Income Tax FAQs

When it comes to taxes, there are some questions we hear all the time. Below are some of the most common questions our clients have.

I hired an accountant to prepare my taxes, and they still got it wrong; do I have to pay the additional taxes?

Yes. In Canada the taxpayer is responsible for the information contained in his or her tax returns. Your best defense is to hire a competent tax professional to prepare your returns and to ask them to review your returns with you in detail before you sign them and they are filed.

How do I determine if something is deductible?

Generally, for an expense to be deductible it must have been incurred for the purpose of earning business income. Business income doesn’t actually need to be earned, but the expense had to have been incurred for the purpose of earning business income. Certain expenditures that have an enduring nature (last more than one year) may be considered to be capital items that need to be written off over a number of years.

Generally speaking, the CRA will allow taxpayers to expense capital items that are below $500.

Learn more about business expenses.

What types of records do I have to keep in case of an audit?

You need to keep all your financial information and accounting documents. Here is a summary of the records you need.

Are digital records OK in the case of a CRA audit?

Yes, if they meet the criteria listed here.

Can I deduct my home office expenses?

Employees: If you have an office in your home, you may be able to deduct expenses if they are related to your employment and you have not been reimbursed for the expenses. You do, however, have to meet certain conditions

Business Owners: Generally speaking, if you have a regular place of work that is not your home office, you will not be able to deduct home office expenses. However, there are certain exceptions, such as if you regularly meet clients at your home or if your home is your principal (>50%) place of business.

Can I deduct my personal vehicle?

You may be able to deduct certain expenses if your vehicle is used to earn business income. The amount you can deduct depends on the type of vehicle you own, and you should keep a logbook of your business travel for the year. Find out more about motor vehicle expenses here. Note that travel between your home and your office is generally not eligible for an auto deduction.

Is there tax on the sale of my principal residence?

The gain on the sale of your principal residence should not be taxable; however, you now have to report the disposition of your primary residence. This is a new change in 2016 that many people may not be aware of.

What are the benefits of charitable donations?

Charitable donations can result in a tax credit of over 50 per cent! That means that if you donate $10,000 to charity, you may get over $5,000 back in taxes (personal and corporate). Read more about charitable donations and taxes.

What medical expenses can I claim to get medical tax credits?

There are a number of eligible medical expenses you can claim for yourself, your spouse, or your common law partner, and it varies from province to province. If you’re wondering about whether you can claim specific medical expenses, talk to your tax advisor.

What can I claim for childcare expenses?

You may be able to claim childcare expenses if they were incurred so you could go to work, operate a business, go to school, or conduct research. Here is more information on childcare expenses from the CRA.

Note that childcare expenses can only be deducted against ‘earned income’ such as employment income earned on a T4, and not against dividends from your private company. Your tax professional can help you plan the correct remuneration strategy to ensure that you are able to utilize your childcare expenses.

Can I deduct my alimony / support payments?

Generally, you can deduct spousal support payments that are the result of a written agreement or court order. Child support payments are not deductible. If you receive spousal support payments as a result of a written agreement or a court order, you must report this amount in your income.

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