Q: I had a capital gain in January 2000 when the capital gains inclusion rate was 75%, and a capital loss in March when the inclusion rate was only 662/3%. How do I determine my inclusion rate for the year?

A: Your inclusion rate for the year will be the rate in effect for the period in which you had the greatest capital gains or losses. For example, if you had a capital gain of $10,000 in the first period (i.e., before February 28) and a capital loss in the second period (after February 27 and before October 18), your inclusion rate would be 75%. The same rate would apply if you had a capital loss of $10,000 in the first period and a capital gain of $5,000 in the second period. However, if your second-period capital gain or loss was the greater amount, your inclusion rate would be 662/3%.

If you also had a capital loss in the third period (i.e., after October 17, when the inclusion rate was dropped to 50%), you first have to figure out your inclusion rate for the first two periods. If your net capital gain for the first two periods is greater than your loss for third period, this will be your inclusion rate for the year. Otherwise your inclusion rate will be 50%.

If you had a net capital gain in the first two periods, and you also had a capital gain in the third period, a blended rate will apply.

Q: What is a "principal residence?" And why is the distinction important?

A: A principal residence is a housing unit that you ordinarily inhabit during the year and which you designate as your "principal" residence. For 1982 and later years, only one principal residence may be designated per family.

The distinction is important because there is no requirement to pay capital gains tax when you sell a principal residence.

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Q: I sold some shares that I inherited from my grandfather. He purchased them more than 25 years ago. How do I determine their cost?

A: For tax purposes, their cost would be their value at the time you inherited them. The accrued value up until the time of death should have been reported on your grandfathers final return. You should contact the executor of your grandfather's estate to find out how much he shares were worth when he died.

Q: If I have made charitable donations, but my other non-refundable tax credits are sufficient to reduce my taxes to zero, can I carry these charitable donations forward, and if so for how many years can I carry them forward?

A: Yes, you may carry the donations forward for five years.

Q: I have made charitable donations of under $200 during the tax year. Next year I plan to donate about the same amount. Is it best to claim all of my donations on this year's tax return, or wait until next year or later to claim these?

A: For smaller donations it may be advantageous to save the donations for several years and combine them because there is a higher credit for donations over $200. The non-refundable credit for donations up to and including $200 is 17%, and on the balance, 29%.

Q: I attended a social that was intended to raise funds for a "recognized" Canadian charity. Can I claim the cost of the tickets as a charitable donation?

A: Probably not. The cost to such an event would only be claimable if the charitable organization separates the admission cost portion from a donation cost portion, and issues a receipt for the amount qualifying as a donation. This is because a charitable donation must be a true gift without any consideration in return.

Q: Both my wife and myself work full time. She makes more money than I do, so it's more beneficial for her to claim the day care expense. Is this OK?

A: No, the spouse with the lower net income must claim child care expenses except in certain extenuating circumstances.

Q: My husband is a full time student and works part time. I work full-time. If his net income is lower than mine, will he have to claim the child care expenses?

A: No, if one spouse is attending school, the higher income spouse can claim the child care expenses.

Q: I'm a single Mom and work evenings. I have a teenaged babysitter come in to look after my kids. Can I claim this as child care expenses?

A: Yes, as long as the teenager is not related to you. Include their S.I.N. (if they have one) and make sure you have a receipt.

Q: What is the maximum amount of child care expenses I can claim for my 4-year-old son?

A: The maximum allowable claim is the lesser of:

1. $7,000;
2. total childcare expense paid; and
3. 2/3 of your earned income.

Q: How much can I contribute to my RRSP that I can deduct on my 2000 tax return?

A: Your RRSP limit for 2000 is shown on your 1999 Notice of Assessment that you received after you filed your 1999 return. If you have lost your Notice of Assessment, you can call the government TIPS line at 1-800-267-6999.

Q: What happens if I accidentally contribute too much?

A: If you contribute more than your limit, you can carry forward the excess amount on Schedule 7 and deduct it in a future year when you have accumulated more RRSP room. However, if your excess contribution is more than $2,000, you will be subject to penalty tax. In this case, it may be advisable to withdraw the excess amount.

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Q: What are the tax consequences of contributing to my wife's RRSP?

A: If you contribute to your wife's RRSP, you get the same deduction as if you had contributed to your own. Likewise, the deduction is subject to your own RRSP limit, not your wife's. On the other hand, the RRSP belongs to your wife, so when the money is removed, she will have to report it, not you. In short, you get the deduction; she reports the income. Therefore, it is an excellent way to split income between spouses. However, to prevent abuses, any withdrawals from a spousal RRSP will be attributed back to the contributor to the extent contributions were made to any spousal RRSP during that year or the immediately preceding two years.

Q: Is it best to contribute to my own or to my husband's RRSP?

A: That depends on the level of income both you and your husband can expect at retirement. Ideally, you should try to equalize the retirement income between you to minimize taxes. This means that if you will have a company pension when you retire, and your husband will not, it may be best to contribute to your husband's RRSP. However, if the situation is reversed, you should contribute to your own RRSP, at least until you have generated enough capital in your RRSP to generate an income to equal your husband's retirement income.

Q: I understand that there is a disability credit available on one's tax return. As I am somewhat arthritic, I am not able to participate in many recreational activities. Does the inability to participate in such activities establish a legitimate claim for non-refundable disability credit?

A: No. A disability must be such that it markedly restricts your ability to perform a basic activity of daily living. This does not include working, housekeeping, or a social or recreational activity.

Q: How does electronic filing work?

A: We enter your tax information into our computers and transmit your return electronically to the CCRA.

Q: What are the advantages of filing electronically?

A: Because you no longer need to mail your return, and because the CCRA no longer needs to manually enter your tax information into their computer, it is a lot faster than paper-filing. In fact you can normally expect to get your refund within two weeks.
Because the CCRA checks your return before processing it, you can also be sure that it was accurate and complete.

Q: Are there any types of tax return that cannot be electronically filed?

A: Only a small percentage of tax returns cannot be electronically filed. These include the returns of deceased taxpayers and non-residents.

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Q: How can I be sure that my personal tax information will remain confidential?

A: The CCRA requires that all EFILE transmissions be encrypted and sent through specialized telecommunications systems in order to ensure their confidentiality.

Q: Can I deduct expenses I incur to earn employment income?

A: You can deduct employment expenses only if your contract of employment requires you to pay the expenses, you will not receive reimbursement for the expenses, and you have a T2200 Declaration of Conditions of Employment, or a TL2 Claim for Meals and Lodging Expense, signed and certified by your employer. There are also additional requirements, based on the types of expenses you incur.

Q: Can I deduct the cost of commuting to and from my place of work?

A: No. The cost of commuting is a personal expense and is not deductible.

Q: If my employer requires me to use my car, can I deduct the standard 37¢/kilometre?

A: No. Your claim must be based on the actual auto expenses you incur, prorated by the ratio of business use to total use. This means you must keep a record of all your auto expenses, as well as the total kilometres driven for business purposes versus the total kilometres for the year. Furthermore, you can deduct auto expenses only if you are ordinarily required to work away from your employer's place of business or in different places, and you did not receive a non-taxable allowance for your expenses.

Q: I have to use my car for employment purposes. What are the tax consequences of buying versus leasing?

A: If you buy your car, you can deduct capital cost allowance, based on the price you paid (up to a limit of $27,000 plus GST/HST/PST), as well as interest charges, up to a maximum of $8.33/day. If you lease the car, you can deduct the total lease payments made, up to a maximum of $700 per month, plus GST/HST/PST. In either case, you must prorate these totals by the ratio of business use to total use.

Q: Can I deduct meal expenses if I am away from the office on company business?

A: Meal expenses can be deducted only if you are ordinarily required to work away from your employer's place of business or in different places, and only if you were out of town for at least 12 hours. However, if you work for a transportation company, you may be able to deduct meal expenses after four hours. In either case, only 50% of meal expenses are deductible.

Q: Some employees who are required to travel can deduct $11 per meal, regardless of the amount paid for the meal. Does that apply to me?

A: This provision applies only if you are employed by a company whose principal business is the transportation of goods or passengers. Employees of other companies are limited to the amount actually spent. In either case, the deduction is limited to 50% of the total, whether that total is based on actual receipts or calculated at $11 per meal.

Q: I got married in the tax year. Before the marriage I was supporting my 6 year old son from a previous marriage. Can I claim the equivalent-to-spouse amount for my son?

A: Yes, the claim is permitted since the conditions for claiming this credit need only be met at some time in the year.

Q: I separated from my spouse in the tax year. During the separation I supported my 10 year old daughter. Can I claim the equivalent-to-spouse credit for the period of the separation?

A: Yes, because the conditions for claiming this credit need only be met at some time in the year. Therefore a short and informal separation may allow a legitimate claim.

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Q: I am divorced and had to pay child support payments to my ex-wife on behalf of my son. However, in July of the tax year, my son began to live with me, and I was no longer required to make the support payments. Can I claim an equivalent-to-spouse amount for the period in which he lived with me for the current tax year?

A: No. In any year in which the spouses are separated for the entire year, taxpayers are not allowed to claim an equivalent-to-spouse amount for dependants if they are required to make support payments for them. However, if your son continues to live with you next year, you will be able to claim the equivalent-to-spouse amount for your son for that tax year.

Q: I paid our 16 year old daughter to help us out with the work on the farm. Can I deduct the amount I paid her?

A: You can claim wages paid for services performed by your child if you actually pay the wages and the work your child did was necessary for you to earn farming income. In addition, the wages must be reasonable considering your child's age and the amount that would be paid to an arm's length individual.

Q: In order to help me pay for all of my farming expenses this year I obtained an advance payment for my grain. Do I have to report this on my tax return?

A: Because advance payments received under the Advance Payments for Crops Act and the Prairie Grain Advance Payments Act are considered loans, they are not reported on your tax return when the payments are received. Rather, the amounts are reported in income when the related cash purchase or deferred cash purchase ticket amounts would normally be reported.

Q: I gave my son a heifer that we raised on our farm in order for him to participate in the local 4H group. Is it true that I have to report the value of this animal in my income?

A: Generally speaking, whenever you dispose of property to a non-arm's length individual it is deemed disposed of at fair market value.

Q: I sold my fishing licence to the government and agreed to retire under the Groundfish Licence Retirement Program. Is this treated as retirement income?

A: The tax consequences to fishers who took advantage of the program are generally the same as those under similar licence retirement programs offered by Fisheries and Oceans Canada in recent years. The sale of a fishing licence is considered to be a disposition of an eligible capital property. Like the disposition of most capital properties, only a portion of the gain realized upon disposition is taxable.

Q: I made a deposit this year for a brand new fishing boat. I will pay the balance of the cost next year in the spring when the boat will be completed. Can I claim the Investment Tax Credit for the entire cost of the boat or for just the amount of the deposit?

A: The rules for claiming an Investment Tax Credit parallel those for claiming capital cost allowance. The "acquisition" of the boat does not in itself give you the right to an ITC. The boat must also be available for use which, for practical purposes, is considered to be the earlier of when you actually begin to use the boat and the second taxation year following the year of acquisition.

Q: I hired my 15-year-old son as a crew member. Can I deduct the amount I paid him?

A: You can claim wages paid to your son if you actually pay the wages and the work your child did was necessary for you to earn fishing income. The wages you paid your son must be reasonable considering his age and the amount that would be paid to an arm's length individual.

Q: I received some dividends from a company in the United States from which the IRS withheld tax. I have been told that I have to report the dividends on my Canadian tax return and pay tax on it again. Why do I have to pay tax on the same income twice?

A: Canadian residents must pay tax to Canada on their world-wide income even though foreign income may also be taxed in the country from which it arises. However, to avoid double taxation, Canadians who pay income or profits tax to a foreign country are allowed to claim a foreign tax credit. This will offset the foreign tax to the extent that it does not exceed the Canadian tax payable on that income.

Q: I receive Social Security retirement benefits from the United States. Should I be paying tax to the United States government for these benefits?

A: U.S. social Security benefits paid to a resident of Canada are fully exempt from tax in the United States and partially exempt from tax in Canada. The entire amount of benefits is reported as income on your Canadian return and the exempt portion (15% of the benefits) is claimed as a deduction.

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Q: Last year I worked in Australia for the entire year. I filed a return with the Australian government and paid taxes on the income I earned while I was there. Do I have to file a Canadian tax return even though I was not in Canada?

A: If you retained residential ties with Canada, you are considered to be a "factual resident" even though you were not physically present here. This means that you continue to be taxable on your world income. However, you can claim a foreign tax credit in respect of the taxes you paid to Australia.

Q: I am a U.S. resident working in Canada on a one-year contract. I have not brought my family with me and I will be returning to the United States as soon as my contract has finished. Am I considered to be an "immigrant" to Canada for tax purposes?

A: No: you are not considered an immigrant unless you establish residential ties here. If you do not establish residential ties, and you remain a resident of the United States under the Canada Ð United States tax treaty, you will be taxed as a non-resident.

Q: I immigrated to Canada on July 1. Will I be taxed on my income for the whole year?

A: No: You will be taxed on that portion of your world income you earned after you established residential ties here. The only types of income earned before that which are taxable are Canadian-source employment income, business income, or scholarship income, or capital gains from the disposition of Taxable Canadian Property. "Taxable Canadian Property" is a technical term that includes real estate situated in Canada, but not publicly traded shares.

Q: Can I claim the expenses I incurred in moving here?

A: You can only claim your expenses incurred in moving to Canada if you are a full-time student at a post-secondary institution. You may then deduct your expenses against any income you have from scholarships, fellowships, bursaries or research grants from that institution.

Q: I am immigrating to Canada later this year. Is there anything I can do to avoid paying more tax than I have to?

A: If you are expecting to receive any lump-sum payments (for example, a retiring allowance from your employer), you should try and time it so that you receive them before you establish residential ties here, otherwise they will be included in your income for tax purposes.

You may also want to consider the possibility of transferring some of your investments to a non-resident trust before you leave. As long as the income is retained in the trust, it will not be taxable in Canada until you have been here for five years.

Q: My wife and I have a joint bank account. Since she is in a lower tax bracket, I want her to report the interest from it. Is this acceptable?

A: Probably not. You have to report income from investments in proportion to how much each of you contributed. If you both contributed the same amount of money to the account, you would each report half the interest. However, if you contributed all the money, you would report all the interest.

One way to achieve the result you want would be to arrange your affairs so that your wife uses her money to make income-producing investments, while you use your money for non-income-producing items such as paying off the mortgage.

Q: If I buy mutual funds and put them in my daughter's name, does she report the income they earn?

A: No. When you transfer property to a minor child, you have to report any income it earns up until the year in which the child turns 18. However, the child reports any capital gains realized by the property. If you want to set aside money for your daughter, you should therefore put it in an investment that will generate capital gains as opposed to dividends or interest.

Q: Are there any legitimate means I can use to split income with my daughter?

A: A special rule allows your daughter to report the income from her Child Tax Benefit payments if they are deposited in a separate account in her name. If you are saving for her education you may also want to consider a Registered Education Savings Plan (RESP). Income earned in an RESP is not taxed until it is withdrawn. Assuming your daughter decides to pursue a post-secondary education, it will then be taxed in her name.

Q: Can incorporating my business protect my personal assets?

A: Incorporation provides some protection against personal assets by limiting your liability, however; in most cases, financial institutions require a personal guarantee from the principal shareholder(s) of a small business corporation. This severely limits this advantage to incorporation.

Q: My proprietorship is booming! I'm making more money than I need. Is now a good time to incorporate?

A: Generally speaking, if your small business is earning more profit than you need personally, incorporation may be a good idea. Incorporating gives you as a shareholder more options for the distribution of income. Another advantage is that the income tax rate for small business corporations is more favourable than that for individual shareholders.

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Q: Are dividends paid out by a corporation a tax-deductible expense?

A: No, dividends are paid out of after tax dollars. This is why the recipient gets a lower tax rate on dividends than on other income.

Q: I have heard that dividends enjoy a preferential tax rate. Can you explain?

A: Dividends from taxable Canadian corporations enjoy beneficial tax treatment because of the dividend tax credit. Since dividends are paid out of a corporation's after-tax income, they have already been taxed at the corporate level. To prevent double taxation, a dividend tax credit is allowed to the individual who receives the dividend, to offset some or all of the corporate tax paid. Depending on your income bracket, this may result in an effective tax as low as 7%, up to a high of 36% (the exact percentage will vary, depending on the provincial tax rate and other factors).

Q: How are capital gains taxed?

A: Only a percentage of capital gains are taxable. For gains occurring before the February 28, 2000 budget, the inclusion rate was 75%. The budget reduced the taxable percentage to 66 2/3%. This was further lowered to 50% after the Federal min0budget on October 18, 2000. Therefore for 2000, the percentage of capital gains that is taxable depends on when the gain occurred. (See Capital Gains section for more details.)

Q: Financial planners often use the term "marginal tax rate." What is that and why is it important?

A: Your marginal tax rate is the rate of tax you will pay on the next dollar earned. It is related to the federal income tax brackets of 17% for incomes up to $30,004, 25% on incomes between $30,005 and $60,009, and 29% on incomes over $60,010. When provincial taxes are factored in, the rates are about 25%, 38% and 45% (the exact percentage will vary with province, and will depend on the various surtaxes, etc., that may apply). It is important because it determines how much tax you will pay on any extra money you earn. For example, if you earn an extra $100, the tax on that income might be $25, $38, or $45, depending on your marginal tax rate. Similarly, a deduction of $100 could reduce your tax by $25, $38, or $45, depending on your marginal tax rate. The higher your marginal tax rate, the more tax you pay on additional income earned, and the more advantageous will be any tax deductions you can take.

Q: In the case of a married or common-law couple, which spouse should claim the medical expenses?

A: Usually it is more advantageous for the spouse with the lower net income to claim the medical expenses because the claim is reduced by 3% of one's net income. Because of this 3% reduction, the higher the net income, the lower the net claim for medical expenses will be.

Q: Can the purchase of aspirins be claimed as a medical expense?

A: No, if purchased "over the counter", but yes if prescribed by a medical practitioner and recorded by a licensed pharmacist.

Q: Can vitamins and herbs that you purchase from a health food store on the advice of a friend be claimed as a medical expense?

A: No, because these were not prescribed by a qualified medical practitioner they do not qualify.

Q: Can I claim medical expenses such as the purchase of prescription glasses for my 21 year old son who is away from home attending university?

A: Only if at some time in the year your 21 year old son was dependent upon you for support. In order to calculate how much can be claimed on behalf of your dependant, your claim must be reduced by the amount by which the dependant's net income exceeds $7,231 multiplied by 4. For example, if your son's net income was $7,300, the claim would be calculated as:

the total medical expense minus ($7,300-7,231) x 4.

So if the cost of his glasses was $300, the amount that you could claim would be:

$300 minus ($7,300-7,231) x 4 = $24.

Q: Do I still need receipts to claim my 2000 moving expenses?

A: Not for all moving expenses. Receipts are not needed if you use the simplified method for claiming meals and vehicle expenses. Under the simplified method there is a flat rate of $11 per meal to a maximum of $33 per person per day. And if you use your car, there is a flat rate per/kilometre that may be claimed. However, you must keep track of the total kilometres driven that relate to the move. All other moving expenses still have to be supported by receipts.

Q: What is the detailed method for claiming moving expenses?

A: The detailed method for moving expenses can be used for claiming meals and automobile expenses. The detailed method for claiming meals is accomplished by using supporting receipts to claim what was actually spent on meals. The detailed method for claiming automobile expenses for your move involves keeping track of all motor vehicle expenses for the entire year and calculating the deduction as a percentage of the total kilometres driven in the year. For example if the distance driven for your move was 2,000 kilometres, you drove your car 20,000 kilometres in 2000, and your total vehicle expenses for the year were $5,000, your deduction would be $500, calculated as (2,000/20,000km) x $5,000 = $500.

Q: I lived in a rented apartment in the city where I used to reside before my move to start a job in a new location. Can I claim a deduction for costs such as legal fees related to the purchase of my new home in the new city?

A: No. Since you did not own and sell a home in the old location, you cannot claim expenses related to the purchase of a home in the new location.

Q: Do I have to have a job secured in the new location before my move in order to claim moving expenses, or can I move to a new city, look for a job, and then claim moving expenses once I start working?

A: You can claim moving expenses to the extent of your earned income at the new location regardless of whether you had obtained your new job before or after the move.

Q: Should I cash in my RRSPs before I move to the US?

A: In most cases, it is not advisable to cash in your RRSPs before you move to the US. If you collapse your RRSPs while resident in Canada, you will be taxed at your marginal rate for that year. If you wait until you move, lump sums will be taxed at a rate of 25%. If you leave the money in until you convert it to a RRIF or an annuity, the Canadian tax rate drops to 15%.

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Q: Will I have to file a Canadian tax return after I move?

A: If your move is temporary and you do not sever your Canadian residential ties, you will have to continue filing a Canadian return every year, reporting your worldwide income. If you are making a permanent move and severing your Canadian residential ties, you will have to file as a part-year resident in the year you move. In subsequent years, you will not have to file a Canadian return unless you have Canadian-source employment or business income or dispose of taxable Canadian property.

Q: How will my CPP and OAS be taxed if I move to the US?

A: Under the Canada-US tax treaty, CPP and OAS benefits paid to a resident of the US are not taxable in Canada. However, you will have to include them on your US return and, depending on your total income, may have to pay US tax on them.

Q: How much can I contribute to a Registered Education Savings Plan (RESP)?

A: The maximum annual contribution limit is $4,000 per child. There is also a lifetime contribution limit of $42,000. Note that this is the maximum amount per child. For example, if you contribute $3,000 to any one child, the maximum that anyone else can contribute is $1,000. However, there is no limit on the number of children for whom you can make contributions.

Q: What is the Canada Education Savings Grant?

A: The Canada Education Savings Grant (CESG) is a grant that the federal government provides when you make an RESP contribution for a minor child. It is equal to 20% of your RESP contribution to a maximum of $400 per child ($7,200 lifetime). CESGs are only paid to 16- and 17-year-olds if $2,000 has already been contributed to the child's RESP before the age of 16, or there were contributions of at least $100 in any four years before the child reached 16.

Note that you only have to make an RESP contribution of $2,000 in order to get the maximum CESG of $400.

Q: What happens if my children decide not to pursue post-secondary education?

A: If the terms of the plan allow it, you can name another beneficiary under the age of 21 as a replacement. The contributions you made for the original child are not taken into account in determining the contribution limits for the new child.

Alternatively, if the plan has been in existence for at least ten years and each beneficiary in the plan has reached the age of 21, the accumulated income in the plan may be returned to you. It will then be included in your income. Unless you have sufficient RRSP deduction room to transfer the income to your RRSP (up to a maximum of $50,000), you will also have to pay a 20% penalty tax. Any portion relating to CESG grants must be returned to the government.

Q: My wife does not work outside our home and therefore will not have pension income that normally results from employment income. How can we set up a retirement income plan for her?

A: Assuming you have sufficient RRSP deduction room, you can contribute to a spousal RRSP. When your wife withdraws from the plan, providing you do not make contributions for a minimum period, the income will be taxable to your wife.

Q: My spouse never contributed to the Canada Pension Plan so therefore does not receive benefits from the plan. My sister told me that I can split my benefits with my spouse. Is this true?

A: Under certain circumstances, spouses can apply to have their CPP retirement benefits divided equally between them. To be eligible for this division, both spouses must be at least sixty years of age and must have applied for their retirement benefits.

Q: I am turning 69 this year. Is it true that I must withdrawal all amounts from my RRSPs? I contributed to these plans over many years, why must I report all of it in one year?

A: Although it is true that past the age of 69 you can no longer hold RRSPs, you have several other options, two of which are to transfer your RRSPs amounts to a Registered Retirement Income Fund or purchase an eligible annuity. The amount will then be spread over a number of years and you will not be required to include the entire amount in income this year.

Q: I plan to buy a house next month. Can I put my downpayment into my RRSP, get the tax deduction, then take it out to buy the house?

A: You cannot claim a deduction for an RRSP contribution if it was made less than 90 days before the Home Buyers' withdrawal. However, this applies only the extent that the balance in the RRSP after the withdrawal is less than the amount contributed in the 90-day period.

Q: I have owned a house in the past. Does that mean I cannot make use of the Home Buyer's Plan?

A: Not necessarily. You are eligible to participate for calendar year 2001 as long as neither you nor your spouse owned a home and lived in it as a principal residence in the period beginning January 1, 1997, and ending 31 days prior to your withdrawal. Also, if you participated in the Home Buyers' Plan previously, your repayment balance must be zero as of January 1 of the year in which you wish to make a new withdrawal.

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Q: If I make use of the Home Buyers' Plan, what are my future obligations?

A: The amount you withdraw will have to be repaid over a 15-year period, beginning the second year after your withdrawal. You will be notified of the amount you have to repay, and the date by which it must be repaid. If you do not repay the money as required, the amount will be added to your income.

Q: How do I make a repayment under the Home Buyers' Plan?

A: The repayment is easy: simply make a regular contribution to any of your RRSPs. It does not have to be to the same RRSP from which you withdrew the money. However, it must be to your own personal RRSP, not a spousal RRSP. Then, when you file your tax return, designate the amount of your Home Buyer's Plan repayment on Schedule 7.

Q: Can I pay more than the amount required under Home Buyers' Plan if I have the money?

A: Yes, you can pay as much as you want, up to the total balance owing. Simply make an RRSP contribution to a personal RRSP, then designate any amount you wish as a repayment on Schedule 7 when you file your return. This will reduce your outstanding balance and thus your future minimum repayment amounts.

Q: I am turning 65 this year. Am I going to be taxed at a lesser rate because I am a senior?

A: The tax rates do not fluctuate according to age; however, seniors are entitled to a couple of credits that are not available to most others. These include the age amount ($3,531) and the pension income credit (maximum of $1,000).

Q: I have recently transferred all of my registered retirement savings plans (RRSP) to a registered retirement income fund (RRIF). I do not need any additional income but I was told that I have to withdraw from this plan every year. Is this true?

A: Every RRIF must pay out a specified percentage of its value each year to the annuitant as income. This amount is called a "minimum amount" and is determined by multiplying the RRIF's value at the beginning of the year by a factor that varies with the taxpayer's age. The annuitant may withdraw more than the minimum amount in a given year if the RRIF contract allows. Any amount over the minimum is called an "excess" amount.

Q: My husband turned 65 this year and his only income consists of Old Age Security benefits. Before he started receiving this income I was able to claim the full amount allowed for a spouse with no income. Can I still claim this amount?

A: Unfortunately, you will no longer be entitled to the full spousal amount. However, your husband is now entitled to the additional credit of $3,531 available to seniors. If he does not need the credit himself because he is not taxable, he can transfer this amount to your tax return.

Q: I started a small home based business in 2000. How do I report my income and expenses?

A: If your business is a proprietorship, which means you are the sole owner and it's not incorporated, you would need to summarize your business income and expenses on form T2124 and include the net income on your 1999 Income tax return.

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Q: Why can't I expense the new machine I bought in 2000? It's a business expense.

A: Although you bought the machine to use in your business you can't expense all of the cost in the year of purchase because it's usefulness lasts over a number of years. Instead you can claim CCA (Capital Cost Allowance), which is the CCRA's version of depreciation, and it allows a portion of the expense to be claimed each year over a number of years.

Q: I started a business this year. Do I have to register for GST?

A: Businesses with taxable sales less than $30,000 are not required to register for GST.

Q: My husband and I separated in the year and he pays $500/month for child support for our 2 children. We have a separation agreement in force dated January 15, 2000. Do I have to include these payments in my 2000 income for tax purposes?

A: No: if your agreement was signed after April 30, 1997, the amounts you received for child support are neither taxable to you nor deductible for him.

Q: I paid my ex-wife a lump sum payment of $4,000 in 2000 as part of our separation agreement. Can I claim this?

A: No: lump sum payments do not qualify as deductions unless they were paid to catch up on arrears payments for regular periodic amounts.