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[H&R Block Insight - October 2008]
[Candidates promise tax cuts and credits]

With Canadians going to the polls in a few weeks, the tax cuts and promises are coming fast and furious. Each party is proposing their own tax cuts to help the average Canadian. Here are some recent tax cuts that have been presented by candidates in the early weeks of the election campaign.

  • The Conservatives have promise to extend maternity and parental leave benefits to self-employed people. Right now, self-employed people do not qualify to collect maternity leave benefits because they do not pay Employment Insurance premiums. Under the new program, they would qualify for a maximum of 15 weeks while parental benefits can be claimed by one parent or shared between two parents up to a maximum of 35 weeks.
  • The Conservatives also want to create a tax credit of up to $5,000 for first-time homebuyers towards closing costs on the purchase of a new home. It would be phased in over four years and help make owning a home more affordable. This new credit would be addition to the First Time Homebuyers Plan that allows Canadians buying their first home to borrow up to $20,000 from their RRSPs.
  • The Conservatives have also promised to increase the age amount by an additional $1,000.
  • The NDP have promised to reverse $50-billion in Conservative corporate tax cuts.
  • The Liberals have pledged to reduce personal income tax rates. The lowest tax rate would drop from 15 percent to 13.5 percent. The second lowest tax rate would drop a percent to 21 and the third would be lowered to 25 percent from 26 percent.
  • The Liberals are also promising a new refundable tax child credit of $350 per year as well as a supplement to the existing Child Tax Benefit called the Guaranteed Family Supplement which will provide a maximum of $1,225 for low income families with children under 18.
  • Other promises include increasing the Working Income Tax Benefit, increasing the OAS Guaranteed Income Supplement and lowering the small business tax rate to 10 percent.
  • The Green Party would introduce a carbon tax of $50 per tonne and use the revenues to cut personal income tax, CPP contributions and EI premiums.
  • The Green Party would also increase the GST back to six percent in order to invest in infrastructure. The current exemptions for food items would be extended to children's clothing and books. Rural Canadians would qualify for rebates.

 

[Giving for Tax Purposes]

The Canada Revenue Agency (CRA) recently announced that the International Charity Association Network (ICAN) has been removed from the list of registered charities.

ICAN was one of the highest-grossing Canadian charities in 2006. ICAN issued more than $460 million in donation tax receipts in 2006 - almost five times the charitable donation receipts issued by the United Way of Greater Toronto in the same year.

ICAN's suspension came one year after a stern warning from the CRA last August cautioning them to be wary of all tax-shelter arrangements. ICAN donors were issued tax receipts worth more than the actual amount they donated and the CRA is now reassessing all donors who supported ICAN. If your taxes are re-assessed and the donation disallowed, the CRA will calculate the taxes owing as well as penalties and interest.

In addition, hurricane season is here again and it has already brought a number of destructive storms to the Caribbean islands and Southern U.S. states. And with every hurricane, a number of humanitarian organizations organize relief efforts.

Though most Canadians will not feel the effects of a hurricane, they are donating to organizations like the Red Cross to help with the relief efforts. And while there are other organizations helping with efforts, for tax purposes it is only Canadian groups that can issue a tax receipt you can use on your returns.

If you are unsure if a charity qualifies for a tax credit, check Canada Revenue Agency's list of registered charities on their website.

Taxpayers should also be aware of copycat schemes. Fraud artists will use names that sound similar to a reputable charity in order to sound legitimate. If you are unsure, ask for information on the charity so you can check if it is registered. Taking the time to research your donation may mean you are not fooled by fraudulent charities.

Though donating to any charity is reward enough, if you are looking to maximize your tax benefits, make sure you are donating to charities on the CRA list.

 

[Are you in or are you out?]

September and October can be a rough time on the stock market. And 2008 has been no exception with some major changes happening in the financial world. The volatility of the stock market is a roller coaster some choose to ride while others watch from the sidelines because of the ups and downs.

When the market is performing well, everyone wants to invest in stocks but when the market is on the way down, many investors want to get off the roller coaster and be on solid ground as quick as possible. The recent market activity has certainly followed this pattern.

Even as many investors suffer losses, there is some good news. Capital losses can help off set capital gains on your tax return. If you have an investment that turns out to earn money (also known as a capital gain), 50 percent of the gains are taxable. Capital losses are not taxable. So you can match up gains and losses to help reduce your tax burden.

When shares are not performing well, the general rule from financial advisors is to hang on until things get better. However, sometimes you may have to liquidate even if you will lose money. Or if you have a stock that is performing particularly well, you can sell a money losing investment to make tax time easier.

The Canada Revenue Agency (CRA) will allow you to apply your capital losses to capital gains in the year they are incurred or you carry losses back to three previous years or you can carry them forward to use in future years.

It is worthwhile to review your investment portfolio before the end of the year to evaluate the impact on your tax situation. You can sell stock up to December 24, 2008 and still claim the capital loss in 2008.