Tax Tip: The More Obscure Medical Expenses

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

By Evelyn Jacks The financial stimulus packages of prior years are doing their job: stimulating domestic demand, and helping Canadians recover their financial health. But is there a cost for this flood of money into the economy? Will it spell higher taxation levels in future federal and provincial budgets? Should more be done to encourage Canadians and their governmentsóboth federal and provincial - to act responsibly and with purpose towards our ongoing economic recovery? These are important questions in advance of the annual federal budget expected to come down this quarter. According to the Department of Finance's Annual Fiscal Report for 2008-2009, the share of revenues spent on public debt charges declined from 13.7 percent in 2007ñ08 to 13.3 percent in 2008ñ09. This is down from a peak of about 38 percent in 1990ñ91. The share of revenues devoted to public debt charges is now at its lowest level since the late 1970s. However, recent deficits have increased dramatically: For the first seven months of the 2009ñ10 fiscal year, the budgetary deficit was $31.9 billion, compared to a deficit of $0.1 billion reported in the same period of 2008ñ09. With a budgetary deficit of $31.9 billion and a requirement of $26.3 billion from non-budgetary transactions, the federal government had a total financial requirement of $58.3 billion in the April to October period of 2009ñ10, compared to a financial requirement of $33.8 billion in the same period of 2008ñ09. Currently the Department of Finance is requesting input from Canadians on the upcoming Federal Budget. It's an opportunity to express opinions and best thoughts on the financial future and provide feedback. You can make your suggestions through the following link to the Department of Finance website. Suggestions submitted by The Knowledge Bureau include the following changes to personal taxation provisions that may continue to increase after-tax income available to stimulate both savings and spending by certain demographic groups in Canada: Raise basic personal amounts so as not to tax non-discretionary income of single moms and young working families. Increase the TFSA savings rate to $10,000 per year; then encourage average Canadians to pay down non-deductible consumer debt. Provide a moratorium on taxation of the first $10,000 in RRSP/RRIF withdrawals to stimulate spending by boomers; Increase deductible attendant care/nursing home costs to $2,500 a month and make this a deduction from income of either the elderly or their supporting individuals; who are bearing an economic burden with health care advocacy; Increase tuition/education transfer to supporting individuals from $5,000 to $10,000 per year; Allow for general averaging on severance packages over 5 years to allow the best tax result. NEXT TIME: HOUSEHOLD FINANCE NUMBERS ARE LOOKING GOOD Mark Carney, Governor of the Bank of Canada recently spoke on Current Issues in Household Finances (December 16), and the news is mostly good. Tune in next week to anticipate what 2010 holds in store for purchasing power, savings rates, consumer spending and debt as well as taxation trends.

By Evelyn Jacks Happy New Year! The tax preparation and wealth planning process will take on new importance this quarter with tax season beginning again for over 24 million Canadian tax filers in the aftermath of an unprecedented financial stimulus into the global marketplace, over the past two years. It appears Canada is poised for a significant economic recovery in 2010, and with that comes some tax planning opportunities. The personal net worth of Canadians has rebounded above its ten-year average and Canadian savings rates are at an eight-year high, according to statistics from the Bank of Canada and the Department of Finance. In addition, millions of Canadians have responded to the economic stimulus provided by the Home Renovation Tax Credit. This provision might well result in significant bottlenecks in tax preparation services, as busy tax advisors prepare for the increased data entry required on new Schedule 12, which requires an itemization of home renovation receipts. Specifically then, investment and financial advisors and their clients will want to focus on a review of the following provisions, sooner rather than later, to maximize tax preferences and reduce waiting time for tax refunds and their related investment benefits: RRSP top-ups for 2009 tax year TFSA contributions for 2010 A 2010 income projection and quarterly instalment tax review for March 15, 2010 Completion of source deduction and reduction forms: TD1 and T1213 A review of personal amounts for 2010 to ensure receipting is properly started for the calendar year A review of remaining opportunities under the temporary Home Renovation Tax Credit, under which work must be completed by February 1, 2010, but materials can be acquired for later use by the same date. Additional Educational Resource: EverGreen Explanatory Notes: Your online gateway to the latest changes at the Department of Finance and CRA.

Tax filing season 2010 will bring with it some new tax provisions and numerous increases in personal tax deductions, as well as refundable and non-refundable tax credits. Reviewing new personal provisions is a great way to start the financial year, particularly as Canadians get ready to file their 2009 tax returns, top up their RRSP contributions and make TFSA deposits. To help advisors and their clients prepare to pay only the correct amount of tax on personal and business activities, Evelyn Jacks, Canada's most trust tax author has recently released her 45th and 46th books, Essential Tax Facts 2010 (Knowledge Bureau, Inc) and Make Sure It's Deductible (McGraw Hill) and the following checklist to discuss in preparation for tax season 2010. 2010 TAX SEASON READINESS CHECKLIST: WHAT'S NEW? Tax receipting for the new Home Renovation Tax Credit The New Home Buyers' Amount ($5000) The GST/HST New Housing Rebate Increased EI Benefits and Clawback Zones ($52,875) Wage Earner Protection Program Employment Perks. Employees will be treated to new tax free perks of employment in certain circumstances. New RPP Contribution Maximums New RRSP Contribution Maximums Deductibility of Losses in RRSP/RRIF values on final return Child Care Expense Limitation for Working Teenagers Moving Expenses review Increased claims for Trucker's Meal Expenses Changes to GST/HST Rebates on Employment Deductions ( 5/105 for GST and 13/113 for HST) Indexing changes to personal amounts including Basic Personal Amount and Age Amounts and many more.  Changes under the CANADA-US Tax Treaty GST and the Financial Services, including Trailer Commissions or Trailer Fees Additional Education Resources: Distinguished Advisor T1 Tax Update Tour. Join us for a concentrated, focused day on the personal tax filing issues of concern to taxpayers, investors and professional planners in major centres across Canada January 15 to 25.   EverGreen Challenge 2010 Self Study Course: Hands-on practical training designed especially for tax and financial advisors and their new and returning staff. Convenient self study course to enable in-office certificate studies before the busy tax season starts. Lower in-office group study rates available. Don't delay! Call 1-866-953-4769 to register now.

<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />  We look forward to working with you in sharing knowledge on tax efficient retirement, investment and wealth management strategies in 2010.   All the best for a happy and healthy year!

As we discussed in our last issue of Breaking Tax and Investment News, with the end of the year now past us, it is worthwhile to review changes that have occurred during 2009 that may impact you or your clients at tax filing time.   Following are recent tax changes specific to those who are employed. It is important to review various tax provisions available to employees in this year of change, as the economic downturn has led to numerous job losses, especially in the automotive, media and manufacturing sectors. Travel Within a Municipality or Metropolitan Area. Starting with tax year 2009, allowances paid for an employee to travel within the municipality or metropolitan area may be excluded from income if the allowance is paid primarily for the benefit of the employer. Certain criteria must be met including that the vehicle is specifically designed or suited for the employer's business and essential for the performance of the employee's duties, and that there are legitimate business reasons why the employee must take the vehicle home at night. Gifts and Awards. Effective for 2010, the CRA's policies regarding gifts and awards paid to employees will be as follows: ï Non-cash gifts and non-cash awards to an arm's length employee, regardless of number, will be non-taxable to the extent that the total aggregate value of all non-cash gifts and awards to that employee for the year is less than $500.   ï In addition, a separate non-cash long service/anniversary award may also qualify for non-taxable status to the extent its total value is $500 or less.   ï For the purposes of applying the $500 thresholds, the annual gifts and awards threshold and the long service/anniversary awards threshold are separate. Nominal Value Gifts. Items of an immaterial or nominal value, such as coffee, tea, T-shirts with employer logos, mugs, plaques, trophies, etc., will not be considered a taxable benefit to employees.   All of these amounts will already be included in Box 14 of the T4 slip, however, it's good to know about them as you negotiate your compensation from your employer. Transit Passes. Effective for 2010, note the following for employees of transit companies (including bus, streetcar, subway, commuter trains or buses and ferry services): ï Passes for the exclusive use of the employee will be tax-free. ï Free or discounted passes for the use of the employee's family will be a taxable benefit. Educational Resources:  Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources available from The Knowledge Bureau: Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business

The Knowledge Bureau management and staff would like to extend warm holiday wishes to all Knowledge Bureau clients, students and faculty members and all the best for a happy and healthy 2010. Please note that The Knowledge Bureau's offices will be closed for the holiday season, beginning on December 24th and will open with reduced holiday hours from December 28th - 30th. The offices will be open with regular hours beginning on Monday, January 4th, 2010.      Student support questions received from December 24th - 27th will be responded to by end of day December 28th.   The Knowledge Bureau Management and Staff