A FEW TAX TIPS

TIME IS RUNNING OUT…

In the recent past, converting personal debt to investment debt to make an interest expense deduction possible has been generally accepted.

The Department of Finance has not been pleased with recent Supreme Court decisions, which allow interest expense deductions. Legislation to limit interest deductibility is to be introduced shortly.

What does this mean for you? Any restructuring of debt is still possible, but should take place very soon, before the legislation is passed.

POINTS OF INTEREST FROM THE 2003 FEDERAL BUDGET:

*Increase in RRSP limits:

The RRSP limit will be increased to, $15,500 for 2004, $16,500 for 2005, and $18,000 for 2006.

*Automobiles:

Standby Charge When Personal Use is Limited or Restricted
R egular standby charge is set at 2% per month of the original cost of the vehicle (or 2/3 of the lease payment). If personal driving is less than 20,000 kilometres per year, and 50% - of the driving is for business purposes, the charge can be reduced.

*Small Business Deduction:

The annual amount of active business income eligible for the reduced 12% tax rate - generally referred to as the “small business limit” – is to be increased from $200,000 to $300,000 as follows:

• For 2003, to $225,000
• For 2004, to $250,000
• For 2005, to $300,000

The amounts will be prorated for non-calendar yearends.

THIS SOUNDS FAIR…

REASSESSMENTS ON INDIVIDUALS BACK TO 1985

What is the “fairness package”? It permits taxpayers to request adjustments for their individual tax returns (not corporate) all the way back to 1985! CRA can issue a new personal tax assessment for 1985 and later.

OPPORTUNITY FOR REFUNDS!

CHILD REARING DROP-OUT PROVISION FOR CPP

As CPP benefits are calculated based on the number of years from when a person began contributing to retirement, it has been noted that those taking time off for child-rearing should have those particular years removed from the equation. This has resulted in significant refunds for those already collecting CPP benefits but are now notifying HRDC of their children. To apply, the child’s birth or baptismal certificate will be needed.