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Personal Income Tax

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?. Examples

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Personal Income Tax

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  1. Personal Income Tax Alice Yi XU November 2010

  2. 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)

  3. Why file the tax return? 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 • Get refund $$$$! • Get GST/HST • Government benefits • Keep good tax-record • Official documents -Notice of Assessment

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

  5. 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.

  6. How to file? • Paper file • Online –CRA website • Efile • Software $10-40/year • Tax professional/Accountant $30-200+ • TELE-File

  7. 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.

  8. 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 Calculation

  9. Income • What is income? • Employment income • Commissions • Self-employ earnings • Tips • Capital gains • Rental income • Dividends • OAS/Pension/RRSP • UCCB • Interest • and more… • 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

  10. 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 Calculation

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

  12. 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 Calculation

  13. 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% <$36,848 • 9.15% $36,848-$73,698 • 11.16% >$73,698 $30K $30K Tax: 4,497*2=$8,994 $60K $0 Tax: $11,517

  14. 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 Calculation

  15. Credits Age amount $6,408 Caregiver $4195 Medical expense -3%Net Income, <$2,011 Disability $7,196 Public transit Interest on student loans Transfer credit from spouse Transfer tuition from child $5,000 • 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 1st time home buyer $5,000 Home renovation $1000-10000 Donation 1st $300 *15% ($$$-300) *29%

  16. 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 Calculation

  17. 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.

  18. 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)

  19. Tips to get more refund $$$ • From January 1st, 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

  20. Questions??? CRA personal 1800-959-8281 CRA business 1800-959-5525 CRA GST/HST 1800-959-1953 CRA CCTB&UCCB 1800-387-1193

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