Tax Planning Centre

Many people don’t think about taxes until tax time. By then, it may be too late.

Basic to Advanced Tax Planning Options

For many of us, thinking about our income taxes, much less doing our own tax returns, is about as appealing as getting a root canal. That said, it pays to take some time to familiarize yourself with Canada’s tax system.

In fact, with a little effort, you may be able to ring up some substantial tax savings.

That’s because knowing how the tax system works gives you a powerful advantage in benefitting from the many legitimate opportunities for minimizing income tax payments. A good way to begin is to dig out your last tax return to see how much tax you actually paid. Ouch!

Get Started

We encourage you to explore the links below. They’ll take you to articles with answers to many common tax questions. You’ll also find information and ideas that will help you plan a more effective tax strategy for you and your family. If you have any questions, send us an email and we would be pleased to help.

What's New


2024 Ontario Budget Summary

The Ontario government's 2024 budget, tabled on March 26, 2024, proposes investments in the workforce
and essential public services, with a focus on not increasing taxes or fees.


2023 Federal Budget Summary

The federal government's 2023 budget, tabled on March 28, 2023, introduces a range of new measures that could have an impact on your personal finances, business operations and annual tax filing.


A Guide to Tax-Efficient Investing

Gain a better understanding of how you can reduce or defer the tax you pay on your investment portfolio, thereby allowing you to grow your investments faster and reach your retirement goals sooner.


2023 Tax Planning Guide

Each year brings changes to the tax code. This tax guide can help individuals and owner-managed businesses prepare their annual tax filing and pay less tax.


Tax Documentation Checklist

The Fund Facts document provides valuable information about a mutual fund, including the performance history, investments and the costs associated with investing in a mutual fund. Looking to invest in a fund? Get the facts.


CRA Confirms Paying Fees Outside of RRSP or TFSA Accounts Not an Advantage

After nearly three years, the uncertainty has ended for investors who pay the management fees on registered accounts like RRSPs and TFSAs from outside those accounts.


CRA Updates Principal Residence Folio

The ability to claim the principal residence exemption (PRE) on the sale of a home is one of the most valuable tax-reduction strategies many Canadians will ever use. Read the CRA update.


Federal Trust Rules Update

Effective January 2, 2016, the federal government changed the rules governing trusts. If your estate plan included trusts in your existing will(s) or gifts to registered charities, you may need to revise your strategy.

Additional Information

Attribution Rules

Attribution Rules

Finding ways to lower taxes

Income splitting is a strategy for decreasing the tax burden of a family. Here’s how it works: Money or property is loaned or transferred to a lower-income family member so that gains are taxed at a lower rate.

It can be a great way to minimize taxes, but attribution rules can block many of these opportunities. The first thing you need to know about attribution rules is that they are very complicated. The rules were designed to prevent attempts to shift income to another person by attributing it back to the person who transferred the money or property. In other words, if a wife transfers investments to her lower-income husband, any income realized on the investments could be assigned back to the wife.

Though the husband receives the income, the wife still pays tax on it at her marginal rate, and the family is no further ahead.

The rules governing attribution

There are a lot of rules in the Income Tax Act pertaining to attribution, and many of them are intended to foil circumvention of the general rules.

One of the most misunderstood attribution rules is significant because of its scope. The rule states that trust income is attributed to the person who transfers property to a trust when that person reserves the right to take back the property or retain some control over it. This rule applies to certain specific circumstances, and professional guidance is advised. However, in spite of the numerous attribution rules, some income-splitting opportunities do exist.

For example, a higher-income family member can pay all of the family’s living expenses, leaving the lower-income person with more to invest. Also, the new Canada Child Benefit (CCB), like its predecessor, the Canada child tax benefit (CCTB), may be invested in a child’s name without any attribution of income back to the parents.

As in all matters related to tax planning, it’s important to understand the rules and how they affect your specific situation.

Taxes and Your Investments

Taxes and Your Investments

The only real number that matters in investing is what you make after the Canada Revenue Agency takes its share. This is known as your after-tax rate of return.

A fixed-income investment paying 7% sounds good but consider your after-tax return. If you were in the top income-tax bracket of around 50 percent, you would take home only about 3.5%, which is quite a difference (assuming the investment is outside of your RRSP).

What is more, the amount of tax you pay varies with the type of investment and how you arrange your portfolio. These factors can have a great impact on your after-tax return. (Note that you don’t have to pay any tax on gains earned by money in a tax-sheltered account such as an RRSP or a RRIF until you make a withdrawal.)

The most heavily taxed types of investments are those such as GICs and CSBs that earn you interest income. Stocks, real estate and other investments that entail more risk but have the potential for higher returns in the form of capital gains are taxed less.

Dividends from Canadian corporations have the lowest effective tax rate.

Description Interest Dividends
(Gross-up)
Capital Gains
Taxable Amount$1,000.00$1,380.00$500.00
Basic Tax (41%)$410.00$565.80$205.00
Dividend Tax CreditN/A($207.00)N/A
Net Tax$410.00$358.00$205.00
Net After-Tax Income$590.00$642.00$795.00

Tax Loopholes

Tax Loopholes

Here’s a little-known tax fact: most tax loopholes are intentional, created by the Ministry of Finance to stimulate certain sectors of the economy. For example, if your employer buys a $30,000 car on Dec. 31, you can write off half a year’s depreciation, or $4,500, even though this new asset was held for only one day.

This is no oversight. More likely, it’s an incentive for businesses to purchase cars. In contrast, true tax loopholes are unintentional benefits you find only by reading between the lines of the Income Tax Act.

For example, consider the tax-saving opportunity that presents itself if your spouse has losses on investments and you have gains:
Shifting Capital Loss From One Spouse to Another

Imagine Susan is sitting on a capital loss this year, while her husband, Tim, realized a capital gain. According to the letter of the law, Tim cannot use Susan’s loss to offset his gain. He will have to pay tax on his gain, while Susan’s loss remains unused until she can apply it to a future capital gain of her own.

By reading the Income Tax Act closely, there is a solution. To share a capital loss with her husband, all Susan has to do is sell her losing shares to Tim, allowing him to claim the loss as his own. Let’s explain. We’ll assume that Susan’s shares originally cost $10,000, but are now worth $1,000 – a potential loss of $9,000. She sells the shares to Tim at the fair market value of $1,000, then elects on her income tax return not to have the transaction occur at cost.

This allows her husband, as the purchaser of the shares, to add the $9,000 capital loss to his adjusted cost base for tax calculation purposes. Now Tim owns shares with a fair market value of $1,000 and an adjusted cost base of $10,000.

The final step is for Tim to simply sell the shares. The $9,000 loss goes on his books, not Susan’s, because he bought the shares from her at fair market value. While this may sound complicated, it really isn’t in practice.

Keep in mind, however, that this loophole applies only to spousal transfers of capital property. In other words, it won’t work if you sell losing shares to another family member or a friend.

RRSP Contribution vs. Mortgage Paydown

RRSP Contribution vs. Mortgage Paydown

Some people feel that it is more important to pay down the mortgage rather than contribute into RRSPs. While reducing your mortgage quickly makes sense, you should recognize that you’ll need a significant nest egg to retire comfortably.

There is a way to accomplish both goals, however. Contribute to your RRSP and use your tax refund to pay down your mortgage. You’ll be building your nest egg and reducing your mortgage at the same time!

Example:

Here’s an example that asks the question: Is it better to pay down the mortgage or contribute to an RRSP?

Certainly, every situation is different and mortgage rates change over the years, but let’s consider this example: Assume a 42% marginal tax bracket and a maximum RRSP contribution room of $12,000. Tax savings from the contribution are approximately $5,040 in this case. This equates to $420 a month of new money that can be applied to the mortgage.

Now let’s assume the $125,000 mortgage is amortized over 25 years and an average interest rate in that period of 6%. Monthly payments are $799.76.

If this is bumped up by the $420 a month in tax savings from the RRSP, the taxpayer cuts the amortization period by 13 years.

The results are the following: Accumulated tax-sheltered earnings on growth of annual $12,000 contributions for 12 years, compounding at a before-tax rate of return of 6% amounts to about $214,600. Interest savings on the reduced amortization period of 12 years rather than 25 years equals approximately $65,300.

Total accumulated principal and earnings in the period will produce net worth of $214,600 in the RRSP and $125,000 in home equity and a further $65,300 in interest savings for a total of $404,900 all from an investment of just $144,000 ($12,000 x 12 years).

7 Key Tax Planning Tips

7 Key Tax Planning Tips

While tax preparation software can catch most credits and deductions, it’s easy to
overlook them. Here are some of the key reminders for you:

  1. Pension splitting
    Your spouse can benefit from pension splitting by using Form T1032-Joint Election to Split Pension Income. Up to 50% of income can be allocated to a spouse or common-law partner, producing a lower overall tax bill and either avoiding or reducing the clawback of Old Age Security (OAS) benefits for one or both spouses. In addition, both spouses may be able to claim the pension tax credit.
  2. Expenses
    Some expenses only qualify as tax deductions or tax credits if you pay them before the end of the tax year. Examples include interest costs on investment loans, medical expenses and spousal support payments.
  3. Donations
    Charitable donations should also be used to create the greatest possible tax benefit. If a couple has donated more than $200 in the tax year, the receipts should be combined and claimed by the partner with the highest income, thereby maximizing the allowable credit. Don’t forget, you can claim as many as five years’ worth of donation receipts on the same tax return.
  4. Tax credits for kids
    Tax credits aimed at children can help parents reduce or eliminate the amount of tax they owe. Child-oriented tax credits you may benefit from include the federal government’s children’s fitness and arts tax credits (both of which will be eliminated for 2017). You may also benefit from the adoption expense tax credit.
  5. Child care
    Deductions are available for child care expenses such as daycare and after-school care costs. Costs for boarding school and camp fees may also qualify. Generally, the younger the child, the greater the allowable expense claim limit.
  6. Students
    Non-refundable tax credits for tuition, education and textbook costs can also be claimed by a student or their parents or grandparents. Certain types of examination fees will also be considered as part of tuition expenses when claiming the credit.
  7. Kiddie tax
    Budget 2014 expanded the so-called “kiddie tax,” making it more challenging to split business income with minor children. The new rules apply to the 2014 taxation year onward. Also known as the tax on split income, these rules tax income at the highest federal tax rate (29%), even if a minor child or spouse is in a lower bracket.

Additional considerations

Finally, if you have a spouse or child with little or no income, there are some good reasons why they should still file a tax return. First, earned income determines eligibility for government programs such as the Canada Child Tax Benefit (CCTB) or the GST/HST credit. Students, especially, should make sure they file a return in order to claim the GST/HST credit. And even a small amount of reported income will add to future registered retirement savings plan contribution room.

Deadline exceptions

The April 30 deadline has exceptions, including for individuals or their spouses who are self-employed or ran a business, or if a spouse died during the tax year. In these examples, the individual has until June 15 to file returns. The Canada Revenue Agency (CRA) allows the extension in these cases because it may take longer to gather the necessary filing information. However, the extended deadline in these instances doesn’t cover the actual taxes owed. They still have to be paid by April 30.

Need Advice?

Reviewing your Tax Plans? We encourage you to talk to us. Speak to your Financial Advisor or contact investor services at 1 800 608 7707.

Download the PDF version of this article

10 Tips to Avoid a CRA Audit

10 Tips to Avoid a CRA Audit

Are you actively seeking an audit? Probably not. But if you were, Canada Revenue Agency (CRA) helpfully publishes alerts on its website that identify areas of concern for auditors and warn about actions and investments the agency is likely to investigate. Here are 10 red-flagged practices that could contribute to a CRA decision to audit your tax return.

  1. Employment Expenses
    The CRA is paying closer attention to employees who attempt to deduct employment expenses from their employment income. Employees are very limited in the types of expenses they can deduct. Those employees who choose to make a claim can expect questions from CRA.
  2. Large Charitable Donations
    The CRA seems to draw the line at cash donations in excess of $25,000, asking for additional information to substantiate the donor’s claims.
  3. Allowable Business Investment Loss (ABIL)
    An ABIL occurs when a person disposes of debt or a share of a small business corporation. The advantage of realizing an ABIL over an ordinary capital loss is while capital losses may only be deducted against capital gains, an ABIL may be deducted against all sources of income, including employment income. In order for a loss on debt or equity to qualify as an ABIL, it must meet certain complex and strict rules. When claiming an ABIL, make sure to keep all relevant information that may be required by CRA.
  4. Tuition/Education Expenses
    The CRA continues to ask for backup for any post-secondary tuition and/or education expenses claimed on a student’s tax return. Ensure your children keep copies of all tuition slips, especially if the amounts are being transferred to you, the paying parent.
  5. Carrying Charges
    While expenses incurred for the purpose of earning investment income (such as interest expense on borrowed money) are typically tax-deductible, it’s essential to keep the necessary supporting documentation and to ensure personal expenses are not being claimed. This is particularly important when interest is being claimed on leveraged investing. If a line of credit (LOC) is used for investing, you must ensure that funds drawn from the LOC are being recorded in detail and not mixed with any personal expenses.
  6. Foreign Tax Credits
    If you earn foreign-source income, you must claim any foreign tax withheld as a credit on your Canadian personal tax return. This foreign tax credit can be used to offset any Canadian tax payable and will directly reduce Canadian tax dollar-for-dollar. That said, Deloitte reported that in 2004, the CRA has become much more active in questioning entitlement to foreign tax credits and reviewing taxpayer claims. We can’t emphasize enough the importance of keeping good records, especially foreign tax documents, bank or investment statements that may substantiate any foreign income earned and foreign taxes paid.
  7. Child-Care Expenses
    Many organizations provide receipts to parents for services that may not actually qualify for tax relief because their main purpose is not the provision of child care. Examples cited by Deloitte include athletic coaching, music lessons and tutoring. For expenses to be deductible, they “must relate to the overwhelming component of guardianship, protection and child care. Recreational activities were never intended to be included as such an expense by Parliament…” Perhaps the reason for the confusion among some taxpayers is that these organizations often print “for tax purposes” on their receipts, potentially misleading parents into thinking such fees are tax-deductible as child-care expenses.
  8. Verification of Capital Gains and Losses
    When you purchase non-traditional investments, such as income trusts or investments in foreign currencies, the calculation of your capital gains and losses can attract unwanted attention. Income trusts pose a unique problem because they often distribute a “return of capital” (ROC), which is tax- advantageous since it’s not currently taxable but rather reduces your adjusted cost base (ACB). You need to keep a record of your ACB adjustments so the correct capital gain or loss can be reported when the income trust is ultimately sold. The other item to watch for when calculating a capital gain or loss is investments denominated in foreign currencies. When these are sold, you must calculate not only your economic gain but also the foreign exchange component of any gain or loss. The foreign exchange gain or loss calculation should be done by comparing the foreign exchange rate on the date of purchase with the rate on the date of sale, as opposed to the average rate for the year.
  9. Province of Residence
    As the debate about interprovincial tax planning continues to grow, provincial residency is increasingly an item of scrutiny for the CRA. For example, if you live in a province with a high marginal tax rate, it would be very attractive to take advantage of a lower marginal tax rate in another province. This could be done by acquiring a recreational property in the province with the lower rate, or even by merely establishing a mailing address in the province. Under our tax law, Canadians must pay provincial tax on their worldwide income based on the taxpayer’s residence in a particular province on December 31
  10. Mining and Oil & Gas Investments
    There are specialized tax rules governing investments in resource properties. If you choose to invest in such flow-through shares and other resource-based limited partnerships, you may wish to seek professional help come tax time. The CRA often requests additional information on amounts reported on the return when flow-through amounts and tax credits are claimed.

Need Advice?

Reviewing your Tax Plans? We encourage you to talk to us. Speak to your Financial Advisor or contact investor services at 1 800 608 7707.

Download the PDF version of this article

Recent Articles

Taxes and the Self-Employed

Taxes and the Self-Employed

April 2020

Canadians have heard the lure of self-employment–and they’ve responded. Some three million tax filers now call themselves boss, and the number is growing annually.

If you’re self-employed and your business is not incorporated,
you are responsible for filing an individual tax return each year. Your income must be reported as business or professional income, and you can deduct, or “write off,” your business expenses.

The Canada Revenue Agency (CRA) gives self-employed workers a bit longer to submit their returns each year–the deadline is June 15. But remember, if you owe taxes, interest begins accumulating as of April 30, which is the deadline for individuals who are not self-employed.

Claiming expenses

The CRA allows you to deduct a reasonable amount of the expenses you incur to earn business income. Just be sure to keep your receipts in case you’re audited.

Here are the main deductions you may be eligible to claim.

Business operating costs

Any money spent in the operation of your business–including interest on borrowed money, fees for professional services like accounting, and the cost of office supplies and utilities–is considered a business expense.

For some expenses, like meals and entertainment, you can claim only half the amount spent, or a reasonable portion under the circumstances, whichever is less.

For items with both a personal and a business component, you can claim only the business portion of these costs.

Capital property costs

Capital property covers things you buy in the course of running your business, like office furniture, computer equipment or a building. Over time, you can write them off in the form of depreciation. This is called a capital cost allowance (CCA).

Home office and automobile costs

The cost of having an office workspace in your home can be deducted. To calculate the deductible, start by determining the size of the office space as a percentage of your home’s total size. For example, if your office is 10 square feet and your home is 100 square feet, your office is 10% the size of your home. This means you can deduct 10% of your home expenses, including mortgage interest or rent, utilities, insurance, security monitoring and repairs.

Similarly, if you use your vehicle for both business and personal use, you can deduct a percentage of the costs based on how often you use the vehicle for business.

Should You Incorporate?

As your income grows, you may reach the point where it makes sense to incorporate your business. A rule of thumb is to consider incorporating once your business is profitable enough that you’re covering all your living expenses and have money left over to save and invest.

There are costs to setting up and maintaining a corporation, but these costs can be more than offset by the fact that corporate profits are taxed at a much lower rate than personal income.

By incorporating, you’re also protecting yourself from personal liabilities, which is an important part of creating a sound financial plan for you and your family.

CRA Confirms Paying RRSP, TFSA Fees from Outside Accounts Not an Advantage

CRA Confirms Paying RRSP, TFSA Fees from Outside Accounts Not an Advantage

October 2019

After nearly three years, the uncertainty has ended for investors who pay the management fees on registered accounts like RRSPs and TFSAs from outside those accounts.

The Department of Finance has released a so-called “comfort letter” to commercial tax information
providers saying the department will recommend an amendment to the Income Tax Act’s definition of “advantage” to exclude the practice of paying for investment management fees from funds outside of registered plans.

In 2016, the CRA said it viewed this practice as creating an unfair advantage because it was equivalent to a tax-free increase in the value of the registered plan. In other words, paying fees from outside registered accounts would preserve registered capital.

Ever since, industry groups such as the Investment Funds Institute of Canada and the Canadian Life and Health Insurance Association have been consulting with the CRA to halt the proposed implementation, saying that clients who pay fees outside registered accounts aren’t usually tax-motivated.

If you have questions about the payment of fees on your registered accounts, contact your GP Wealth financial advisor.

Year-End Tax Planning

Year-End Tax Planning

April 2020

Year-end means the return of winter, the arrival of the holiday season and, like it or not, a certain amount of financial planning.

And that means taking advantage of every deduction and tax credit available to you.

Come tax time, the goal is to pay yourself… not the CRA.

Leaving funds on the table for the government just doesn’t make sense. As we enter the final weeks of 2017, here for your consideration are a few year-end tax tips that could help you keep more money in your pocket: Repay any money withdrawn from your Registered Retirement Savings Plan (RRSP) under the RSP Home Buyers’ Plan.

Repayments must be made no later than March 1, 2018, to avoid taxation. Make any charitable donations you want to claim in 2017. If you have business-related purchases to make, consider doing so before year-end. These may include professional dues and membership fees.

Capitalize on the new $5,500 TFSA contribution limit.

10 Tax Planning Strategies

Here are 10 strategies to consider now – before the end of the year – in order to reap the greatest benefit.

1. Tax-Loss Selling
In times like these, when markets are volatile and investors sustain more than the usual capital losses, tax-loss selling can be a silver-lining strategy. There are several ways to approach this strategy:

  • Transfer unrealized capital losses from a spouse or common-law partner.
  • Donate securities to a registered charity by year-end to receive a tax credit.
  • If you have investments with unrealized capital losses, you can sell them before year-end to realize the loss; then use the loss to offset realized capital gains in the current year (which will minimize taxes).
  • Or, you can offset any capital gains you may have incurred in the past three years, or carry the loss forward indefinitely to offset future capital gains.

IMPORTANT NOTE

One of the most commonly suggested loss-realization strategies for clients who still want to hold an underlying fund is to transfer the fund with the accrued loss to an RRSP. This idea, however, comes with an important caveat – if a fund with an accrued loss is transferred to an RRSP, the loss is denied.

Instead, the fund should first be switched into a money-market fund outside the RRSP.

Next, the money-market fund should be contributed in-kind to the RRSP. The RRSP can then redeem the money-market fund and repurchase the original fund.

In the past, there was no need to worry about the 30-day superficial loss rule because the individual isn’t buying back the same fund – their RRSP is. The 2004 federal budget, however, amended the definition of affiliated, such that a person is now considered to be affiliated with a trust if the person is a majority interest beneficiary of the trust, which would be the case with RRSPs.

As a result, the investor should either wait the 30 days before switching back from the money-market fund to the original fund or consider transferring to another version of the fund inside the RRSP, such as a corporate class fund, if available.

If you want your loss to be immediately available for 2017 (or one of the prior three years), the settlement must occur in 2017, meaning the trade date can be no later than December 27, 2017.

Talk to your financial advisor about these strategies and whether selling or transferring equities is right for you.

2. Estate Planning
Is your will up to date? End-of-year financial housekeeping is a good time to review your will and make sure it represents your current situation and intentions regarding your estate.

3. Registered Plans
If you have any unused contribution room in your RRSP, consider topping it up. (The deadline for 2017 RRSP contributions is March 1, 2018.) If you turned 71 in 2017, you have only until December 30, 2017, to make a contribution to your RRSP for 2017 (but you can include 2017 contributions if you were paid a salary or wage in 2017).

4. Personal Payments
The final tax installment payment for 2017 is December 15th. Parents of children under 16 can claim a non-refundable tax credit of up to $500 for each child registered in an eligible physical activity program.

5. Transit Pass Tax Credit
Provided certain conditions are met, public transit users can claim a non-refundable tax credit.

6. Mutual Fund Purchases
To avoid having to report year-end distributions, consider postponing the purchase of non-registered mutual funds until the new year.

7. Non-deductible Interest on Your Loans
Consider paying off your debt by selling some of your non-registered investments, and then borrowing to replace the investment.

8. Allocating Pension Income to your Spouse
You may be able to increase your after-tax income from your retirement plans by allocating up to one-half of eligible income that qualifies for the existing pension income tax credit to your resident spouse or common-law partner.

9. Stock Option Deferral
Stocks acquired through stock option plans can have the benefit deferred on amounts up to $100,000 in total fair market value (at the time the options were granted).

10. Tax Shelters
Seek professional advice and consult with your financial advisor before investing your money in a tax shelter. The quality of the product is more important than the immediate tax savings.

Tax-Loss Selling Can Save Taxes

Tax-Loss Selling Can Cut Your Tax Bill Today

October 2020

The end of each year is a good time to review your portfolio and identify under-performing securities for tax-loss selling to help with year-end tax planning and savings.


What is Tax-Loss Selling?

  • Tax-loss selling is a year-end strategy an investor can use to reduce their tax liability. By selling securities with accrued capital losses, an investor can help offset taxes otherwise payable in respect of other securities that have been sold at a capital gain. The proceeds from the sale of these securities can then be reinvested in different securities with similar exposures to the securities that were sold, to maintain market exposure.
  • Even if capital gains are not available in the current year, the realized losses may be carried back for three years to shelter gains realized in those years or carried forward to reduce capital gains in upcoming years.
  • The ability to recognize a capital loss for tax purposes may be restricted in certain circumstances, including where the acquired security is identical to the security that is sold. You should not repurchase the loss security within 30 days of the loss sale. You should consult with your advisor to ensure that restrictions do not apply.

Tax-Loss Selling Example

  • Realized capital gains from previous transactions or capital gains distributions from mutual funds can be offset by selling securities, which are trading at a lower price than their adjusted cost base.
  • An Investor can then use the proceeds from the security that was sold to invest in a different security.
  • In addition to common shares, tax-loss selling can also be applied in respect of other financial instruments that are on capital account, such as bonds, preferred shares, ETFs, mutual funds, etc.

Important Date to Remember

Every year, the last day for tax-loss selling in Canada and the United States is December 29.

The Ontario “Staycation” Tax Credit and How to Use It

The Ontario “Staycation” Tax Credit and How to Use It

January 2022

Ontario’s provincial government has introduced a temporary tax measure to stimulate tourism in the wake of the pandemic lockdowns.

The Ontario Staycation Tax Credit is also a nice holiday gift for the province’s taxpayers, applicable on vacations taken between January 1 and December 31, 2022.

The refundable credit will give residents back 20 percent of the money they spend on accommodations on amounts up to $1,000 for an individual and $2,000 for a family — for a maximum credit of $200 and $400, respectively.

According to the conditions of the Staycation credit, the spending must be for a stay of less than a month in Ontario establishments like motels, hotels, lodges, cottages, campgrounds and bed-and-breakfasts.

Additionally, the money must be paid by the Ontario tax filer, their spouse or common-law partner, or their eligible child, as set out on a detailed receipt.

The Staycation initiative was announced as part of the government’s Fall Economic Statement, tabled in November 2021.

From Tax Refund to Investment Savings

From Tax Refund to Investment Savings

April 2022

Sometimes a tax refund seems like free money from the government. Hello big-screen TV or luxury getaway. That refund, however, was your own money all along. You’re just getting it back.

By resisting the urge to splurge, you can use it to enhance your future finances. An effective way is to invest the refund in a registered plan.


Make an RRSP contribution

You can magnify the effect of the refund by investing it in your RRSP – because you also receive a tax deduction to lower your taxable income.


Supplement your TFSA

By contributing your refund to your TFSA, you’ll benefit from both compound growth in a tax-free environment.


Contribute to an RESP

Applying the amount to an RESP for your children or grandchildren is another way you can stretch your refund dollars. The first $2,500 of an annual contribution can trigger up to $500 in a Canada Education Savings Grant (CESG) that will be deposited into your RESP.

Here are a couple more ideas to benefit financially in a big way:


Pay off debt

If you have any high-interest debt, you can use the refund to reduce the balance and lower or, perhaps, eliminate the ongoing interest costs.


Add to an emergency fund

Your tax refund can enhance an existing emergency fund or present a great opportunity to get one started.


Get Started

Learn how compound interest makes your investments grow faster because interest is calculated on the accumulated interest over time as well as on your original principal.

Medical Expenses - One of the Most Underused Tax Credits

Medical Expenses - One of the Most Underused Tax Credits

April 2022

According to Canadian tax preparation firms, the medical expense tax credit is among the most underused tax credits or deductions. One reason is that many taxpayers aren’t aware of what expenses are allowable.

For example, you can claim the costs of eyeglasses, contact lenses, laser eye surgery and orthodontics, and fees paid to a physiotherapist, chiropractor or psychologist. If you have a group insurance plan through your employer, your out-of-pocket portion of dental costs is allowable and so is the portion of the premiums you pay for dental, medical and vision benefits.

For a complete list of eligible expenses, see the Medical Expenses publication RC4065 at canada.ca.

You can combine the expenses for you, your spouse and children for a 12-month period – and either spouse can make the claim.

But note that this credit isn’t for everyone. Expenses can only be claimed when they exceed either $2,421 (for the 2021 tax year) or 3% of your or your spouse’s net income. Usually, the lower-income spouse claims the credit.


Make a list and check it twice

Don't forget to use our helpful Guide to Tax-Efficient Investing to ensure you have all the documentation required to complete your tax return.

Do You Know How Your Investment Income Is Taxed?

Do You Know How Your Investment Income Is Taxed?

April 2023

When choosing investments, it's important to consider the tax implications. As the chart below illustrates, the amount of tax you will be obligated to pay on your earnings varies depending on the investment type.

Keep reading to learn more about the income tax levied on these investment-income types.

Interest income


Interest income from Canadian sources is fully taxable at your marginal tax rate, making it one of the highest-taxed income types. Interest income is earned from fixed-income investments, including guaranteed investment certificates (GICs), government treasury bills (T-bills) and government and corporate bonds, as well as some allocations or distributions received from mutual funds, segregated funds and exchange-traded funds (ETFs). Interest income is usually taxable annually as earned, whether or not it's actually received.


Dividends


Compared to interest income, Canadian dividend income gets preferential tax treatment through the gross-up and dividend tax credit mechanism. The grossed-up amount is included on your tax return, but the dividend tax credit reduces the tax you pay. Dividends are generally taxed when received.


Capital gains


Capital gains arise when you sell a capital asset for more than its adjusted cost base (ACB). The increase in value is a capital gain, and 50% of the gain (called the taxable capital gain) is included in your taxable income in the year the capital gain is realized.

A capital loss arises when you sell a capital asset for less than its ACB. A realized capital loss can be applied against any capital gains realized that year. The excess, if any, can be used to reduce capital gains realized in any of the three preceding years or any future year.


Foreign income


Foreign income comprises income such as dividends and interest from foreign investments, whether owned directly or through a mutual fund, segregated fund or ETF. Foreign income receives no special tax break, making it equivalent to, from a tax perspective, interest from Canadian sources.


What You Need to Know

Our Guide to Tax-Efficient Investing will help you make wise investment choices that maximize your returns and minimize your tax burden.

The Value of Advice

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Client Relationship Document

We’ve developed a plain-language document that describes the relationship between you and your GP Wealth Financial Advisor or Planner.