If the following expenditures are made by individuals by December 31, 2004 they will be eligible for 2004 tax deductions:
moving expenses, child care expenses, safety deposit box fees,
charitable donations, political contributions and medical expenses.
2004 eligible Registered Retirement Savings Plan (RRSP) contribution amounts
are noted on the 2003 personal income tax return assessment notices. You have
until March 1, 2005 to make tax deductible RRSP contributions for the 2004 year.
Consider contributing to a spousal RRSP to achieve income splitting in the future.
Persons turning age 69 in 2004 must mature their RRSP into cash,
an annuity or a Registered Retirement Income Fund by December 31, 2004.
If you own a business, consider paying a reasonable salary to family members
for their services rendered to the business.
Ensure that all deductible alimony or maintenance payments are made by December 31, 2004.
An individual whose 2004 net income exceeds $59,790 will lose all,
or part, of their old age security.
Senior citizens will begin to lose their
income tax age credit if net income exceeds $29,124.
Contact your professional
advisors for assistance in managing 2004 personal income.
Consider purchasing assets eligible for capital cost allowance before the year end.
For example, employees may claim capital cost allowance on automobiles used in their employment.
If you had taxable capital gains in the year, or any of the preceding three years,
consider selling capital properties with an underlying capital loss prior to the year end.
This capital loss may be offset against the capital gains.
If income in an inter vivos trust is to be taxed on a beneficiaryís return,
the income must be paid or payable to the beneficiary by December 31, 2004.
Registered Education Savings Plan (RESP)
A Canada Education Savings Grant (CESG) for RESP contributions will be
permitted equal to 20% of annual contributions for children
(maximum $400 per child per year).
The 20% is proposed to be increased to 40% or 30% for lower income
families commencing January 1, 2005.
Budget 2004 introduces a new Canada Learning Bond from the government
totalling $2,000 for each child born on or after January 1, 2004 ($500
in the first year and $100 per year until age 15) if the family net
income is under the $34,000 range. An RESP is needed for the deposit.
Health and dental premiums for the self-employed
Individuals will be allowed to deduct amounts payable in respect
of the year for Private Health Service Plan coverage in computing business
income provided they meet certain criteria.
Tax on Split Income
The Income Tax Act applies the maximum marginal tax rate
to certain passive income of individuals under the age of 18.
Therefore, consider minimizing this type of income in 2004.
The tax rate for higher income individuals is now significantly lower on capital
gains than on dividends thereby presenting an incentive to receive capital gains.
Canadians receiving shares in foreign tax-free reorganizations can apply for favourable tax treatment.
A refund of Employment Insurance paid for non-armís length employees may be available upon application to CRA.
an individual may request an adjustment to a tax return back to 1985.
It is proposed that after 2004, adjustments will be limited to ten years back.
Therefore, adjustments for 1985 to 1995 should be requested by December 31, 2004.