Tax Tip: The More Obscure Medical Expenses

Are you claiming all the medical expenses you or your clients might be entitled to? 

The Electronic Filer's Manual for 2010 (RC4018) was released on January 14, 2011: http://www.cra-arc.gc.ca/E/pub/tg/rc4018/rc4018ch1-10e.pdf The "What's Newî section discusses the Universal Child Care Benefits (UCCB) amount which can now be designated to a dependant of single parents, E.I. for the self-employed, GST/HST modifications and several provincial changes to tax and credits. New fields for Stock Option Special Relief are outlined as well. ADDITIONAL EDUCATIONAL RESOURCES: Distinguished Advisor Workshop Reference Journal, now available in the Knowledge Bureau bookstore.

The Governor of the Bank of Canada, Mark Carney, spoke at a press conference in Ottawa on January 19, 2011. He discussed several factors that caused the Bank to maintain its target for the overnight rate at 1%. The economic recovery, although proceeding more quickly than anticipated, still has associated risks and challenges. Although private domestic demand in the U.S. has grown, financial stability and sovereign debt issues in Europe continue to be of concern. In Canada, household debt is expected to restrict consumption and residential investment but business investment should continue to grow. The strong Canadian dollar and low productivity will continue to dampen the recovery here. The inflation target remains at 2%. Upside risks include higher commodity prices and unexpected momentum in the housing sector. Downside risks include weak Canadian competitiveness and muted household spending. The Bank expects the economy to return to full capacity by the end of 2012. The next scheduled announcement date to announce the overnight target is March 1, 2011. ADDITIONAL EDUCATIONAL RESOURCES: Distinguished Advisor Workshop Reference Journal, now available in the Knowledge Bureau bookstore.

 For the second time in less than a year the federal government has announced measures that will tighten mortgage regulations in this country, a move designed to protect Canadians from taking on too much debt. The three changes announced on January 17, 2011 are: Borrowers looking for more than 80% financing for a new, government insured mortgage will be restricted to a 30% amortization period. The loan to value ratio for refinancing is reduced from 90% to 85% Lines of credit that do not require regular payments (non-amortizing) and are secured by homes will no longer be eligible for government-backed insurance. A home ownerís line of credit that has a fixed schedule of principal and interest payments will continue to be insured by the government. The first two measures will come into force on March 18, 2011 and the third on April 18, 2011. Although the new rules reduce mortgage options, they should also serve to increase equity for homeowners and reduce interest paid for the lifetime of the mortgage, particularly for those using home equity loans.   These changes follow an interesting history in home financing in Canada: In 2006 the government began loosening regulations, allowing amortization periods to rise from 25 to 40 years and approving 100% loan-to-value financing. In response to the global economic crisis amortization periods were reduced to 35 years in October, 2008 and financing brought down to 95%. In April, 2010 the loan to value financing ratio was further reduced to 90% and a 20% down payment required for properties not occupied by the owner. Measures to ensure that borrowers are credit-worthy have been implemented recently as well. ADDITIONAL EDUCATIONAL RESOURCES: For more information on financing a mortgage see Essential Tax Facts, 2011 edition.

The Knowledge Bureau Report issued on January 12, 2011, contained an error in the article: Did You Know? Part Time Studies May Qualify For Education and Textbook Credits. We extend our thanks to tax professional Nancy Williams for pointing this out. Eligible students may claim the education amount if they receive a salary or wages while taking a course related to their job. This was not the case until the rules changed in 2004. This is certainly an important piece of information for all who believe in life-long learning! For more information about the Education Amount: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/dctn-eng.html

On January 13th The Prime Minister announced the launch of a project that aims to reduce red tape for small and medium businesses. Did you know that the Canadian Federation of Independent Business estimates that businesses in Canada spent 30.5 billion dollars (that's 1.9% of the GDP) on regulatory compliance tasks in 2008? The smaller the business is the higher is the cost of doing business, according to Statistics Canada. The Red Tape Reduction Commission will consult with Canadians to identify compliance requirements that distract from the operation of a business and cost the employer time and money. Innovation, productivity and competitiveness suffer when a business is over-taxed with paperwork. This endeavor may provide a long lasting stimulus to the business community at a very reasonable cost. Click here for more information. Additional Educational Resources: Tax Planning for the Small Business Owner

A recent court ruling has caused CRA to change its policy on whether Wage Loss Replacement Benefits are pensionable for CPP purposes. On January 28, 2010, the Federal Court of Appeal ruled on Toronto Transit Commission v. Canada. It wrote that employees in receipt of WLRB are not able to perform services under their contract of employment therefore not pensionable under CPP regulations. CPP does not have to be deducted from these benefits and employers may apply for a refund of 2010 and current year payments and may refund employees. Past year overpayments must be requested via Form PD24: http://www.cra-arc.gc.ca/E/pbg/tf/pd24/pd24-09e.pdf within 4 years of the end of the tax year in which the overpayment occurred. Please note that this ruling does not apply to the Quebec Pension Plan. For more information: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/wglssqstns-eng.html   Additional Educational Resources: Advanced Payroll for Professional Bookkeepers