2012 Tax Questions & Answers, Part 2

By Kate Musgrove • Page 1 of 1

Last Updated: April 17, 2012

Tax time is fast approaching and it pays -- literally -- to be properly prepared. If you need some help, TurboTax Canada offers a great, free Tax Advice service. We've put TurboTax tax experts to work with some questions from our readers. Check out the first round of questions here and read on for the second round!

1. I married an American citizen in 2011. She will be moving to Canada in the future, but for now, she continues to reside and work in the US. We don't jointly own property or any other big assets. What does this mean for filing my tax return? Do I have to make any special declaration or provide extra information?

When you get married, there are a few things you’ll note in your income tax return. Your spouse’s residency status will need to be indicated as “non-resident” but everything else you enter would be the same as if she was a Canadian resident

Here are the main pieces of information you’ll be providing on your spouse:

  • Indicate your change in marital status on your tax return; you will also need to provide the date that you got married
  • Since your spouse is not currently a resident and has no residency ties to Canada, she will not need to complete a Canadian tax return; however, you will need to provide information about her including name, date of birth, income earned in 2011 (include her U.S. income). Don’t forget to indicate that she is a non-resident.
2. My mother passed away unexpectedly in December 2011. She had a retirement income (RIF) of about $60,000. Does our family need to file a tax return on her behalf? What is involved?

I’m very sorry to hear about your loss. To answer your question, you will need to file a return for your mother’s final income tax return on her behalf. Preparing a return for a deceased taxpayer can be complex. You may want to consult the CRA guide T4011, Preparing Returns for Deceased Persons before proceeding.

The guide will help you understand how to prepare the return completely. TurboTax will accommodate a final return, but I recommend that you use TurboTax desktop because occasionally an override may be needed in a final return and the desktop version allows overrides. Here is an FAQ from TurboTax that is also helpful in preparing a final return.
3. I operate a home business. Can I deduct things like a home telephone line, internet service, and electricity on my tax return?

Assuming your home business is a self-employed venture, and operated with the reasonable expectation of making income, than yes, your home office expenses are deductible expenses. You can claim your home telephone line, internet service and electricity on the self-employment form of your tax return. You’ll have to calculate the percentage of your home that is used for your business and then take that same percentage of the expenses.

4. I've earned income in USD. How do I determine the exchange rate I am supposed to use when reporting it?

You need to use the Bank of Canada’s 2011 annual exchange rate for the US which can be found here. (This link also includes the exchange rates for all other currencies.)

5. I own a condo and have a roommate who pays me rent. What expenses can I deduct, if any?

Are you renting out a room in your home for the purpose of earning income? Or are you just sharing the expenses of the home with your renter?

If you are simply splitting the house expenses with your renter, then you do not need to include the income on your return; and of course if you’re not claiming any income from the rental than you can not claim any expenses.

If you are earning income from your rental, then you are required to fill out a T777 form where you can deduct part of your maintenance costs such as heating, home insurance, electricity, and cleaning materials. You can also deduct a part of your property taxes, mortgage interest, and CCA.
6. I am renting an apartment from July 2011 to January 2012. I'm pretty sure I qualify for a rent credit. My payments have included my first and last month though... do I include the last month even though it's meant for the month of January 2012?

Do you live in Manitoba? Manitoba is the only province where rent can be applied as a tax credit on an individual’s income tax return. If so, you would include the rent you paid for the months of July 2011 to December of 2011.

If you are an Ontario resident, please note that there have been changes to the personal income tax return. Rent is no longer a tax credit on an individual’s income tax return. However, the individual can apply for Ontario Trillium Benefit credit which works similar to the GST/HST credit where you will receive a credit if you paid rent or property taxes for your primary residence during the year. Your income tax return will include the forms to apply for the benefit.

No other provinces have any credit related to rent paid.
7. I send my kids to a Sunday school. Another parent mentioned that they were getting a charitable donation credit. What do I need to submit or where can I go for more information?

It sounds like the other individual made a donation to the church and the church provided a donation receipt.

If this is the case, you will need to follow up with the church to see if they can provide a receipt for any donations you may have made in the 2011 tax year.

8. How do I know how much to contribute to my RRSP to maximize my tax savings?

The amount you can contribute to your own RRSPs or your spouse's RRSPs, or your common-law partner's RRSPs for a given tax year without tax implications is determined by your RRSP deduction limit.

You can find your RRSP deduction limit on line (A) of the RRSP Deduction Limit Statement, on your latest notice of assessment or notice of reassessment from your last filed tax return.

If you misplaced your last notice of assessment, you can also find your RRSP deduction limit using the My Account service from the Canada Revenue Agency.

9. Is interest on money I borrowed to invest in my TFSA tax deductible?

Unfortunately, no. Interest paid on TFSA loans is not tax-deductible.