There’s no question that understanding the Income Tax Act is difficult. There are so many rules and regulations that it’s not surprising that there are a lot of myths floating around out there — especially with the filing deadline on the horizon.
But fear not. Cleo Hamel, senior tax analyst with H&R Block Canada, points out some of the biggest tax myths and how you can avoid making a costly mistake.
Myth #1: Maternity Leave Income Is Not Taxable
"You are required to report your EI benefits as income. In most cases, Service Canada withholds less than the lowest tax rate so you may have tax obligations at the end of the year."Check out the cheapest cities to live in Canada for where your dollar would stretch furthest.
Myth #2: RRSP Contributions Don’t Have to Be...
"Even if you are not claiming a deduction for the contributions you made in the year, you are still required to record the fact that you made it."Here is a list of the world's richest women to get you inspired.
Myth #3: Tips Are Not Considered Income
"Servers and others working in the hospitality industry are required to record and report their tips on their tax return. For servers, tips may be as much as 200-400 per cent of their income."And here is a list of the highest paying jobs in Canada, if you're curious.
Myth #4: Students Get Refunds on Their Tuition
"In order to receive a tax refund, you need to have overpaid your income tax during the year. If a student does not have taxable income, they cannot use their tuition and education credits on their return. They have the option to transfer up to $5,000 to a parent, grandparent or spouse or they can carry forward credits to use in future year."If you are looking for other ways to smartly handle your income, take a look at these items that will save you hundreds of dollars over time.
Myth #5: Mothers Are Required to Claim the...
"The lower income spouse is required to claim childcare expenses whether it is the mother or father. Either parent can claim the child tax credit."
Myth #6: I Earned Less Than $10,000 so...
"Even if you did not earn more than the personal amount ($11,038 for 2013), filing a tax return may trigger benefits like the quarterly GST/HST payment. And if you had tax withheld, you should receive a refund."
Myth #7: I Can Claim a Flat Rate...
"Self-employed Canadians are required to keep a logbook to calculate the auto expenses for their business."
Myth #8: Child Support Is a Tax Deduction
"Unless your agreement is dated before May 1, 1997, child support payments are reported on your tax return but they are not a deduction or included in income."
Myth #9: If I Work Abroad, I Don’t...
"The Canadian tax system is based on residency. If you are emigrating, you should indicate your date of exit on your last tax return. If you are working outside of the country but have substantial residential ties to Canada still, you will be required to file a Canadian tax return."
Myth #10: Mortgage Interest Is a Tax Deduction
"Only self-employed Canadians who work from home are allowed to claim a percentage of their mortgage interest as a business expense. The tax benefit of owning a home comes when you sell. Every Canadian receives a capital gains exemption on the sales of their principal residence."