citizens or $500,000 for spouses who are both U.S. the first $250,000 gain on the sale of a house is exempt from tax for U.S. However, I can envision a government trying to move to a U.S model. I would suggest the tax-free nature of a home is clearly a sacred cow to most Canadians and the political risk in making your home taxable would be immense. This measure was implemented to prevent some of the abuse in respect to the non-reporting related to PR (especially house flips) and situations where taxpayers thought the sale was exempt and in fact it was not exempt. In 2017, the Liberal government issued legislation that requires you to report the sale of your PR, even if it is exempt ( see the second paragraph of this post). Each family unit is only entitled to one PR exemption. Tax-Free Sale of Your Principal ResidenceĬurrently, when you sell your principal residence (“PR”) it is tax-free. In addition, a change in inclusion rates has been floated multiple times by different governments, so the shock component would not be high. I think no one would be surprised if the capital gains inclusion rate is increased in the future and I don’t think there is huge political risk in doing so, since most people paying capital gains have already been hit with higher personal and corporate taxes and are numb to various tax hits. However, the inclusion rate was not changed. In fact, in 2017 I had a few clients sell stocks to lock in the 50% rate because there were rumours the Federal Liberals would increase the inclusion rate to 3/4. The above clearly reflects various governments do not see a 50% inclusion rate as a sacred tax cow. From 2000 onward, we have been at the current 50% inclusion rate (except for 8 months in 2000). For the years 1990-1999, 3/4 of your capital gain was taxed. For 19 the inclusion rate was changed to 2/3 of your capital gains. ![]() ![]() Aw, the good old days! From 1972 to 1988, the government only taxed 50% of any capital gains. The capital gains rate prior to Januwas nil. The tax-free nature of your principal residence The 50% tax inclusion rate for capital gainsġ. In my opinion, these tax cows are as follows:ġ. What tax cows am I talking about? I would suggest in Canada we have two “sacred tax cows” and one “tax cow” which is important but has been sacrificed in the past and will likely be in the future. I am not sure exactly what they are finding, but I would guess personal type expenses such as professional fees for matrimonial or family law advice, will preparation and/or corporate organizations (that often need to be amortized rather than deducted on a current basis) are the type of expenses they are looking at. I can only presume the CRA has had some success in the last two years reviewing such claims. Clients are still getting requests to support their professional fee claims as far back as 2015. Surprisingly to me, the majority of these request still relate to professional fees (I noted this in a prior blog post). These requests seemingly arrive daily for my corporate clients. These claims often indirectly also affect the parents, as their child may have transferred up to $5,000 in tuition credits to their parent. Tuition Tax Credit – This request is typically for the children of taxpayers attending University, especially when outside Canada. ![]() That way you won’t need to provide 20 or 50 individual receipts when you receive a request.ĭonation receipts – Typically for larger donation claims. Medical receipts – I have noted in prior blog posts, make your life easier: ask your pharmacy and medical practitioner to print out one yearly receipt. These requests continue to arrive on a frequent basis for my clients:įor personal tax returns, the information request which is essentially a request to provide back-up documents to substantiate deductions and credits claimed on your 2017 tax return, continue, as in prior years, to be typically for the following deductions and credits: I was also informed by a CRA representative, that the CRA can only process one T1 adjustment per taxpayer at a time (I was not aware of this) and thus, if you have an adjustment in progress, wait until it is resolved before sending in the second adjustment. The CRA is often inundated with these forms and last week I was told there could be up to a 6-7-month turnaround on the reassessment of a T1 adjustment so keep this in mind if you are waiting for a response on a previously filed T1 Adjustment Request or filing a request. ![]() You or your accountant would use this form to report a late received tax slip, an amended tax slip, information that was inadvertently missed, or anything else that should have been reported or claimed as a deduction and was not on your return. A T1 Adjustment Request is probably the most often filed tax form with the CRA.
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