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Pay Less Tax on Your Income In A Day For Canadians For Dummies®

Table of Contents

Introduction
What You Can Do In A Day
Foolish Assumptions
Icons Used in This Book
Chapter 1: Workin’ for the Weekend (or for Retirement)
Understanding Your Employment Status
The ups and downs of self-employment
Determining whether you’re self-employed
Taking the self-employment assessment quiz
Saving for Your Retirement
Understanding your registered pension plan
Knowing what to do with a pension adjustment
Knowing what to do with a pension adjustment reversal
Buying back service
Knowing What to Do When You Leave Your Employer Before You Retire
Contributing to Your Employer’s Profit-Sharing Plan
Chapter 2: Taking Advantage of Your Benefits
Taking Advantage of Employee and Shareholder Loans
Working with employee and shareholder loans
Recognizing special circumstances
Understanding Your Stock Options
Checking out the general rule
Exploring the exceptions
Looking at Common Taxable Benefits
Negotiating Non-Taxable Benefits
Getting Your GST Rebate
Assessing your eligibility for the GST/HST rebate
Determining which expenses qualify for the GST/HST rebate
Calculating and claiming your GST/HST rebate
Chapter 3: Deducting Employee Expenses
Comparing Commissioned Salespeople and Regular Employees
Letting the CRA’s Forms Help You
Deals on Wheels — Claiming Your Automobile Expenses
Capital cost allowance (CCA) when an automobile is owned rather than leased
Restrictions on certain automobile expenses
Home Is Where the Office Is — Claiming Home Office Expenses
Deductible home office expenses
Deductions for special employment situations
Chapter 4: Making Your Business a Tax-Savvy Business
Choosing a Taxation Year-End
Pay CPP on Self-Employment Earnings
Choosing the Right Business Ownership Structure
Operating a sole proprietorship
Entering into a partnership
Deciding to incorporate
Making the most of incorporation
Being a Tax Winner Even When You Realize a Loss
Limited-partnership losses
Non-capital losses
Use business investment losses (BIL) to your advantage
Chapter 5: Maximizing Your Capital Cost Allowance (CCA) Claim
Understanding Capital Cost Allowance
Calculating CCA — The Declining Balance Method
Common CCA classes and rates
A CCA example
Undepreciated capital cost (UCC)
Sale of capital assets
Recapture and terminal loss
Restriction on the maximum capital cost of a class 10.1 automobile
Special rules in calculating CCA on class 10.1 automobiles
Chapter 6: Where to Go From Here
Taking Your First Steps
Visiting dummies.com
About the Author

Pay Less Tax on Your Income In A Day For Canadians For Dummies®

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Introduction

If you’re like many Canadians, much of your time is spent at work. Among us are farmers and bankers and teachers and bus drivers and tax accountants, plus occupations that many of us have yet to imagine. But the one thing that we all have in common is that we work to get paid so that we have income to enjoy the rest of our lives. In this book, we offer strategies to help you hold on to as much of that income as possible, whether you’re an employee or a business owner.

Employees are very limited in the expenses they can deduct when calculating the tax they owe to the CRA and therefore, much to the chagrin of many Canadians, employment income is where we pay the bulk of our taxes. But don’t despair — with some planning and a better understanding of how the CRA views employment income, you just might end up with a few more dollars in your pocket after all is said and done.

As for you business owners, running a small business is no “small” feat. Issues arise continually that need your attention — customers, manufacturing, marketing, sales, labour relations, and so on. And then there are the taxes. In this book, we tackle many tax issues that a small business owner must face. Tonnes of these issues can lead to positive tax planning opportunities to help maximize after-tax income for you and your family.

What You Can Do In A Day

The goal of Pay Less Tax on Your Income In A Day For Canadians For Dummies is to help you understand the basic rules of Canadian taxes and how they can benefit you. Whether you’re your own boss or you work for someone else, you need to know what income and benefits are taxable and what types of deductions and credits you’re entitled to claim. This can make a huge difference in how much tax you pay each year.

You can read the chapters straight through and get an overview of the essential tax information as we’ve outlined it, or you can have a look at the Table of Contents and pick and choose the information that applies to you. How you use this book is up to you. So dive in, and start saving money!

Foolish Assumptions

Here’s what we’re assuming about you. You work for a living, either for someone else or yourself, and you’re interested in Canadian taxes. You want to make sure you keep as much of your money in your pocket as possible.

Icons Used in This Book

To help you navigate your way through this book, we place icons in the margins. Here’s a list of the icons and what they mean:

remember_4c.eps When you see this icon, you’ll find a friendly reminder of stuff we discuss elsewhere in the book or of points we really, really want you to remember.

tip_4c.eps The bull’s-eye marks the spot for smart tax tips and timesavers to help you get your tax return done quickly and with a minimum amount of pain.

technicalstuff_4c.eps This nerdy guy appears beside discussions that aren’t critical when you just want to know the basic concepts and get answers to your tax questions — that is, when you’re using the book as a quick reference days before your return is due (you wouldn’t do that, now, would you?).

warning_4c.eps Don’t make these common but costly mistakes with your taxes! Aren’t we nice folks to point them out?

5minuteexercise.eps Take a break from the text for a quick exercise designed to help you get a better grasp of Canadian taxes.

exploresomemore.eps When you see this icon, head to this book’s companion website at www.dummies.com/inaday/paylesstaxonincome. Online, you’ll find more-detailed information about topics that we cover in the book.