2019 Tax Changes: It’s a mixed bag

It’s that time of the year again. While everybody is starting to get their paperwork ready for the 2018 tax return, we at Softron are ready to do our best to save you tax dollars. This year is a mixed bag when it comes to tax credits.

The tax changes that will impact your tax returns are discussed as follows:

Climate action incentive payments:

Everybody gets a refund and it’s good for the environment too! Well, everybody may not get a refund, but this non-refundable tax credit will definitely lower your tax owing. A family of two adults and two children is qualified for a tax incentive of $307.00.  So even if you had no income in 2018 and paid no taxes, you will qualify for a tax refund this year.

TOSI Rules

The government has changed tax laws around income sprinkling. A tax on split income may be applicable in some cases for children under 18 years at the highest rate of 33%. So, if you child receives any income from your business, partnership, rental property or trusts, it is highly recommended that you should discuss your tax situation with an expert at Softron to ensure that your taxes are filed accurately, and you are best advised on your case.

Expanded Medical Tax Credit:

The medical tax credit has expanded. Patients can now claim any money they spent on prescribed medical marijuana. Keyword here being “prescribed”. Also, couples that are undergoing fertility treatments and spending money on treatments like IVF, can now claim all their expenses under the medical tax credit.

Credits that got the Axe:

·         Public Transit Tax Deduction is no longer applicable. It will make a big difference in for people living in Greater Toronto Area as public transit costs can be very high depending on the type of commute.

·         No fitness or arts tax credit for money spent for arts and fitness activities of children.

·         No education and text book credits for students. Recently Ontario government also announced scrapping of free tuition for children from lower income families. So, increasing education costs combined with reduced tax credits will put financial pressure on students.

As I said, it’s a mixed bad and some tax rules can be complicated and confusing. Therefore, prepare yourself by asking your tax accountant all the questions that seem relevant to your case and we at Softron will advise you to ensure you save money on taxes.

Dealing with Fraudulent Phone Calls

Fraudsters are getting smart and finding new ways to scare people and extort money out of them. We just need to be smarter.

The technology that is being used is sophisticated and advanced. Phone masking is now being used to make phone calls. This technology allows the fraudsters to call and make it look like a call is being made from a number that you know. They are also well researched and have gained enough information to make the call look legitimate

Recently there have been instances where Softron clients have been called by fraudsters and it looked like on their caller ID that the phone call was from a Softron Office.

Here are a few attributes of fraudulent phone calls:

  • It may appear a call from a business like Softron, a government office like CRA or RCMP or even a family member or friend
  • Phone call will always be about how you are in default or deep legal trouble.
  • Fraudsters try to intimidate by threatening arrests and using strong language.
  • The solution always is immediate payment of money.
  • The mode of payment offered is prepaid credit cards, online payment systems like paypal or even dropping cash in some scenarios.

Demanding payments through credit card or paypal is a clear red flag. The following are a few facts that you need to remember:

  • Softron, CRA or no other organization will ever call you and threaten you with an arrest.
  • No legitimate organization demands payments through pre-paid credits cards
  • All owings or payments are always demanded through written notices and letters.
  • We at Softron may only contact our clients via phone regarding an on-going tax filing service we are providing or general messages about the launch of new tax or location details.

What can you do if you receive a phone call:

  • Hang up
  • If you are sure that it was a fraudulent phone call, report it at http://www.antifraudcentre-centreantifraude.ca/reportincident-signalerincident/index-eng.htm
  • If you are not sure about whether the call was fraudulent or not, hang up and call back the organization you received the call from. This will protect you against a fraudulent call using phone masking technology.
  • Softron can be contacted at 905-273-4444
  • CRA can be contacted at 1800-959-8281

The TFSA Vs. RRSP Debate. Which one’s better?

This has been ongoing hot topic for discussion with different financial experts coming up with different opinions. So, what’s the answer?

Well the clear answer is: It depends.

Financial Planning is not a one size fits all thing. Both the plans have unique tax benefits and depending on the income level and financial goals of an individual, one plan may be better than the other.

So, let’s see what does it depend on?

Income

  • If you are working part time, have some savings and make less than $12,000, only use TFSA as RRSP deduction will not benefit you. Also, any RRSP contributions will hurt your GIS (Guaranteed Income Supplement) payments in retirement.
  • If you are working full time and making less than $35,000, have no pension plan, TFSA is still a preferred choice as you do not want to hurt your GIS payments in retirement.
  • If you are making more than $50,000 have no pension plan, RRSP becomes a good option and tax deduction will save you taxes and considering your income level at this time, there is little chance that you will qualify for a GIS payment.

Other Factors

  • Long Term Savings Vs Short Term Savings: If you are saving for short term and will be withdrawing the saving in near future, TFSA should always be preferred irrespective of any other factor.
  • Saving for a House: If you have already not saved $25,000 for a house, you can put your house savings in RRSP, get a tax deduction and then withdraw the savings under the Home Buyers’ Plan.
  • Saving for Education: If you are saving for higher education, you can use RRSP account to do that and get tax deduction benefits. The money can be withdrawn under the Lifelong Learning Plan.
  • Employer Pension Plans: RRSPs are primarily an investment tool for retirement planning. If you have generous retirement plan, then it is advised that TFSA should be preferred RRSPs so as o avoid huge tax liabilities in retirement years.

Financial and Tax Planning can be complex. At Softron, we have experts who can guide you on benefitting from Home Buyers’ Plan, Lifelong Learning Plan, Managing RRSP contributions and help you get the value out of your investments.

Call 905-273-4444 today and let the best handle your taxes!

Short Term Rentals are not Tax-Free

Are you renting your property or part of it on AirBnB, VRBO or HomeAway? Well, the income you earned is taxable and has to be reported on your tax return.

Short Term Renting is renting of residential property to a guest for a short length of time. Let’s discuss how this works:

Rental Income:

Any income generated through short term rentals constitutes rental income. Just like conventional rental income, a “Statement of Real Estate Rental” – T778 needs to be completed with the tax return to be compliant with Canada Revenue Agency. But that’s not all. There are other requirements unique to Short Term Rentals

GST/HST Requirements-

Short term rentals started out as a part time renting of the extra room to generate some cash. They have evolved as a business today. Some people have gone on to purchase properties for the sole purpose of short term renting. While it depends how good the occupancy rate you have and what is the average cost you charge for your property, numbers can add up quickly, and short-term rental owners are required to have a GST number and be GST compliant if they generate a revenue greater than $30,000. This includes the gross amount of rental income generated and includes all fees and other charges that home owners are required to pay to the AirBNB and HomeAway for their services.

City Requirements

Housing affordability is a major issue in major Canadian cities and short-term rentals don’t help the cause. They take away from the housing supply that could have catered to long term rentals for individuals and families. So, all city governments are coming up with stringent laws for short term renting and all home owners are advised to be compliant with City bylaws as well.

Claiming Expenses

As mentioned earlier, short term rental income counts as rental income and therefore a property owner can claim all the expenses that a conventional rental income owner does. These expenses include mortgage interest, utilities paid, maintenance costs and other costs relating to renting the property. However, some of the costs are very unique to short term rentals. These include the service fee charged by the service providers like AirBnB and HomeAway, cleaning costs, advertising costs and other related costs. A short-term rental owner can claim all these costs.

Claiming expenses can be tricky and complicated as they might have to prorated if you are renting only part of the property. Also, any expense claimed must be expense made to generate rental income. At Softron, we have studied the short-term rental market in detail and can help you in being fully compliant with Canada Revenue Agency for your short-term rental income.

Call 905-273-4444 and let the best handle your taxes!

Did you ride the bitcoin wave in 2017? Time to pay taxes

The digital currencies have emerged as a new asset class in 2017. While they have been around for a few years, the gains in the value of digital currencies were spectacular in 2017. Also, the number of digital currencies has increased manifold. It’s not just about bitcoin. A new crypto currency is being launched almost daily. Ethereum, Litecoin, Ripple are few prominent ones.

Having said that, a lot of people made money by trading crypto currencies in 2017 and now it’s time to pay their taxes. We discuss the following situations where you will be liable to pay taxes:

Buying and Selling Cryptocurrencies

  • If you bought a cryptocurrency with Canadian Dollars and sold it at a profit in Canadian Dollars, this transaction will need to be reported as capital gain
  • If you complete these transactions in US dollars, all transactions need to be converted in US dollars and gain/loss will be reported on your tax return

Trading Within Cryptocurrencies

As mentioned earlier, there is a plethora of cryptocurrencies available today. But not all currencies can be bought with CAD or USD as this is how the crypto currency exchanges are set up at this time.

When one crypto currency is used to purchase another currency, barter transaction rules apply for such transactions. So, you will need to know the cost of purchase in CAD for such transactions. Let’s assume you bought 10 ethers for 1 bitcoin. The transaction will be recorded as price of 10 ethers in CAD. We will also need to know the price of 10 ethers in CAD at the time of sale to determine whether profit was made in this transaction or loss.

Purchasing with Crypto

Well, it’s a currency after all and the purpose of the currency is to exchange it for products and services. The barter transaction rules apply here as well. So, if you buy a digital coin for $10.00. Its value increases to $20.00 and then you end up buying a USB drive online by paying that one digital coin. The CAD value of the USB drive is $20.00. In this case, the purchase of USB transaction will have to be reported and a tax will be paid on the increased value of digital coin.

As described above, the transactions can be really complicated and confusing. Also, there is lack of proper reporting statements from the informal exchanges where these currencies are traded. Currency conversions also add to the complication. We at Softron have been studying the tax implications related to Crypto currencies and understand the digital currency market.

Call 905-273-4444 today and let the best handle your taxes!