Author: develop

Are you in the market for a new vehicle?  The Government of Canada has come up with tax incentives to steer taxpayers towards purchasing zero-emission vehicles in efforts to reduce greenhouse gas emissions in Canada.

What is a Zero-emission vehicle? 

The CRA has defined zero-emission vehicles into the following categories.

• Plug-in hybrid
• Electric
• Powered by hydrogen

Not only will you be saving our beautiful country from greenhouse gases, but you will also be saving on your tax bill too.  For business owners, the incentive is huge and adds up quickly if you have a fleet of vehicles.  Here is how it works.

Zero-emission vehicles may qualify for a 100% CCA write-off in the year of acquisition up to a maximum cost of $55,000 plus sales tax. 

Also, a new federal purchase incentive of up to $5,000 will be available for zero-emission vehicles with a selling price less than $45,000 for 2019-20.  

Contact Argento CPA if you have any questions about the tax implications of purchasing or leasing zero-emission vehicle!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Since the COVID-19 pandemic many employees now have the option to continue working from home. This leave taxpayers wondering if they can deduct home office expenses related to their employment income on their 2020 tax return. Here is everything you need to know about being eligible for home office deductions.

Typically, an employee can claim home office expenses if the following conditions are met.

• The employee is required by his/her contract of employment to provide and pay for such space;
• A T2200 Declaration of Conditions of Employment is completed and signed by the employer;
• The employee is not reimbursed and is not entitled to be reimbursed from his/her employer for such expenses; and,
• The expenses are incurred solely for the purpose of earning income from an office or employment.

In addition to the rules above, you can deduct home office expenses you paid in 2020 if you meant one of the following conditions.

• The workspace is where you mainly (more than 50% of the time) do your work.
• You use the workspace only to earn your employment income. You also must use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.

Expense deductibility is different for non-commissioned and commissioned employees.

• Commissioned employees may deduct rent, utilities, repairs and maintenance, supplies, property taxes, and home insurance up to the amount of commission income.
• Non-commissioned employees may deduct rent, utilities, repairs and maintenance, and supplies.
  

You can deduct a portion of the above costs in respect to your workspace. We calculate the tax-deductible amount by taking the sq. footage of your office space divided by the sq. footage of your home and multiplying that by your total expenses. It is important to note, that you cannot deduct mortgage interest or depreciation on your home.

What if you are only working at home during the COVID-19 pandemic?

Many people are only working at home because of the pandemic which may add up to them doing less than 50% of their work at home during 2020. CRA does recognize this fact and may be willing to accept that the test apply only to the time they work from home due to COVID-19. CPA Canada and CRA are still in discussion as to how that might look.

A short version of form T2200 is also on the horizon. CRA is looking to simplify this form to address the administrative burden that will arise from many T2200 submissions. This form will focus on home office expenses, instead of including a complete list of other employment expenses.

Contact Argento CPA if you have any questions about whether you are earning investment income or business income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

A growing number of taxpayers are trading on the stock market using online broker accounts. Knowing how to report gains/losses from trading activity accurately on your tax return is especially important since failing to do so can end up being a costly mistake and leave you owing lots of money to CRA.

The most important question you should ask yourself is, are you trading on account of business income vs. capital gains.

What is the difference between business income vs. capital gains and what are the factors to consider?

The reason we care so much about whether your trading activity is on account of business income or capital gains, is because business income gets taxed at 100% whereas capital gains are only taxed at 50%. Also, capital gain losses are only deductible against other capital gains, and business losses can be deducted against other sources of income, even employment income. This has a major impact on the taxes you pay at the end of the day.

Factors to consider:

Frequency of transactions
Period of ownership
How much of your time you spend studying and investigating the securities market
The securities you purchase are speculative in nature
Security purchases are financed primarily on margin or by debt
Intention
For those who have a high frequency of transactions, short period of ownership, spend substantial time researching the markets, make speculative trades, and who finance trading on margin or by debt, would be considered day traders and would include 100% of your gains as income. If you did incur losses, it would be advantageous for you to claim those losses against other sources of income.

Most importantly, the intention of the taxpayer is examined to determine whether to treat transactions as income or capital. It is possible that a taxpayer may have investments which are capital transactions and others that are income transactions. You could do that by having two separate investment accounts. One for day trading and one for long term investing.

Do you invest using your TFSA?

Many taxpayers take advantage of the Tax-Free Savings Account to avoid paying any capital gains or tax on interest and dividend income. However, the TFSA is only a tax haven to those who are investing and not day trading on account of business income. Therefore, if you have dozens and dozens of trades during the year and are in fact day trading, CRA could determine that you will owe tax on 100% of your profits, since tax-free capital gains is only available to those who trade to earn investment income.

What if you already filed your taxes and made an error reporting your transactions?

If you made an error reporting your day trading activity as capital gains/losses, you are still able to amend your return to report your taxes accurately. If you had significant losses from your trading, this will be advantageous for you since you can take those non-capital losses and apply it against other sources of income or carry-back those losses for up to 3 previous tax years to recover any tax paid.

Contact Argento CPA if you have any questions about whether you are earning investment income or business income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.