
Your 2018 income tax return
As a final reminder, don’t leave your tax filing to the last minute. That increases both your stress level and the likelihood of an audit.
Having said that, the fact that tax returns are now filed electronically without the attachment of all your receipts for things like donations and medical expenses means that you can expect CRA to routinely ask for some of these receipts to be submitted.
Don’t be concerned about that or let such an inquiry interrupt your enjoyment of spring. It’s just the new routine.
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIMis recipient of the Fellow ofFPSCTM Distinction, and repeatedly named a Top 50 Financial Advisor in Canada. He is a Portfolio Manager and Senior Vice President with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.