Canadian Personal Taxes

CRA offers many payment options.

If paying by cheque, make your cheque payable to “Receiver General of Canada” and send it to:


Canada Revenue Agency

PO Box 3800 STN A

Sudbury ON P3A 0C3

Attach a remittance voucher, or else clearly mark on the cheque your SIN or business number (ending RT0001 for HST payments) and the period it applies to (year or quarter).

We are accepting new clients for Canadian returns. Please call or email to arrange a complimentary consultation (up to 15 minutes) with one of our tax preparers, or simply complete and submit your tax package to our office at tax time.
April 30th – General tax deadline
June 15th – If you and/or your spouse has self-employment income.

NOTE: interest will accrue on any outstanding balance owing as of May 1st.

The penalty for late-filing a tax return is 5% of the balance due, plus an additional penalty of 1% of the outstanding balance for each full month the return is late.

Interest on overdue taxes, CPP and EI remittances is charged at CRA’s prescribed rate and compounded daily.

Penalty for repeated failure to report income: A taxpayer may be assessed a repeated failure to report income penalty of 20% (10% federally and 10% provincially) of the unreported amount of income for a second or subsequent failure to report income on a tax return that occurs within a four-year period. (For example, omitting one of your T-slips).

Occasionally, filing many years of tax returns at once will result in a CRA audit, so it is a good idea to have one’s receipts and documents well-organized in this situation.

If you are legally married, you must list your status as “married” on your tax return.
If you have been living with a partner for at least consecutive 12 months, you should file as “common-law”.
If your marital status changes during the year, you must inform CRA within one month of the change by filing a RC65 form. We can file this for you if you contact our office.

When a couple separates or divorces, the Child Tax Credit can be shared.

The tax preparer will apply the expenses to maximize the tax benefit.

Medical expenses create a tax credit to the extent that they exceed either 3% of a taxpayer’s net income or about $2200 (whichever is less). They can be combined and claimed by one taxpayer, so please submit medical expenses for all family members.

The tax preparer will apply the donations to maximize the tax benefit.
Donations can be combined and claimed by one taxpayer, so please submit charitable receipts for all family members.
Unused donations may be carried forward for 5 years.
The tax preparer will apply these expenses to maximize the family’s tax benefit.
Generally, child care expenses have to go on the return of the lower-income earner. This means that if one spouse has no earned income, no deduction can be taken for child care.
Tuition expenses can be transferred to one’s partner, or parent, to the extent that the taxpayer does not need the credit to reduce his/her own tax. It can only be transferred in the year the expense is incurred, however.

Unused tuition amounts may be carried forward indefinitely, but must be used in any given year to the extent that the taxpayer is taxable.

There is an extensive list of eligible medical expenses, including prescription drugs, dental and vision costs, premiums for private health insurance plans, and payments to certain types of medical practitioners like chiropractors and naturopaths.
NOTE: vitamins and supplements are NOT eligible medical expenses, even if prescribed by a medical practitioner.
For a full list of eligible medical expenses, click here.
To see authorized medical practitioners by province, click here.
Your principal residence can be any of the following types of housing units:

  • a house;
  • a cottage;
  • a condominium;
  • etc.

A property qualifies as your principal residence for any year if it meets all of the following four conditions:

  • It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
  • You own the property alone or jointly with another person.
  • You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
  • You designate the property as your principal residence.

Please note that the disposition (sale or change in use) of a principal residence must be reported on the tax return in order to qualify for the capital gains exemption – please be sure to notify us in this situation, and to file your tax return on time as there are costly penalties for failure to comply.

You designate your home as your principal residence when you sell or are considered to have sold all or part of it. You can designate your home as your principal residence for the years that you own and use it as your principal residence.  For the designation to be recognized for income tax purposes, a prescribed form must be completed and filed with CRA as part of your tax return.
You can be considered to have sold all or part of your property even though you did not actually sell it. For example:

  • You change the use of all or part of your principal residence to a rental or business operation.
  • You change your rental or business operation to a principal residence.

Every time you change the use of a property, you are considered to have sold the property at its fair market value and to have immediately reacquired the property for the same amount. You have to report the resulting capital gain or loss (in certain situations) in the year the change of use occurs.

The rules for determining what portion of the house can be claimed as a principal residence are fairly complex, so it is important to keep accurate records of the specifics regarding change in use (dates, fair market value of the property at the time, and percentage of property allocated to each use).

Also see:
What are the tax implications of selling a principal residence?
What do I need to know if I am thinking about renting out part of my house?

Please note that the change in use of a principal residence must be reported on the tax return in order to qualify for the capital gains exemption – please be sure to notify us in this situation, and to file your tax return on time as there are costly penalties for failure to comply.

When you sell your home or when you are considered to have sold it, usually you do not have to pay tax on any gain from the sale. This is the case if the property was solely your principal residence for every year you owned it.

Starting in 2016, if you sold your principal residence, and it was your principal residence for every year you owned it, you do have to report the sale on your income tax return. Before 2016, sales of principal residences did not have to be reported on tax returns.

The penalty for late-filing the information regarding the sale of a principal residence (designation form and details of sale) is $100 per month to a maximum of $8,000.

A taxpayer’s principal residence is not subject to capital gains tax when it is sold. When a taxpayer starts to rent part of his/her house, a change in use is said to occur, and the principal residence capital gains exemption may be affected. If the part of the house that is rented is small relative to the whole property, then the whole house may still be considered a principal residence (and thus free of eventual capital gains tax). However, no structural changes can have been made to make it more suitable for renting, and no capital cost allowance (depreciation expense) can be claimed. If any of these conditions are not met, then the rental portion will be subject to capital gains tax when the property is sold.
The main consideration in this situation is the principal residence exemption. A taxpayer’s principal residence is not subject to capital gains tax when it is sold.

A property qualifies as a principal residence for any year if it meets all of the following four conditions:

  • It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
  • You own the property alone or jointly with another person.
  • You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
  • You designate the property as your principal residence.

If you own more than one property only one can be your principal residence. A spouse cannot have a different principal residence. When you sell one of your properties, you must designate which is your principal residence (it can change from year to year).

Income from a rental property is taxable income.

If the property is to be used for short-term residential rentals (less than a month stay; such as AirBnB) then HST must be charged if the revenues are over $30,000 in a year. Please note that if you already have an HST number, then HST must be charged on all short-term rentals (even if rental revenues are less than $30,000).

Expenses incurred to maintain the property (such as property tax, maintenance, insurance, utilities, etc.) are deducted from the income and the net amount is taxable.

Note that if you rent property for commercial use (as opposed to residential use) and the gross rent is over $30,000 you will have to register for an HST number, collect HST and file HST returns. A rental property will be subject to capital gains tax when it is eventually sold.

EMPLOYEE

  • May not deduct expenses incurred in earning income (certain exceptions apply)
  • Receives a T4 for wages
  • Employer pays a share of the employee’s Canada Pension Plan
  • Employer pays a portion of Employment Insurance contributions
  • Receives vacation and statutory holiday pay
  • Tax preparation costs usually lower
  • May receive employer benefits such as health or life insurance

SELF-EMPLOYED

  • Permitted to deduct reasonable expenses incurred to earn income
  • May receive a T4A for wages
  • Must pay the full cost of CPP (employer & employee portions)
  • No EI paid, but nor can EI be collected (certain exceptions apply)
  • No vacation of statutory holiday pay
  • Tax preparation costs usually higher
  • If over $30,000 in gross annual sales must register for an HST number, collect HST and file HST returns
A business expense in order to be deductible for tax purposes must be receipted, reasonable and revenue related.  Documentation must include proof of purchase and payment.  Reasonableness will be evaluated in comparison to total income being reported, comparison to prior years, etc..  The expense must be incurred to earn income either in the current year or within two to three years.  With all three components, the expense could be claimed as a deduction for tax purposes.
The portion of a vehicle that can be claimed as a business deduction will depend on the actual business usage.  This percentage must be calculated as a percentage of the total amount of kilometers driven within the reporting period, Canada Revenue Agency requires a log document which clearly identifies the business portion details such as name of business contact, address, purpose of meeting and distance travelled.
The portion of a home that can be deducted as a home office will depend on the actual square footage as compared to the total size of the home.  This percentage must then be applied against rent or house expenses such as mortgage interest, utilities, insurance and repairs and maintenance to arrive at the total home office deduction.
The decision to lease or buy a vehicle will often depend on the taxpayer’s personal financial position.  If an individual does not have sufficient funds to purchase the vehicle nor qualify for financing, then leasing is the remaining option. 

With either option (purchase or lease), all vehicle expenses must be prorated for business purposes and supported with adequate documentation.

For leased vehicles, there will be a monthly lease payment in addition to the operating costs of the vehicle. No depreciation can be claimed as the vehicle is not owned.

When a vehicle is purchased and financed only the interest portion of the loan payment many be deducted and not the principal.  Additionally, depreciation may be claimed and is based upon pre-established rates.  This non-cash outlay represents the on-going obsolescence of the vehicle.

The credit card receipt by itself is not adequate; there must also be a proof of purchase (ie, store receipt). Credit card receipts must be maintained as a supporting document and the credit card account must be in the taxpayer’s name.  Without both of these documents, in the event of a Canada Revenue Agency audit, the  expenditure will be disallowed. 
There are many ways to keep track of earnings, including spreadsheets, accounting software, running everything through your business bank account… or even just recording with pen and paper. The most important thing is to find a system that works for you, so that you can maintain it throughout the year.
CRA requires that income records should show the amount and date income was received, as well as the source of the income. You should keep original documents to support all income, i.e. invoices; contracts, deposit slips, etc

If you have an HST number, you should also record the breakdown of HST collected, versus business income.

If you are incorporated, also see the related FAQ: How do I keep track of what I pay myself through my corporation?

In this situation, the expenses that can be claimed are specified on the T2200 form. Some examples are: auto expenses, supplies (such as cell phone and stationery), and home office expenses. If an expense is not specified on the form, it cannot be claimed.

If home office expenses are specified on the form, you can deduct the part of your costs that relates to your work space (home office expense), such as the cost of electricity, heating, and maintenance. An employee paid by commissions may also deduct property taxes, and home insurance. Employees cannot deduct mortgage interest or capital cost allowance.

In recent years CRA has become very strict about accepting employment expenses, and has denied may claims.  Be sure to have all documentation in order (signed T2200 and receipts) before claiming this type of expense.

An RRSP should be thought of as strictly for retirement planning, while a TFSA is more general purpose.

An RRSP results in a deferral of tax, since it allows a deduction in the year of contribution. A TFSA is after-tax money, but any interest, dividends or capital gains earned on that money will be tax free.

Both are important parts of a financial plan. Contribute to a TFSA if you are saving for a short-term goal such as a car, vacation, or emergency fund. Contribute to an RRSP if you will not need to withdraw the funds, and can leave them as a true retirement savings plan.

Since contributing to an RRSP results in tax deferral and a possible tax refund, consider contributing to an RRSP, and contributing the resulting tax refund to a TFSA.

There is no straightforward answer, as there are many factors to consider, such as long- and short-term goals, stage of life, tolerance for risk and many others.

First, if you are carrying debts other than a mortgage, they are likely to be at a higher interest rate and should be paid off first.

If your mortgage is at a higher rate of interest than the rate of return you can get on your RRSP contribution, it probably makes sense to pay it off first. On the other hand if you are concerned about your retirement situation it may be time to contribute to the RRSP.

Often a balanced approach is best where some of your excess funds go to RRSP contributions, and some go to debt reduction.

Note that making an RRSP contribution does allow for deferral of tax. The resulting refund could be used to pay down the mortgage.

If you are buying a house you will be asked for 2-3 years of T1 (individual tax) returns, 2-3 years of Notices of Assessment, and if incorporated, financial statements.

Be sure your information is up to date and easily accessible. If you need to request copies from our office, be sure to allow a reasonable turnaround time so you will be prepared when you go to the bank.

Canadian residents must report world-wide income on their tax returns. This includes income generated by properties held in foreign countries such as interest, dividends, capital gains, rental and royalty income, and business income.

If the cost (book value) of any foreign-held assets exceeds C$100,000 at any time in the year, the details must be reported on the Canadian resident’s tax return.

Foreign property includes:

  • money in foreign bank accounts (even if the balance is over the threshold for just a few days)
  • stocks in foreign companies EVEN IF HELD IN, OR PURCHASED THROUGH, A CANADIAN BANK OR BROKERAGE (for
  • foreign rental property
  • units in offshore mutual funds
  • bonds/debentures issued by foreign governments/companies
  • income-producing real estate situated outside Canada
  • interests in non-resident trusts

Foreign property does not include:

  • registered pension fund investments (e.g. RRSPs, US IRA)
  • Canadian-registered mutual funds that invest in foreign stocks (as opposed to foreign stocks held in a brokerage account)
  • personal-use properties (such as a vacation property, even if rented on a short-term basis)
    shares of a foreign affiliate of a Canadian company

Penalties for failing to report this information are punitive: $25 per day for a maximum of 100 days (maximum $2,500).