Tax Tips: New rules means new ways to save tax!

From 1999 ...

• On death, an RRSP may be transferred tax-free to an RRSP of a surviving spouse or if no spouse to other qualifying dependents. Effective for deaths after 1998 tax-free distributions to qualifying dependents can be made even if there is a surviving spouse.

• Retroactive lump-sum salary payments are currently taxable in the year received and in some cases may result in more taxes than the year earned. Persons receiving $3,000 or more after 1994 will be allowed to compute the tax as if the payment had been received in the year to which it relates.

• The list of expenses eligible for the medical expense tax credit for persons with disabilities is extended.

• Commencing year 2000, the tax benefits from income splitting plans involving minor children will be eliminated for taxable dividends received from shares of a family business and income from a partnership or trust derived from a business carried on by a person or corporation related to the child.

From 1998, did you know….

• Up to 1998 a business lunch at a golf club in conjunction with a golf game was not tax deductible until this rule was changed in 1998.

• Retroactive to 1994, all Alternative Minimum Tax (AMT) arising from a large RRSP deduction (eg: as a result of a large carry forward amount or retiring allowance) and not utilized will be eligible for a refund pending final legislation.

• Child care expenses increased by $2,000 to $7,000 for children under age 7 and by $1,000 to $4,000 for other eligible children generally under 16.

• A new $400 Caregiver Tax Credit can be claimed by individuals who provide in-home care for a parent or grandparent over age 65 or infirm dependent relatives. The credit is reduced by 17% of the elderly or infirm relative’s income over $11,500.

• As of February 24, 1998, a person can be certified for the disability tax credit by an occupational therapist and by psychologists for intellectual impairments.

• Moving expenses now include certain costs of maintaining a vacant former residence for up to three months and are limited to the actual costs and $5,000.

• Employer assistance paid to a relocated employee representing a reimbursement for a loss on the sale of a former residence, the first $15,000 is tax-free and any amount over $15,000 is only half-taxable.

• Self employed individuals are now allowed to deduct amounts paid for their private health services plan provided they are active in the business.

• Small businesses can deduct up to 100% of computer hardware and software costs up to $50,000 and incurred before October 31, 1999 for the purpose of replacing systems that are not Y2K compliant.

• Part-time students can now claim $60 a month for each course lasting at least 3 weeks with a minimum 12 hours of course work per month.

• Students and former students paying student loans can now claim a non-refundable tax credit on interest paid on student loans. If not used, it is available to be carried forward for five years.

Important Changes from 1997….

• Medical expenses includes up $1,000 for a home air conditioner if it is prescribed by a doctor, up to $5,000 for the costs of altering a van for the use of a wheel chair, and reasonable expenses relating for altering a driveway at the principle place of residence for a person with a severe and prolonged mobility impairment.

• The costs for a part-time attendant care eligible for the medical expense credit has increased from $5,000 to $10,000 ($20,000 in the year of death).

• Students can now carry forward unused post 1996 tuition and education tax credits to future years, the maximum transferable amount to a supporting person is $5,000.

© 1999 - 2002 www.offshoreplus.com. All Rights Reserved.