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Frequently Asked Questions

1. I am 18 years of age. Can I apply for GST?

2. I separated on July 27th. I have a 7-year-old dependant. Am I allowed any credit on my tax return?
3. My daughter went to school. She paid tuition fee of $7,200. Can I claim it on my tax return?
4. I earned $30,000 last year and my wife earned $20,000. Can I claim child care expenses?
5. I moved from Surrey to Mississauga in July 2003. I have eligible moving expenses for $10,000. I was not able to claim these expenses on my 2003 return. Can I claim these in 2004?
6. My daughter went to Private School in the year. Can I claim the fee that I paid for her?
7. I am a truck driver, do I need receipts to claim meal expenses?
8. What is the difference between Netfile and Efile?
9. I use my car to commute to work. Can I claim commuting cost on my tax return?
10. This is the first year I am using my car for employment purpose. What do I need in order to claim employment expenses?
11. Is it true that I can claim expenses related to my home office expenses on my tax return?
12. Is it true that I can claim additional expenses if I am commission employee versus salaried employee?
13. Why is it important to distinguish between passenger vehicle and motor vehicle?
14. I am entitled to claim employment expenses. I started leasing BMW car on March 11th last year. My monthly lease payment is $ 965. Can I claim full amount of leasing cost?
15. Is it better to lease or buy a car?
16. I work for a publicly traded corporation. I am in the process of exercising option. Is there any tax consequences upon exercising a stock option?
17. I own a rental property. During the year I performed repair to my rental property, which is located 63 kilometers away from my principal residence. I used my automobile to transport tools and supplies. Can I claim automobile, cost of maintenance and cost of my labor?
18. I purchased new appliances for my rental property. Can I claim the cost of appliances on my tax return?
19. If I rent part of my principal residence, would I loose principal residence status for my house?
20. I want to give property to my daughter as a gift. Is there any tax consequences?
21. What is the maximum amount up to which I can contribute to RRSP for the year 2006?
22. My aging father is living with us. His income is through investment and social security programms. What can I claim for him?
23. Can I claim medical expenses for spouse, son (age- 15), daughter (age-22)? What are the types of medical expenses, which I can claim?
24. Should I incorporate my business?
25. What are my obligations under Home Buyers’ Plan withdrawal?
26. What is ‘Net file’?

Question 1: I am 18 years of age. Can I apply for GST?

Answer: As long as you are turning 19 before April 1, 2007 you are eligible to apply for GST credit on your 2006 tax return. You must file your 2005 tax return. If you have not done that yet, come to the nearest Softron location and we'll file it for you.

Question 2: I separated on July 27th. I have a 7-year-old dependant. Am I allowed any credit on my tax return?

Answer: You do not need to be single, divorced, separated or widowed throughout the year, but only at some time in the year and at that time you had a dependant living with you.

You may qualify for an additional credit if any time in the year, you were Single, Divorced, Separated or Widowed. The "amount for an eligible dependent" is reduced by the income of the dependant for which the claim is made.

Question 3: My daughter went to school. She paid tuition fee of $7,200. Can I claim it on my tax return?

Answer: Your daughter requires the form T2202A from her school. She has to file her tax return and based on other information the tuition fee could be transferred to you.

Question 4: I earned $30,000 last year and my wife earned $20,000. Can I claim child care expenses?

Answer: Child care expenses have to claimed by person with lower income - in this case your wife. These expenses could be claimed by the person with higher income in some exceptional circumstances.

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Question 5: I moved from Surrey, BC to Mississauga, ON in July 2005. I have eligible moving expenses for $10,000. I was not able to claim these expenses on my 2005 return. Can I claim these in 2006?

Answer: You can claim moving expenses to the extent of your income that you earned after your move. If you moved but could not claim all the moving expenses on the return for that year, you may be able to claim the remaining expenses on your return for 2006.

In addition you can carry forward unused amounts until you have enough income to claim them.

Question 6: My daughter went to Private School in the year. Can I claim the fee that I paid for her?

Answer: No you cannot claim Private School tuition fees.

Question 7: I am a truck driver, do I need receipts to claim meal expenses?

Answer: No, you can use simplified method to claim meal expenses. You can claim three meals per day and $17 per meal. If you go to US then you can claim US $17. You need a signed copy of TL2 form that is signed by your employer.

Question 8:What is the difference between Netfile and Efile?

Answer: EFILE is a service by CRA for professional EFilers. Efiler must register with CRA and get an agent number. Efiler can update the address and banking information for their clients and can do batch processing of tax returns.

NETFILE is a service by CRA for individuals to file their personal tax returns over the internet. The individual must have a Web Access Code (WAC) to netfile their tax return using CRA certified software.

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Question 9: I use my car to commute to work. Can I claim commuting cost on my tax return?

Answer: No, the traveling cost from home to work and work to home is considered personal expenses.

Question 10: This is the first year I am using my car for employment purpose. What do I need in order to claim employment expenses?

Answer: You need a signed T2200 from your employer to claim employment expenses. You should keep all the receipts and detailed log sheet of kilometers driven for business and personal.

Question 11: Is it true that I can claim expenses related to my home office expenses on my tax return?

Answer: You will need signed T2200 form, "Declaration of Conditions of Employment" from your employer. There are also additional requirements, based on the types of expenses you incur.

Question 12: Is it true that I can claim additional expenses if I am commission employee versus salaried employee?

Answer: Yes, you may claim additional expenses, which may not be allowed to salaried employees such as property tax and insurance for home office expenses. Employment expenses are limited to commission income plus capital cost allowance and interest on car loan.

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Question 13: Why is it important to distinguish between passenger vehicle and motor vehicle?

Answer: A passenger vehicle is an automobile purchased or leased after June 17, 1987. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles. Passenger vehicles are subject to the limits for capital cost allowance, interest, and leasing costs.

Question 14: I am entitled to claim employment expenses. I started leasing BMW car on March 11th last year. My monthly lease payment is $ 965. Can I claim full amount of leasing cost?

Answer: Since leasing cost exceeds $800 per month limit, the lease formula must be used to calculate allowable deduction.

Question 15: Is it better to lease or buy a car?

Answer: You should take following factors into account.

1. How many miles are you expecting to travel? If you expect to have a lot of mileage then most leasing companies, charge additional fees over certain mileage. This information should be specified in leasing contract. You have to determine how much extra you have to pay over specified mileage. Then it might not be to your advantage to lease a car.
2. How often do you change a vehicle? Are you the type of person who changes a vehicle after two to three years or do you like to keep the same vehicle for five to ten years. It is better to lease if only keeping the vehicle for a short period of time.
3. Cash flow? Do you have enough cash to purchase a vehicle. If not, it may be better for you to lease. Since leasing a vehicle is easier for a person with bad credit rating.
4. Legal Issues: Do you have any court order against you, i.e. owe money to other people or in the course of divorce settlement. If so, then any of your assets may be seized or distributed. Then it might be better for you to lease a vehicle.
5. Tax Point: From a tax point of view, the difference between buying and leasing is minimal.

You have to look at other factors to determine what is the best decision for you.

Question 16: I own a rental property. During the year I performed repair to my rental property, which is located 63 kilometers away from my principal residence. I used my automobile to transport tools and supplies. Can I claim automobile, cost of maintenance and cost of my labor?

Answer: You can claim the cost of supplies to repair the rental property. However, you cannot deduct the cost of your own labor. You can claim reasonable expenses incurred to transport tools and material to rental property.

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Question 17: I purchased new appliances for my rental property. Can I claim the cost of appliances on my tax return?

Answer: You cannot claim the cost of appliances on the tax return. However you can claim the capital cost allowance on appliances. Capital cost allowance cannot be used to create or increase rental loss.

Question 18: If I rent part of my principal residence, would I loose principal residence status for my house?

Answer: You can rent minor part of your house, however you should not claim capital cost allowance on your house.

Question 19: I want to give property to my daughter as a gift. Are there any tax consequences?

Answer: You would have deemed disposition at FMV at the time of transfer. You will have to pay tax on capital gain if any. If this is depreciable property there may be recapture or terminal loss.

Question 20: I work for a publicly traded corporation. I am in the process of exercising option. Is there any tax consequences upon exercising a stock option?

Answer: Yes, you would receive taxable benefit at the time of exercising. Taxable benefit will be calculated difference between fair market value at the time of exercise minus option price. However, you can file an election form T1212 to defer taxes until the disposition of shares.

Question 21: What is the maximum amount up to which I can contribute to RRSP for the year 2006?

Answer: On filing 2005 Tax Return, you must have received Notice of Assessment from Canada Revenue Agency. Your 2006 RRSP limit is shown on it. At the same time, you will have to consider ‘undeducted amount’ on the same Notice as well as your obligation under Home Buyers’/Life-long Learning Plan(s). If you require any assistance in this connection, please visit any Softron Location.

Question 22: My aging father is living with us. His income is through investment and social security programms. What can I claim for him?

Answer: If your father is 65 or older and his income is less than $17,363,either of you can claim caregiver amount for him. Maximum claim is $3,933 and income threshold is $13,430.He must be living with you (may be sometime during the year) and not sharing rent or engaging himself as caretaker for any of your children.

Question 23: Can I claim medical expenses for spouse, son (age- 15), daughter (age-22)? What are the types of medical expenses, which I can claim?

Answer: Between you and your spouse medical expenses have to be claimed by the person whose income is lower. Certainly, either of you can claim for self, spouse and dependant child born in 1989 or later (2006 tax year).

However, lower of $1,884 and 3 % of your net income is not allowed. As far as claim on behalf of your daughter is concerned, you can claim her portion of expenses, only if she was dependent upon you for support. It has to be reduced by lower $1,884 and 3 % of her income. Your claim is restricted to $ 10,000 per dependant.

You can claim prescription drugs, dental treatment, eyeglasses; premium paid for private health coverage etc. For more guidance on the subject matter, visit any Softron location near to you or call 905-273-4444.

Question 24: Should I incorporate my business?

Answer: Incorporation does make sense due to limited liability concept, splitting income, lower tax burden etc. In case you require assistance as to how to incorporate/tax implications as a result of incorporation, please drop-by at any Softron location or call us at 905-273-4444. Our experienced, courteous staff will be happy to assist you.

Question 25: What are my obligations under Home Buyers’ Plan withdrawal?

Answer: Withdrawn amount has to be repaid over a 15-year period, starting with the second year after the withdrawal. Canada Revenue Agency notifies every year the date by which it has to be repaid and yearly instalment. If repayment through investment in RRSP (even if no room to invest) does not happen before the stipulated date, it is added as income for that year.

Question 26: What is ‘Net file’?

Answer: It is the process of entering your tax details into your computer and file it online with Canada Revenue Agency. You require access code in order to net file your tax return. For more information, log on to http://www.taxtron.ca.

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