Budget 2010 Tax Tips
The March 4, 2010 Federal Budget was a cautious document in a post-financial crisis environment, delivering no additional tax increases for most Canadians, and some interesting tax changes. In particular, families, students and investors are affected positively, while executives and business owners have seen the last of tax loopholes surrounding stock option benefits. Are you affected? Check out our Budget 2010 tax tips below.
Medical Expenses: More and more people are having cosmetic surgery and in some cases the costs will be tax deductible. A good example is reconstructive surgery required after an accident or an illness, like cancer. However, for expenses incurred after March 4, 2010, the cost of medical or dental services, or any related expenses, provided for purely cosmetic purposes, will not be deductible. This includes the cost of botox, liposuction, hair replacement or teeth whitening. Tax Tip: Medical expenses are often under-claimed. From glasses and dental work to hearing aids and their batteries, a host of medical expenses can be claimed in the best 12 month period ending in the tax year but is subject to a 3% net income limitation or $2,011 (whichever amount is less) for 2009.
Tax Changes for Single Parents. If you are sharing custody of your children with an ex-spouse, or receiving benefits as a single parent you'll be interested in two new provisions:
-
Joint Custody of Children: Effective for payments received after June 2011, where a child lives more or less equally with two individuals who live separately, each of the individuals will be eligible to receive 50% of the amount of any Canada Child Tax Benefit, Universal Child Care Benefit (UCCB) and GST Credit received in respect of the child. Tax Tip: Each parent should invest these benefits in the name of the child to build up a great education fund, but also to avoid tax on resulting investment earnings.
-
UCCB for Single Parents: Beginning in 2010, where the UCCB is received by a single parent, the parent may elect to include it either in their own income or in the income of the child who was claimed as an "eligible dependantî; that is one who qualifies for an equivalent-to-spouse tax credit. Where that child has little of no other income, this election will eliminate the tax on the UCCB. In addition, if the child invests the UCCB, resulting investment earnings are taxed in the hands of the child. Tax Tip: Be sure to invest the tax savings the parent earns from this reporting change; possibly in an RRSP to leverage the tax results. Child benefits should be invested in a separate account in the hands of the child.
Next time: Students and the disabled are affected too!
Evelyn Jacks is President of The Knowledge Bureau and author of Essential Tax Facts 2010, Master Your Taxes, and Make Sure It's Deductible; all available from the Knowledge Bureau bookstore at bulk purchase pricing for advisors and their clients.
Help & Contact: 1 866 953 4769