Don’t Report These Top Fifteen: Exempt Income Sources

It’s important to be a law-abiding tax filer, but did you know that some sources of cash flow and income are not reportable on the tax return? Consider the following checklist and be sure to avoid paying extra tax by including them in error.

Here’s my Top 15 List of types of income you should not report:

1. TFSA withdrawals (neither income nor capital is taxable)
2. Inheritance or gifts
3. Life insurance policy benefits
4. Lottery winnings
5. Strike pay received from unions
6. MLA (Member of the Legislative Assembly) and Municipal Officers Expense Allowances
7. Capital gains on the disposition of taxable publicly traded shares that are donated to a registered charity or private foundation or gains on exchange of private corporation shares for shares in a publicly traded corporation that are subsequently donated
8. Compensation received from a province or territory if you are the victim of a criminal act or car accident. Furthermore, there is no reporting of investment income from such compensation until the age of 18.
9. Proceeds from accident, disability, sickness or income maintenance plans where the taxpayer has made all the (non-deductible) premiums
10. Refundable provincial or federal tax credits (Social Assistance Payments, however, are reported although they are not taxable, because they impact family net income for the purposes of calculating these credits.)
    1. Child Tax Benefits/Canada Child Benefits
    2. GST/HST Credit
    3. Provincial Tax Credits—including child assistance, disability supplements (PQ)
11. Payments for foster care—these payments do not impact family net income for the purposes of claiming refundable credits because they are never included in income.
12. Scholarships and bursaries that relate to elementary or secondary programs, and those for post-secondary students eligible to claim the Tuition, Education and Textbook Amount.  Note however that the education and textbook amount will be eliminated starting in the 2017 tax year.  The exemptions that rely on these eliminated credits, such as the scholarship, fellowship and bursary income exemption, will be modified so as to be unaffected by these changes.  Unused education and textbook credit amount carried forward will continue to be available for future years.
13. RCMP pension or compensation received in respect of an injury, disability or death arising directly out of, or directly connected with, the service of a member in the RCMP
14.  Canadian Service Pensions, under the War Veterans Allowance Act
15. Service pensions from other countries received on account of disability or death arising out of war service in a foreign country that was an ally of Canada at the time of the war service

It really pays to know more about the details in Canada’s tax system. Visiting with a Tax Services Specialist is important any time new income sources are earned or lifecycle changes happen in the family, to ensure that all your tax preferences are properly reported.

Or, you can take matters into your own hands and earn your professional certification and designation online, starting anytime. Early registration bonus is available for those who enroll in Spring Sessions that begin on May 15.

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