Tips For The New Tax Season!

By Dean A. Moreau

Here are some tax info-bits to think of before you head into another tax season. These items are drawn from a list of the most popular questions asked of us:

You Moved During 1996?

If you moved to start a new job or to attend school and the distance between your old residence and your new job or school is more than 40 kilometres between your new residence and your new job/school, your moving expenses are tax deductible. Until 1995, Revenue Canada measured this distance in a straight line but a court decision has overturned this "as-the-crow-flies" rule: "in determining whether the taxpayer has really moved forty kilometres closer to work, it only makes sense to measure the distance moved using real routes of travel," including roads, bridges and ferries.

If you are eligible to deduct your moving expenses for tax purposes, more than just your traveling expenses and transportation cost will be eligible. According to Revenue Canada, other eligible expenses include:

• the cost of meals and temporary lodging for up to 15 days for you and your family;
• the cost of canceling an unexpired lease on your old home;
• the cost of selling your old home (certain restrictions apply) including advertising, real estate commissions, and certain mortgage penalties; and
• the legal fees associated with buying your new home.

There are certain expenses that you cannot deduct however, including:

• renovation expenses for your old home in order to make it more salable;
• traveling expenses for trips to your new location to look for a new home BEFORE you move;
• the costs of cleaning or repairing a former rented residence; and
• expenses to disconnect and reconnect utilities, or to forward your mail.

Running a Daycare?

If you are self-employed and running a day-care operation from your home, you can deduct all of your business expenses. Business costs include such items as accounting and legal fees, advertising, and business cards. Other less obvious expenses include:

• children's meals;
• toys, books, and other play supplies;
• diapers, blankets, and other household supplies used by the children;
• travel during field trips;
• a portion of your household costs such as utilities, insurance and maintenance. (the portion is based on your business use of your home); and
• cost of labour and materials for minor repairs done to your home caused by running the daycare.

Earning Investment Income?

If you earn investment income you can deduct all of the carrying charges you pay to earn that income. These carrying charges include:

• management and safekeeping fees;
• safety deposit box fees:
• accounting fees for recording investment income; and
• fees for investment counseling.

With the introduction of the 1996 federal budget RRSP and RRIF administration fees are no longer deductible.

Paying Tuition Fees?

Most students paying tuition fees to attend a Canadian university or college know the fees they pay qualify for a non-refundable tax credit. Other types of post-secondary tuition fees that are eligible for the credit are:

• fees for courses taken to obtain or improve occupational skills at an institution approved by the Minister of Human Resources Development;
• fees paid for full-time attendance at universities outside Canada if the course is more than 13 consecutive weeks long and leads to a degree; and
• fees paid to post-secondary institutions in the United States if you lived in Canada and commuted to and from the university or college

Tuition fees eligible for the tax credit include the obvious admission fees and these not-so-obvious fees:

• library and lab charges;
• examination fees;
• application fees;
• mandatory computer service fees;
• charges for certificates and diplomas; and
• the cost of books included in the fees for correspondence courses.

Thievery Income

If someone steals cash or property whether it be through theft, defalcation, or embezzlement, the police will be after them, and Revenue Canada will be lurking close behind. Revenue Canada treats such "gains" to be taxable, and the amount of the cash and/or the fair market value of the property will be added to their income for the year. Gains from extortion, blackmail, bribery, and other such acts will be treated in the same fashion. Revenue Canada will also hand out penalties if the thieves fail to report the income.

Setting Up a New Business?

If you are starting up a new business or operating a sideline business, you must be prepared to prove to Revenue Canada that you intend to turn a profit. Revenue Canada has, on numerous occasions, challenged the deductibility of business losses on the basis that their business activities didn't have a "reasonable expectation of profit". Some of the more popular activities scrutinized by Revenue Canada have been activities such as dog breeding, renting out real estate properties, hot air ballooning, photography, and scuba diving.

Taxpayers who have successfully met Revenue Canada's challenge have been able to demonstrate that they have a reasonable expectation of profit from their activities by proving that they had the right training and experience and enough time to conduct the business, that the business was sufficiently capitalized at the outset, and that they had thoroughly assessed the venture's potential profitability by preparing business plans, forecasts and budgets.

Have a financial topic you'd like clarified? Drop us an e-mail, we'll be happy to help.

Please Note: We have taken the necessary steps to ensure the accuracy of the information contained in this section. You should not act upon this information without seeking professional advice in order to determine its applicability in your specific situation.

Dean A. Moreau

D&L Financial Services
"... because you have better things to do!"

E-mail: dmoreau@direct.ca
Tel: (604)597-3296
Fax: (604)543-5188
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