Various deductions and credits can help to reduce the amount of taxes payable to the Canada Revenue Agency (CRA) each year. Please take a few moments to review the following items, to ensure you do not miss out on any eligible expenses for you and your household. Please feel free to contact your Kemp Harvey Group office if you have any questions or concerns about whether you would qualify for any of these deductions and credits.
Yes, it is that time of year again – time to file your personal income tax returns. Before you bring your personal income tax information to your local Kemp Harvey Group office, we encourage you to work through the following checklist. This list will help to ensure you have all of the slips needed in order to complete your return.
There are few changes to personal income taxes in 2018. Most personal tax rates remained the same in 2018 as compared to 2017.
There was a change in the provincial tax rate on income over $150,000, which has been increased by 2.1% for ordinary income over that threshold. There has also been an increase in the amount of tax paid on ineligible dividends.
If you are in the highest tax bracket in 2018, which starts at $205,842, the tax rate on salary and interest earned above that threshold has increased to 49.8%. The tax rate on ineligible dividends has increased to 43.73% in the highest bracket.
In terms of documents you need to bring in to your Kemp Harvey Group office, the biggest change will be the documents you no longer need to provide. All fitness and arts tax credits have been eliminated, so you do not need to supply us with any receipts for those expenditures.
Similarly, public transit passes are no longer deductible, so we do not need copies of those receipts either.
Income splitting rules, which were announced in 2017, are now a factor to be considered when preparing your 2018 personal income tax return.
If you or a member of your family has received income from a related private company, partner-ship, or trust in the year, you may be subject to the new rules. If we have not worked on these related entities, or are unclear on their structure, we may need to discuss this income with you in greater detail.
These changes to income splitting do not affect the availability of pension splitting. This valuable deduction is still available in 2018 and for the foreseeable future.
Professionals such as a doctors, lawyers, accountants, dentists, and chiropractors must now report their work in process at the end of their fiscal year.
You will need to provide an analysis with your records indicating the total work in process of your business. If you are unsure of how to calculate your work in process, your Kemp Harvey Group office can help you determine the calculation.
The rate was reduced to 5% in the early days of the financial crisis, and has remained there for 9 years. Effective April, 2018, the rate climbed to 6%.
Every three months the rate will be evaluated to determine if it will be changed. The next potential change to the interest rate would be April, 2019.
The determination of the rate is based on the average interest rate on Government of Canada 90-day Treasury Bills for the first month in the previous quarter.
At the end of October, the rate on those Treasury bills was 1.73%, up from 1.19% in January, 2018. CRA starts with that rate, rounds it down, and then adds 5% to it. The net result is the current interest rate of 6%.
If the average rate increases to over 2.00% in January, 2019, the interest rate charged by the CRA will rise to 7% starting in April, 2019.
Current interest rates on tax refunds have also increased. Corporate taxpayers will receive refund interest at 2%, whereas non-corporate taxpayers will receive 4% interest.