6. Claim CCA or the principle residence exemption
Generally, we like to claim the capital cost allowance (CCA)— the tax equivalent to depreciation—on our properties. This decreases our current year taxes even if we will incur “recapture” when we ultimately sell the property. After all, a dollar today is worth more than a dollar tomorrow. However, if you can claim the principal residence exemption, thus shielding a gain from taxes for at least a portion of the ownership period, you generally don’t claim the CCA because CCA prohibits you from using the principal residence exemption. Keep in mind, that the principle residence exemption may still be available to you if you have a rental property and later move into it, or alternatively have a personal house and subsequently rent it out. If changing the use of the property in the year, ensure that you are aware of the tax implications and determine whether you need to file a tax election to preserve your right to defer or reduce taxes.
7. Claim income from spousal loans
Claim any income from interest you received from your spouse from a spousal loan program which is used to split income and thus save taxes between spouses.
8. File the tax shelter loss or deduction form
If you invest in a tax shelter, file a T5004 “Claim for Tax Shelter Loss or Deduction” to preserve your right to the benefits of the shelter.
9. Declare all your income slips
Missing one income slip won’t be the end of the world, but making the same mistake in subsequent years can result in federal penalties of 10% of the unreported amounts with potentially corresponding provincial penalties. Forgetting a $5 interest amount from a T5 slip one year could result in huge fines in the following year if you miss a $3,000 one.
10. Review last year’s Notice of Assessment
Review your last year’s Notice of Assessment or Notice of Reassessment to ensure that you agree with the findings. You generally have until April 30th of the following year to file a Notice of Objection if you disagree with the findings. And, after careful discussion with your tax advisor, consider a voluntary disclosure if you missed income from a prior year.
Bonus tip!
Get ready for next year –integrate personal and corporate planning, structure yourself properly, investigate income splitting opportunities, prepare a tax calendar to meet deadlines and avoid penalties, pay tax installments on time, and put a system in place such as www.accountantinabox.ca to manage your investments.
For tips 1 to 5, see Top 10 tips for prepping your personal tax returns – pt 1
Authored by George E. Dube, CA and Joseph Martins, CGA. A version of this article appeared in Canadian Real Estate Magazine, April 2011.
