700 plain-language Q&As about tax. Browse below, or search the whole library.
Most trusts in Canada, including a typical family trust, are treated under the Income Tax Act as if they sold and immediately reacquired all of their…
Read the full answer →Your adjusted cost base (ACB) is the cost of a capital property after adjustments required by the federal Income Tax Act. For most assets, the starting…
Read the full answer →Yes, advertising and marketing expenses incurred to promote a business are generally fully deductible. This includes costs like website hosting and…
Read the full answer →The Income Tax Act sets a mandatory age by which an RRSP must be converted, or "matured," into a retirement income vehicle, most commonly a RRIF, and…
Read the full answer →Yes, that's one of the main reasons people over 65 use an alter ego trust. It's a trust you create during your lifetime and fund with your own property…
Read the full answer →Not necessarily a brand-new registration from scratch, but amalgamation does require sorting out which GST/HST account the combined corporation will…
Read the full answer →If you made an error or omission on a previously filed T1 return, you can request an adjustment rather than filing a new return. The most common method…
Read the full answer →No - profit from assigning a purchase agreement before closing is generally caught by the same residential flipping rule framework as a completed…
Read the full answer →Generally, no. Two corporations owned by unrelated friends who simply do business together, buying from or selling to each other, or collaborating on…
Read the full answer →When two or more corporations are "associated" with each other under the Income Tax Act's associated corporation rules, they don't each get their own…
Read the full answer →Associated corporations don't each get their own separate $500,000 small business limit, the Income Tax Act requires them to share a single limit…
Read the full answer →If your corporation becomes associated with another partway through a taxation year, the shared small business limit generally needs to be prorated or…
Read the full answer →If your employer provides you with a vehicle that you can use for personal purposes, the personal-use portion is a taxable employment benefit that must…
Read the full answer →No, not reliably. CRA and the associated corporation rules look at actual control and the real relationships between the people involved, including…
Read the full answer →Working for more than one client helps, but it isn't a guarantee against PSB status on its own. CRA and the courts look at the whole substance of each…
Read the full answer →Yes — distributing trust property to beneficiaries before the 21-year deemed disposition date is one of the main planning tools used to avoid…
Read the full answer →If you have reported income from a client who never paid you and the debt is now uncollectible, you can generally claim a bad debt deduction to reverse…
Read the full answer →Generally, yes, in the ordinary case. Filing for personal bankruptcy under the federal Bankruptcy and Insolvency Act can discharge, or eliminate,…
Read the full answer →Generally, you, the CRA's administrative approach treats a bare trust or nominee arrangement, where the trustee holds only legal title with no…
Read the full answer →This is an area where Canada's tax rules have been evolving. A bare trust exists when one person (the trustee) holds legal title to property for the…
Read the full answer →The basic personal amount (BPA) is a non-refundable tax credit that reduces the income tax you owe. There are two: one at the federal level under the…
Read the full answer →A below-market-rate loan from your employer to help you buy a home is generally treated as creating a taxable benefit, calculated by comparing the…
Read the full answer →Generally, yes. Assets with a valid, named beneficiary — RRSPs, RRIFs, TFSAs, life insurance policies, and many pensions — typically pass directly to…
Read the full answer →Yes, a corporation can accrue a bonus to an owner-manager at its fiscal year end and deduct it in that tax year, even if the bonus is not actually paid…
Read the full answer →Yes, premiums paid for business-related insurance are deductible as a business expense. This includes liability insurance for your professional…
Read the full answer →Registering a business name (a "trade name") in Ontario under the Business Names Act does not change your legal structure or how you are taxed. You…
Read the full answer →Having a business number and issuing invoices are useful administrative signs of running a business, but on their own they don't establish that you're…
Read the full answer →Business travel expenses are deductible when the travel is undertaken to earn income from your business and is not personal in nature. Deductible costs…
Read the full answer →There are meaningful tax differences between buying and leasing a business vehicle, though neither approach is universally better — it depends on your…
Read the full answer →The standard CRA-accepted method is to divide the square footage of your dedicated workspace by the total square footage of your home. If your home is…
Read the full answer →When an owner-built home is converted to long-term rental use instead of being sold or used as your own residence, the self-assessment is generally…
Read the full answer →Canada's Income Tax Act sets a "normal reassessment period." For most individuals and Canadian-controlled private corporations, CRA generally has three…
Read the full answer →The Canada Workers Benefit (CWB) is a refundable federal tax credit designed to support low-income working individuals and families. As a refundable…
Read the full answer →To properly withhold Canadian tax from your pay, a US employer generally needs to register for a Canadian payroll program account with CRA and collect…
Read the full answer →When you are a tax resident of two countries simultaneously — because you have strong ties to both — the applicable tax treaty (if one exists between…
Read the full answer →Capital cost allowance (CCA) is the tax depreciation deduction available on depreciable property — including buildings used to earn rental income. Each…
Read the full answer →Yes, provided the trust actually pays or makes the capital gain payable to the beneficiary in the same tax year it's realized, and the trust makes the…
Read the full answer →Capital gains in Canada are taxed on an "inclusion rate" — only a portion of the gain is added to income and taxed at your marginal rate; the rest is…
Read the full answer →In Canada, there is no separate "inheritance tax" or "estate tax." However, the federal Income Tax Act provides that on death, the deceased is deemed…
Read the full answer →When you sell a business, the structure of the deal determines the tax treatment. There are two main structures: an asset sale and a share sale. In an…
Read the full answer →A cottage or recreational property you sell for a profit triggers a capital gain under the federal Income Tax Act. The taxable portion of that gain…
Read the full answer →The Canada Revenue Agency treats cryptocurrency as a commodity, not currency, for income tax purposes. Profits from disposing of cryptocurrency can be…
Read the full answer →Whether a profit from selling raw or vacant land is taxed as a capital gain or fully taxable business income depends on your intention and the facts of…
Read the full answer →Yes. When you grant someone an option to purchase your property, the premium you receive for that option is generally a capital gain under the federal…
Read the full answer →Yes. When you sell a rental property in Ontario, any profit above your adjusted cost base is a capital gain, and the taxable portion is included in…
Read the full answer →When you sell publicly traded shares at a profit, the gain is a capital gain under federal income tax rules. The taxable portion is added to your…
Read the full answer →Yes. The federal Income Tax Act allows a taxpayer to claim a "capital gains reserve" when they sell a property but do not receive all the proceeds in…
Read the full answer →Yes. Capital gains earned inside a Canadian-controlled private corporation (CCPC) are subject to corporate tax, and the rules affecting investment…
Read the full answer →Canada's attribution rules significantly restrict the ability to split capital gains with a spouse by transferring property between them. If you give…
Read the full answer →Capital gains tax in Canada is governed by the federal Income Tax Act, not provincial law. When you sell a capital property — such as stocks,…
Read the full answer →Capital gains arise when you sell a capital property — such as stocks, a rental property, or a vacation home — for more than you paid for it. In…
Read the full answer →Pre-sale planning for a significant capital property should ideally begin at least one to two years before the anticipated sale, and in complex cases…
Read the full answer →When you sell shares in a private corporation, the proceeds minus your adjusted cost base represent a capital gain under the federal Income Tax Act.…
Read the full answer →Yes. Under the federal Income Tax Act, capital losses can be applied against capital gains, which reduces the net amount included in your income. If…
Read the full answer →Yes, and the year-of-death rules are more generous than the ordinary capital loss rules. Normally, a capital loss can only be used against capital…
Read the full answer →Yes. The federal Canada Caregiver Credit (CCC) is a non-refundable credit for individuals who support a spouse, common-law partner, or dependant with a…
Read the full answer →Capital Cost Allowance (CCA) is the CRA's system for deducting the cost of capital assets (equipment, vehicles, computers, machinery, and similar…
Read the full answer →No. CCA lets you deduct a percentage of your rental building's capital cost each year, but under CRA's long-standing rule, CCA on rental property can't…
Read the full answer →Yes, this is a real and available planning option for certain rental buildings. Rather than having a building pooled together with other properties in…
Read the full answer →Yes, generally. Stock options from a genuine Canadian-controlled private corporation get more favourable timing than options from a public company,…
Read the full answer →Yes, a certificate of coverage is generally the mechanism that formally confirms which country's social security system applies to your work, and it's…
Read the full answer →When you stop using your home as your principal residence and start renting it out, the federal Income Tax Act treats this as a "change of use." At the…
Read the full answer →It depends mainly on whether you were claiming input tax credits related to the basement apartment's rental use, and what kind of personal use you're…
Read the full answer →Donations to registered Canadian charities generate both a federal and an Ontario provincial non-refundable tax credit. The federal credit is…
Read the full answer →When a charitable gift is made through your will, the donation tax credit generally belongs to your estate, not to any individual beneficiary — it's…
Read the full answer →For individuals, including self-employed sole proprietors, charitable donations to registered Canadian charities are not deducted as business expenses.…
Read the full answer →The Income Tax Act treats "charitable purpose" and "non-profit purpose" as genuinely different categories, and which one an organization falls into…
Read the full answer →This is a real risk area for charity board members, and one worth taking seriously rather than assuming the charity's corporate structure automatically…
Read the full answer →"Direction and control" is the standard CRA applies whenever a registered charity works with a partner that isn't itself a qualified donee — a…
Read the full answer →A charity's disbursement quota is the minimum share of its property that it must spend on its own charitable activities, or give to other qualified…
Read the full answer →Yes, this is a real risk, and it's an area CRA scrutinizes closely. Registered charities are generally expected to have volunteer, unpaid directors and…
Read the full answer →Charities and certain non-profit organizations are treated as "public service bodies" under the federal Excise Tax Act and face different HST rules…
Read the full answer →A charity issuing official donation receipts needs to keep adequate books and records that actually back up what those receipts say. At a minimum, that…
Read the full answer →No, and this is a common misunderstanding. A registered charity does not have to spend every dollar it raises within the same calendar or fiscal year.…
Read the full answer →A registered charity and a non-profit organization (NPO) are both tax-exempt in a general sense, but they are legally distinct categories, and the…
Read the full answer →Yes, the child care expense deduction is a federal deduction available to Ontario residents under the Income Tax Act. It applies to amounts paid for…
Read the full answer →Yes — child care expenses are deductible on your federal T1 return, which also covers Ontario provincial tax. The deduction reduces your net income,…
Read the full answer →Yes, largely. A cash Christmas or holiday bonus is payroll income, and it's generally subject to the same source deductions as your regular pay —…
Read the full answer →In most cases, no - co-owners who simply own a rental property together and split the income and expenses proportionately are not required to file a…
Read the full answer →Each co-owner reports their proportionate share of the rental income and expenses based on their actual ownership interest in the property. If you own…
Read the full answer →Generally, no - if you and a co-owner actually own a rental property 50/50, you can't simply choose to report the income in a different split to shift…
Read the full answer →Generally, no — a company laptop or cell phone that's used primarily for work, with only incidental personal use, is generally not treated as a taxable…
Read the full answer →It depends entirely on what the special assessment actually pays for, since a condo special assessment takes on the character of the underlying work it…
Read the full answer →Yes, meaningfully so. A consumer proposal is a different, less drastic insolvency tool than bankruptcy under the federal Bankruptcy and Insolvency Act…
Read the full answer →Generally, no. Once you've reached the mandatory conversion age and matured your own RRSP, you generally can't make new contributions to an RRSP in…
Read the full answer →Yes. There's no requirement to convert your entire RRSP into a RRIF all at once - you can convert only part of it, transfer that portion into a RRIF,…
Read the full answer →Yes. Converting a single house into a multi-unit rental property is a structural conversion, and the renovation costs involved are treated as capital…
Read the full answer →Yes. Yes. Under the Business Corporations Act (Ontario), dividends are declared by the board of directors. Paying a dividend without a proper board…
Read the full answer →As the 21-year deemed disposition date approaches for a trust holding a family cottage, the core decision is whether to let the trust pay tax on the…
Read the full answer →It's possible, but a cottage used personally for part of the year and rented out for the rest raises its own complications. Expenses have to be…
Read the full answer →Yes. Fees paid for a co-working space membership or desk rental used for business purposes are generally deductible as a business expense. Unlike home…
Read the full answer →Canada Pension Plan contributions are a federal obligation. When your corporation pays you a salary, both you as the employee and the corporation as…
Read the full answer →When you are self-employed, you pay CPP contributions on your net business income above the annual basic exemption amount. Unlike employees who split…
Read the full answer →The Canada Pension Plan (CPP) is a federal program, but the contribution rules apply equally to Ontario self-employed individuals. Unlike employees,…
Read the full answer →Yes. Canada Pension Plan disability benefits are taxable income at the federal and provincial level. CRA issues a T4A(P) slip each year showing the…
Read the full answer →Yes. CRA offers a facilitated dispute resolution process within the Appeals Branch that provides a more structured dialogue between the taxpayer and…
Read the full answer →After you file a Notice of Objection, CRA's Appeals Branch assigns an Appeals Officer to your file. This officer is separate from the auditor and takes…
Read the full answer →When a taxpayer fails to file a return, CRA is permitted under the Income Tax Act to issue an "arbitrary assessment" — its own estimate of the tax you…
Read the full answer →A proposal letter (sometimes called an "auditor's proposal") is not a reassessment — it is CRA's notice that it intends to make adjustments to your…
Read the full answer →CRA auditors pay close attention to expense categories where personal and business use overlap. The most commonly challenged deductions for…
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