afm 202 tax tutorial slides week 3_2014_final.pptx
TRANSCRIPT
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AFM 202 Tax TutorialSept. 26, 2014
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In this tutorial
• Taxprep Midterm prep
• This week’s content▫ Other ncome!
Tax de"erred p#ans $%&&, %%S&, %'S&, etc.(
▫ )ed*ctions
%%S& contri+*tion Moin- expenses
hi#dcare expenses
▫ Tax &a/a+#e Tax redits
Medica# or disa+i#it/ credit
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Tax Prep Midterm Review
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Major Forms & Jump Codes to Know
asic orms
• denti"ication $)(
• ami#/ $3M(• acket $(
• Sched*#e 1 $1(
• O542 $O542(
T/pes o" ncome
• Se#"7emp#o/ment $2128(
• nterest, )iidends $T9,T8, 4(
• apita# :ains $3, 9(
• 'mp#o/ment $T4, 104(• Other income $T4%S&,T43, O%':5(
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Major Forms & Jump Codes to Know Cont’d
Other Misc. orms
•nsta#ments $5ST(• TS;M
• >>
• %%S&, %%S& M3?,
T2208• T1M
• 3%'
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Summar o! "omewor# $ro%lemsProblem Major things to know
1 &ropert/ income, +*siness income, +*siness expenses
2 3 $3, termina# #oss, recapt*re(, capita# -ains, #osses
9 Same as 1 2
4 %o##"orward
8 apita# -ains $&;&,
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Common Mista#es
• or-ettin- to check @Termina#
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ther thin's to note
• Oerrides! )o not do themB $;n#ess speci"ied(
• Deadin-s detai#s
• Enow what /o* can choose "rom F choose themethod that /ie#ds the #east amo*nt o" taxB
• )oes the person need a tax ret*rn $"or "ami#ies(
• or samp#e markin- ke/ #ike#/ to +e *sed F seeassi-nments markin- ke/ "rom #ast /ear
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QUESTIONS? GOOD LUCK!
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Tax (e!erred $lans ) Tax Impa*t
• &ension income▫ T4%S& 7 %e-istered %etirement Sain-s an,
$%%S&( income F taxa+#e when withdrawin-mone/ "rom /o*r %%S&
▫ T4%% 7%e-istered %etirement ncome *nd$%%( F what /o*r %%S& t*rns into a"ter >0
▫ T4O3S $O#d 3-e Sec*rit/( F c#aw+ack possi+#e
▫ T43& $&& income(
▫ T43 $orporate pensions, %'S& withdrawa#s(
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(edu*tions+ ,,S$
• np*t the iss*er and the date o" whenthe amo*nt was contri+*ted%%S& )ed*ction Gorksheet
• omp#ete "orm 102• 'ns*re %%S& Max Gorksheet is a#so
comp#ete
%%S& )ed*ction
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Spousal ,,S$
• Spo*ses can contri+*te to each other’s acco*nts
• Ghen withdrawa#s are receied, T4%S& is*sed i" there are spo*sa# contri+*tions ox24 needs to +e a @H'SA
• orm 2208 Spo*sa# %%S& in"ormation
• The amo*nt that /o* are c#aimin- on #ine 20cannot hae amo*nts "or a spo*se’s %%S& thatis -reater than /o*r own contri+*tion #imit
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Cal*ulatin' ,,S$ *ontri%ution limit• *rrent Hear %%S& contri+*tion #imit $in most
I*estions it is -ien( 7 There is a maxim*m amo*nt
we can contri+*te to o*r %%S&s.The ca#c*#ation sho*#d +e as "o##ows!
Add: Prior year RRSP deduction limit
Less: Prior year deduction
Plus: The lesser of: a) 18% * PY Earned income
) !"#$8"
Less: &nused RRSP contriutions carried for'ard
Less: Pension ad(ustment
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-imit .xamples
a( &a*#’s +ank te##s him that his ded*ction #imit "or2012 is J88,000. )*rin- 2012, he had
contri+*ted J98,800 to his %%S&. )*rin- 2012&a*#’s earned income was J200,000. Ghat ishis contri+*tion #imit "or 2019K
+( &a*#’s +ank te##s him that his ded*ction #imit "or2012 is J28,000. )*rin- 2012 he hadcontri+*ted J98,800 to his %%S&. )*rin- 2019&a*#’s earned income was J180,000. Ghat is his
contri+*tion #imit "or 2019K
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-imit solutions
a(
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-imit Solutions +( ,000
+( J29,20
Take this
Maxim*m contri+*tions made "or 2019 L J19,920
Ghat are the side7e""ects o" this conc#*sionK
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/er*ontri%ution
• n part , &a*# contri+*ted J98,800 when his#imit was J28,000 oer +/ J10,800. ew thin-s
to note that we a#so saw in I*estions!
1. The "irst J2,000 oer this #imit is OE and witho*t pena#t/ and can +e ded*cted in the
next /ear2. The remainin- J,800 is -oin- to hae a 1pena#t/ app#ied to it "or eer/ month itcontin*es to remain within the p#an
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(edu*tions ) Child*are .xpenses
hi#dcare)ata orm
• Make s*re to enter a## chi#dren on the 3M "orm "irst
• np*t a## chi#dcare inc*rred
orm >>
$3(
•
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Tax$rep spe*i!i* details 1Child*areexpenses
3##owa+#e ded*ction is the #east o"!
1. The amo*nt o" e#i-i+#e expenses paid as per&art 3 o" "orm >>
2. 2C9 N earned income
9. '#i-i+#e expenses +ased on date o" +irth
7 Other parts o" the "orm ask "or more in"ormationin re-ards to /o*r spo*se and their income #ee#
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Child*are expenses
hi#dcare expenses are on#/ app#ica+#e i"!
1. The/ are considered to +e e#i-i+#e expenses
the/ m*st +e "or thin-s s*ch as nannies, not +a+/sittin- $ex. parents -o to the moies at ni-ht(
2. The chi#d meets the @e#i-i+i#it/A criteria $m*st +e*nder 16 /rs. )*rin- an/ part o" the c*rrent /ear(
9. The expenses m*st +e "or the p*rposes o"ena+#in- the parents to -o o*t and work
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$ro%lem 3 !rom *lass•
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(edu*tions Mo/in' .xpensesMoin-expenseded*ctions
*st #ike chi#dcare expenses, there istax p#annin- ino#ed
Ge need to comp#ete additiona#"orms to s*+stantiate the
amo*nts T17M "orm
There are e#i-i+#e moin- expensesand not eer/thin- can +e deemed
an expense
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Mo/in' .xpenses
'#i-i+i#it/
• The re#ocation m*st +e an e#i-i+#e re#ocation• $)istance "rom O#d ho*se to work(7 $)istance "rom new ho*se to work(
P 40 km
T/pe o"income
• On#/ app#ica+#e with emp#o/ment or se#" emp#o/ed income• 5o ded*ction i" it is +ein- app#ied a-ainst inestment income or
emp#o/ment ins*rance +ene"its
'xamp#es o"e#i-i+#e
expenses
• Mea#s, accommodations, trae#, #ease cance##ation "ees, incidenta#costs, costs "or se##in- o#d residence and p*rchasin- new residence,
•
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Mo/in' .xpenses• There are two wa/s thro*-h which we can dea# with
moin- expenses!
1. )etai#ed method
2. Simp#i"ied method
•.The "irst method is more "oc*sed on trackin- a##aspects o" the expendit*re reI*ires a properco##ection o" receipts
•.The #atter method wi## p#ace #imits on certainthin-s s*ch as mea#s, since there is #itt#e eidence
to s*+stantiate the amo*nts
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Mo/in' expense .xamplesa#c*#ate the moin- expense ded*ction "or the "o##owin-sit*ation!
ernice and Een moe their "ami#/ on an*ar/ 1, 2012 to Gater#oo, Ontario "rom Eitchener Ontario. The distance"rom their o#d ho*se to their new work is 80km. Thedistance "rom their new ho*se to their new work is 90km.
The/ inc*rred the "o##owin- costs!Moin- tr*ck ! J100
:as "or car! J80
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Mo/in' .xpense Answer• This was a trick I*estionB One o" the reI*irements
"or moin- expenses to +e ded*cti+#e is that the
re#ocation m*st +e e#i-i+#e. The di""erence +etweenthe workp#ace "rom the new ho*se #ess the distance"rom the o#d ho*se to the workp#ace is on#/ 20km.
• 3s noted ear#ier, the reI*irement is 40kmQ hence,
none o" these costs are ded*cti+#e.
ote: the interior costs on the house are not oin
to e deductile$ e+en if the ,rolem could 'or-.
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Mo/in' expense example• 3s a "ami#/ moes, one o" the costs that is
inc*rred is re#ated to mea#s that the/ had to eat
d*rin- the moe. The moe was "rom San 3ntonio, Texas to a#-ar/, 3#+erta. n tota#, the"ami#/ o" "ie had cons*med J6,000 o" "ood in aspan o" 10 da/s. The/ hae kept a## o" theirreceipts, what is the amo*nt that can +ec#aimedK
• Ghat i" there were no receiptsK
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Mo/in' .xpense example answer• 3( J6000 can +e c#aimed, since there is proo" o"
the receipts $this is the detai#ed method(
• ( i" there are no receipts, then that means, wem*st *se the simp#i"ied method. 3s per the %3$http!CCwww.cra7arc.-c.caCtrae#costsC(, we
m*st c#aim J1> per da/ "or each mea# per person,so it wo*#d +e! J1>N9N8N10L J2,880.
http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/http://www.cra-arc.gc.ca/travelcosts/
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4ho *laims Mo/in' expenses• ;s*a##/ p#aced on the indiid*a# with the hi-her
income
• This is +eca*se the/ hae a hi-her mar-ina# taxrate and hence there is a -reater impact
• The moin- ded*ction wi## #ead to a red*ction o"
the income that is taxed
hence, those with thehi-her income and in a hi-her tax +racket wi## +ene"it "rom the red*ction potentia##/ moin-them o*t o" a hi-her +racket and into a #ower one
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Tax $aa%le & Tax Credits• Taxes pa/a+#e F +ased on income +rackets
• Mar-ina# tax rate 7 M3%:53<
• Ghat is the di""erence +etween a credit andded*ctionK▫ )ed*ction is a-ainst taxa+#e income whereas
credits are a-ainst taxes pa/a+#e
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5on ,e!unda%le Tax Credits
• Ghat does non7re"*nda+#e meanK
• Some o" the credits R 18, on Sched*#e 1▫ asic persona# credit
▫ Spo*sa# credit
▫ hi#d Tax credit
▫ 3-e credit
▫ anada 'mp#o/ment
▫ )onations $)O53TO5(
▫ Medica# 'xpenses $M')(
▫ T*ition $T22023(
▫ Text+ook $T22023(▫ &&C'
▫ nterest on St*dent 0(
▫ &o#itica# donation$&O
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Medi*al /s6 (isa%ilit Credit• )isa+i#it/ credit F check +ox on ) "orm
• Dow to decide which oneK
▫ The disa+i#it/ amo*nt is J>,846. The tax credit is 18 o" this.▫ The medica# amo*nt is the amo*nt o" the tota# medica#
expenses #ess a thresho#d amo*nt. The tax credit is 18 o"this.
▫ The tax sain- "rom $( is at most! 18 x J10,000 J>,846
▫ The tax sain- "rom $3( is! 18 x "*## cost o" an attendant ▫ Th*s, $3( wi## a#wa/s +e +etter i" the cost o" an attendant is
more than J1>,846.
▫ or attendants cheaper than that $e.-., a J8,000 part7timeattendant(, $( mi-ht +e a +etter choice.