2007 - 2008
James Lee, B. Comm., CGA, CPC
CERTIFIED GENERAL ACCOUNTANT
VALUABLE TAX TIPS 2007-2008
Thank you for choosing our firm to prepare your income tax returns for 2006.
YEAR 2007 IS BEHIND US! It is now time to prepare your 2007 tax savings. As usual,
we are providing you with Income Tax tips to help you plan beyond deductions, credits and
contributions. If you have any questions, please feel free to contact us.
The following tables are designed to assist you in computing the Federal and B.C. Income
tax payable for individuals.
2007 TAX RATES
The combined federal and provincial personal marginal tax rates for income earned in 2007
Income Federal Provincial Total
Tax Rate Tax Rate
$0 to $34,397 15.00% 5.70% 20.70%
$34,397.01 to $68,794 22.00% 8.65% 30.65%
$68,794.01 to $78,984 26.00% 11.10% 37.10%
$78,984.01 to $95,909 29.00% 13.00% 42.00%
Over $95,909 29.00% 14.70% 43.70%
Refundable Tax Credits For 2007
1. Personal Amount $9,600 * 15% = $1,440
2. Spouse Amount $9,600 * 15% = $1,440
3. Canada Employment Amount $1,000 * 15% = $150
4. Child Amount $2,000 * 15% = $300 (new)
5. Child Fitness Amount $500 * 15% = $75 (new)
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Losses Carried Over
The four main types of “losses carried over” which may be incurred by a taxpayer in a year
are listed in the following table. Such losses may, under certain circumstances, be carried
over and deducted against income from other taxations:
Type of Loss Maximum allowable Carryover period
amount (previous/subsequent years)
Restricted farm losses Net farming income for 3/30
Net capital losses Taxable capital gains for 3/unlimited
Non-capital losses Income for the year 3/302.3
before this deduction
Farm losses Income for the year 3/30
before this deduction
THE NEW CANADA LEARNING BOND (RESP)
If your child was born after December 31, 2003, you could get $500 now as a source of aid
to your child’s education. You may also get an extra $100 each year for up to 15 years (for
more information, inquire toll free at 1-800-622-6232). The maximum lifetime CESG limit
remains at $7,200.
SALES TAX CREDIT
The Sales Tax Credit is for the benefit of low and middle income families. The 2007 credit
amounts are as below:
Basic Amount $172.00
Amount for Spouse $172.00
Amount for a Person Living Alone $117.00
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2007 Personal Tax Credits (Federal)
Under the definition provided by the Income Tax Act, personal tax credits are equal to the
prescribed amount multiplied by the basic rate for the year. The basic rate is 15.00%
Basic personal amount $9,600.00
Amount with respect to age1 $5,177.00
Spouse/common-law partner amount or amount for an eligible dependant2,3 $9,600.00
Child Tax Credit4,5 $2,000.00
Amount for infirm dependants4, 6 $4,019.00
Reduced by net income in excess of $5,702.00
Caregiver amount7 $4,019.00
Reduced by net income in excess of $13,726.00
Contributions to QPP/CPP7 (4.95% of contributory earning) $1,989.90
Employment Insurance (1.8% of insurable earnings) $ 720.00
Pension income amount $2,000.00
Disability amount 10 $6,890.00
Supplement for disabled children 11 $4,019.00
Child Fitness Tax Credit12 $ 500.00
Canada Employment Credit amount13 $1,000.00
Working Income Tax Benefit amount14 Earned income over $3,000.00
Tuition fees15 (if more than $100) Amount paid
Amount for full-time education15 $400.00/month
Amount for part-time education15 $120.00/month
Interest on student loans16 Amount paid
Textbook amount for full-time education $65.00/month
Textbook amount for part-time education15, 17 $20.00/month
Charitable donations, gifts to government, and Amount paid
cultural or ecological gifts18 or carried forward
Medical expenses tax credit19 Amount paid
Adoption expenses Amount paid
Transit Pass Tax Credit Expenses 21 Amount paid
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Notes to Personal Tax Credit and eligibility requirement
1. The age amount is reduced by 15% of the individual’s net income in excess of $30,936.
2. A spouse is a person who is married to the taxpayer. The term “common-law partner” is
defined in ITA, s. 248(1) of the Income Tax Act. The amount for an eligible dependant
(equivalent-to-spouse amount) is granted to taxpayers who have no spouse or common-
law partner but have a dependant who meets the prescribed conditions.
3. The amount must be reduced by any net income earned by the spouse, common-law
partner or dependant. Net income must include the guaranteed income supplement and
the spouse’s allowance, social assistance benefits and workers’ compensation payments.
When a relationship begins during the year, the spouse’s or common-law partner’s net
income for full year must be taken into account. Furthermore, if there is a separation
during the year, only the spouse’s or common-law partner’s net income during the
relationship is considered.
4. If two or more taxpayers are entitled to a tax credit with respect to a dependant, they
may each claim a portion of the amount; however, their combined claim may not
exceed the maximum amount allowable for that dependent.
5. any parent with a child under 18 may claim the Child Tax Credit on an amount of
$2,000 (indexed after 2007) that is not reduced by child’s income and whose unused
portion may be transferred to other spouse or common-law partner.
6. This amount can be claimed for a person who has attained the age of majority and is
dependent on the taxpayer due to a physical or mental infirmity if the person is a child
or grandchild of the taxpayer or the spouse or common-law partner, or a nephew or
niece, brother or sister, father, mother, grandparent or uncle or aunt, residing in Canada,
of the taxpayer or the spouse or common-law partner. For the purposes of calculating
this credit, the term “child” means:
⎯ a person of whom the taxpayer is the legal parent;
⎯ a person fully dependent on the taxpayer and of whom the taxpayer has custody,
legally or de facto, or had custody before the person reached 19 years of age; or
⎯ the daughter-in-law or son-in-law of the taxpayer.
7. An individual may claim the caregiver tax credit if the individual provides in-home
care, at any time in the year, to:
⎯ his/her child or grandchild (age 18 or over) with a mental or physical infirmity.
⎯ his/her Canadian resident parent or grandparent age 65 or over at that time,
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⎯ his/her Canadian resident brother, sister, aunt, uncle, nephew or niece with a mental
or physical infirmity, or
⎯ his/her spouse’s or common-law partner’s Canadian resident parent, grandparent,
brother, sister, aunt, uncle, nephew or niece with a mental or physical infirmity.
8. Employees and self-employed workers are entitled to the same maximum credit for
CPP/QPP contributions. However, since a self-employed worker pays double the
contributions of an employee, he/she is entitled to a deduction in the calculation of net
income for the portion of contributions not eligible for the credit.
9. The amount used to calculate the pension credit includes bridging benefits and lifetime
annuities paid under a registered pension plan, registered retirement savings plan or
deferred profit sharing plan, or payments under a registered retirement income fund if
the person is at least 65, and in respect of lifetime annuities under registered pension
plan if the person is under 65.
10. To qualify for this amount, a certificate issued by a physician, optometrist, audiologist,
occupational therapist or psychologist attesting to the physical or mental impairment
must be submitted to the CRA. As well, no person may have claimed, as medical
expenses, more that $10,000 ($20,000 where the person dies in the year) for
remuneration paid to an attendant, or an amount for the cost of a stay in a nursing home
or rest home, for the person for whom they qualify for the credit. The disability amount
can be fully or partially transferred to the spouse or to a child or grandchild, to a parent
or grandparent, brother or sister, nephew or niece or an aunt or uncle of the
handicapped person or their spouse.
11. This supplement can be claimed in respect of a child eligible for the disability amount
who has not reached the age of 18 before the end of the year. It is reduced by child
care and attendant care expenses in excess of $2,354 deducted for the child.
12. The credit is only available to individuals having paid eligible fitness expenses (e.g.,
fees for registration or membership in a program of prescribed physical activity) in
respect of their child under 16. The amount on which the credit is calculated cannot
exceed $500 and must be reduced by any assistance received in respect of those
13. The credit is only available to individuals having earned office or employment income
in the year and is calculated on the lesser of $1,000 (indexed after 2007) and that
income before claiming any employment deductions.
14. The 2007 federal Budget proposes that low-income individuals over 18 may claim a
new Working Income Tax Benefit tax credit equal to 20% of their earned income over
$3,000, subject to a maximum of $00 for a single individual and $1,000 for a family
(including a single parent). The credit is reduced by 15% of the individual’s net
income over $9,500 or family’s net income over $14,500. Individuals eligible for the
Disability Tax Credit may claim an additional disability supplement credit no
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15. Disabled students are entitled to the higher $400/month credit and $65/month based
credit regardless of their full-time or part-time enrolment. The portion of an
individual’s tuition fees and education amount which is not required to reduce income
tax to zero may be transferred to the supporting spouse or common-law partner, parent
or grandparent up to a $5,000 maximum limit. The unused portion of the tuition,
textbook education amounts which has not been transferred to a supporting individual
is available for carry forward by the student. Please note that the $100 minimum tuition
fees requirement applies to each educational institution attended.
16. The interest paid on a student loan by an individual gives rise to a tax credit. This credit
may be claimed in the year the interest is paid or carried over to any one of the five
following years, but it may not be transferred to another taxpayer.
17. The amount is available for each month a post-secondary student qualifies for a full-
time or part-time education tax credit, and is in addition to the education amount.
18. The tax credit in respect of donations is equal to the total of:
⎯ 15.25% of the first $200 in donations; and
⎯ 29% of the balance
The donor’s capital gains inclusion rate is reduced from 25% to 0% on the following
charitable donations made on or after May 2, 2006: (1) Publicly-listed securities given
to a charitable organization or public foundations; or (2) Ecologically-sensitive lands
given to approve conservation charities. The deemed capital gains inclusion rate on
publicly-listed securities acquired through an employee stock option program and then
given to an eligible charity is also reduced from 25% to 0%. The 2007 federal Budget
proposes that the 0% capital gains inclusion rate be extended to donations of publicly
listed securities (even if acquired through an employer stock option plan) to private
foundations, if the donations are made after March 18, 2007.
The limit with respect to charitable donations and gifts to Canada is 75% of net income.
The limit is increased by 25% of taxable capital gains arising from the donation of
capital property and 25% of recapture included in the donor’s income. Cultural or
ecological gifts are eligible for up to 100% of net income.
Bill C-10 (formerly Bill C-33), which has not been enacted yet, proposes new rules to
determine when a gift is considered as such. For example, the transfer of a property to
a qualified donee by a donor receiving a benefit exceeding 80% of the fair market value
(FMV) of the transferred property would not be considered a gift unless the donor
could convince the CRA that it was made with the intention to make a gift. The FMV
of the transferred property must also be reduced by the value of the benefit received to
determine the amount eligible for the charitable credit.
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19. The medical expense amount can only be claimed for expenses in excess of the lesser
of $1,926 or 3% of net income. Medical expenses of the individual, his/her spouse or
common-law partner and his/her child below 18 at year-end may be grouped to
calculate the above amount. Medical expenses for other dependent relatives that exceed
the lesser of 3% of their net income and $1,926 may also be claimed by the individual
subject to a maximum of $10,000.
20. The first $10,445, of adoption expenses gives rise to a tax credit for a parent adopting a
minor child. Eligible expenses are to include court, legal and administrative expenses,
travel and living costs for the child and parents and fees paid to the adoption agency.
The dollar limit is indexed annually.
21. The expenses must be reduced by an assistance received from the employer or someone
else. The passes must be for public transit by bus, streetcar, subway, train or ferry, must
be for at least a month and must be used by the taxpayer, his or her spouse or common-
law partner or the taxpayer’s dependent child under 19. The 2007 federal Budget
proposes that, for the 2007 and following taxation years, weekly passes bought after
2006 on at least four consecutive weeks and electronic payment cards bought after
2006 for at least 32 one-way public transit trips during an uninterrupted period of 31
days or less also be eligible.
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AUTOMOBILE EPXENSES – Employees
The following automobile expenses are deductible based on the kilometers traveled in the
year for employment purposes:
• gas and oil;
• maintenance and repairs;
• insurance premiums;
• car registration and driver’s permit;
• leasing costs (taking into account the limit below)
With respect to the lease of passenger vehicle, the maximum eligible fees, before the
calculation of the portion for employment expenses, is equal to the lesser of:
• the lease charges;
• $800 plus taxes per month; and
• $30,000 plus taxes x lease charges
85% x the greater of $35,294 ($30,000 ÷ 0.85) plus taxes and the
manufacturer’s suggested retail price.
Parking fees incurred elsewhere than the usual place of employment and for the purpose of
earning business income are fully deductible.
Refunds and Allowances
Refunds of automobile expenses by an employer and reasonable allowances based
exclusively on the distance traveled for employment purposes are excluded from the
employee’s income. However, any allowance that is considered not reasonable must be
included in the employee’s income. Moreover, the portion of allowances paid that exceeds
50 cents per kilometer for the first 5,000 kilometers and 44 cents per kilometer for
additional kilometers is not deducible by the employer.
HOME OFFICE EXPENSES
Operating a Business from Home Office
If you run your own business, you may deduct your home office expenses. A “home
office” is your principal place of business; it is used exclusively for business purpose and
on a regular and continuous basis for meeting clients, customers or patients of the business.
The home office expenses are deductible to the extent of the business income otherwise
determined; any remaining expenses may be carried forward and used to offset the business
income in future years. Although you are not required to file any receipts in respect of
your home office, you must retain record of all the expenses in case CRA asks for it.
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Salaried Employee Who Uses Home Offices
Salaried employees who use their homes as offices may claim rent as well as the electrical,
heating, and maintenance costs in proportion to the space occupied for employment
purposes. However, property taxes, home insurance premiums, mortgage interests and
capital cost allowance are not applicable for tax deduction or claims.
Eligible expenses are only deductible if one of the following conditions is met:
• Home office is the place where the employee principally performs his
• The home office is exclusively used to earn employment income and is
used on a regular and continuous basis for meeting clients or other
persons in the normal course of his duties
The home office expenses are deductible to the extent of the employment income earned in
the year. However any remaining expenses not deducted in a year because of this limit
may be claimed in a following year.
Commission Salesperson and the use of Home Office
Commission salespersons with conditions identical to that of salaried employees are
allowed the same tax deductions described above. He/she may claim the premium paid
under a home insurance policy as well as property taxes. However, mortgage interest is not
deductible and a commission salesperson cannot take advantage of the capital cost
REGISTERED RETIREMENT SAVINGS PLAN (RRSP)
Contributions to RRSP are tax deductible and the income earned inside the RRSP is not
subject to tax. This means that the taxation is deferred until the amount is withdrawn from
An RRSP matures when the annuitant reaches the age of 71. Individual who have RRSP
deduction room available after age 71 will be able to contribute to a spousal RRSP until the
end of they year in which their spouse turns 71.
Contributions deductible in the current year must be made no later than 60 days after the
end of taxation year.
Contribution Limit for the Year
The following table shows the yearly contribution limit for the application of various
deferred income plans.
Year RPP Limit DPSP Limit RRSP Limit
2007 $20,000 $10,000 $19,000
2008 $21,000 $10,500 $20,000
2009 $22,000 $11,000 $21,000
2010 Indexed Indexed $22,000
2011 Indexed Indexed Indexed
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1) Filing the income tax return of an individual April 30, 2008
2) Filing the return of an individual who carries on a
business or whose spouse carries on a business June 16, 2008
FAILURE TO FILE TAX RETURNS
1. Failure to file by deadline 5% of unpaid tax plus interest
2. False statements 50% of additional tax plus interest
3. False or Deceptive statement 50% to 200% of additional tax or 2
years in prison.
4. Failure to file information slips (i.e. T4, T5) $25 per day (minimum $100,
1. December 2007 i.e. 2000-2007 (7 years)
Permanent Files Indefinitely
Tax Files 7 years
Financial statements & reports 7 years
Working Papers 7 years
Correspondence 7 years
* Document for the year 1999 or before can be destroyed *
2. Money Laundering – 5 years in jail is accompanied with a $2,000,000 fine.
We would like to extend our personal
Best Wishes for a Safe and Joyous 2008!
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