You send in your tax return thinking that all is well and another tax slip arrives in the mail a few days later. Or perhaps you’re going through your last year’s tax return and discover you forgot to claim some types of tax credits such as public transmit amount, tuition amount and medical expenses.

You cannot resent your tax return electronically to change your tax return. But there are two ways you can request CRA to correct your tax return.

1. Using CRA online services to correct your tax return

You can make changes to your income tax return using the online My Account Service from the CRA. Once you are in My Account, you simply click on the Change My Return option and then enter and submit any changes to your most recent income tax return or returns from the previous two years. Once you select Submit, your changes will be sent to the CRA.

2 Filing an adjustment form (T1-adjustment) to correct your tax return

You can complete and print a T1-Adjustment form and mail it into the CRA. You will need to include the receipts or supporting documents for the changes you wish to make. For example, if you want to change the amount you claimed for charitable donations, you have to submit all your charitable donation receipts to support your claim.

You can request correct your tax return for any tax year of the previous 10 calendar years.

You’re already using online services—whether it’s banking, shopping or social media. Now, it’s time to ditch the paper and make managing taxes easier with one of the CRA’s online services: My Account, My Business Account, or Represent a Client.

CRA online services are fast, easy, and secure. You can use them to

• make a payment,
• change your address,
• get your tax slips such as T4, T4E and RC62,
• register for direct deposit,
• track your refund,
• view or change your return
• receive your notice of assessment,
• and more.

To use CRA online services, you will have to register with CRA first. And there are two steps.

Step 1 – Provide personal information

1. Enter your social insurance number.

2. Enter your date of birth.

3. Enter your current postal code.

4. Enter an amount you entered on one of your income tax returns. Have a copy of your returns handy. (The line amount requested will vary. It could be from the current tax year or the previous one.) To register, a return for one of these two years must have been filed and assessed.

5. Create a CRA user ID and password.

6. Create your security questions and answers.

After you complete step one of the registration process, you will have access to limited tax information on My Account. After you enter your CRA security code, you will have access to the full suite of services available in My Account.

Step 2 – Receive and enter the CRA security code

You should receive your CRA security code by mail within 5–10 days. CRA will mail the code to the address they have on file for you.

To access your account, return to My Account for Individuals, select “CRA login,” and enter your CRA user ID and password. When prompted, enter your security code.

After you login successfully, you can manage your tax using CRA online services easily.

Claiming your home expense tax deductions can result in big tax saving. If you are work-at-home employee or self-employed, you may be qualified to claim your home expense tax deductions.

Make sure you are qualified to claim home expense tax deductions.

If you are work-at-home employee, you must get your employer’s signature on a form T2200 – Declaration of Conditions of Employment, which should confirm that you are required to do some work from home.

If you are self-employed, to be qualified to claim the deduction, at least one of the two following conditions must be met:

• Your home office is your principal place of business; or
• You use the work space in your home only for the purpose of earning business income, and use it on a regular, ongoing basis to meet clients or customer.

If you have offices inside and outside your home and you want to claim home expense tax deductions, you need to be prepared with enough information to support your claim that you use your home office on a regular and continuous basis for your business.

Know what home expense tax deductions you can claim.

If you are work-at-home employee, you can claim

• Utilities
• Maintenance
• Rent
• Insurance if you are commission employee
• Property taxes if you are commission employee

If you are self-employed, you can claim

• Utilities
• Maintenance
• Insurance
• Property taxes
• Mortgage interest

Calculate the percentage of home expense you can claim

Once you calculate the total home expense, you have to determine the percentage you can claim as your business expense. It must bases on reasonable basis, such as the percentage of the total area of your home that the work space represents.

Don’t claim capital cost allowance (CCA) on your home office.

You can claim capital cost allowance (CCA) on the appropriate percentage of your home, but it has two disadvantages.

• Any CCA you claimed will be recaptured into income when you sell your home.
• CRA will not allow you claim the principal residence exemption. It means you have to pay tax on capital gain when you sell your home.

You cannot create business loss by claiming home expense business deduction. However, the excess amount that cannot be claimed in the year may be carried forward and deducted in the subsequent year.

Any questions, please don’t hesitate to contact us.

Did your children attend daycare or a program such as a summer day camp? You or your spouse may be able to reduce your tax by claiming your child care expenses on your income tax return. Child care expenses are tax deductions. It reduces your taxable income, so you pay less tax. However, if you don’t need to pay tax, it is not useful for you.

What are child care expenses?

Child care expenses are money you pay to have someone look after your child, so that you could:

• earn income from employment;
• carry on a business;
• carry on research or similar work, for which you received a grant.

To qualify, your child must have lived with you for the tax year. If you have no income, you won’t save tax or get more benefits by claiming child care expenses.

Who can claim child care expenses?

If you are the only person supporting the child, you can claim child care expenses.If you live with your spouse or common-law partner, the person with lower net income must claim the child care expense.

What payments can you claim?

You can claim payments for child care expenses made to:

• caregivers providing child care services;
• day nursery schools and daycare centres;
• educational institutions, for the part of the fees that relate to child care services;
• day camps and day sports schools where the primary goal of the camp is to care for children (an institution offering a sports study program is not a sports school); or
• boarding schools, overnight sports schools, or camps where lodging is involved.

The individual or organization who received the payments must give you a receipt showing information about the services provided. When the child care services are provided by an individual, you will need the social insurance number of the individual.

You cannot carry forward unclaimed expenses to a subsequent taxation year.

What payments you cannot claim?

You cannot claim payments for medical or hospital care, clothing, or transportation costs.

For payments made to an educational institution, you cannot claim the part of the fees that relate to education costs, such as tuition fees of a regular program or a sports study program. Also, you cannot claim fees paid for leisure or recreational activities, such as tennis lessons or the annual registration fees paid for Scouts.

Some expenses may not qualify for the child care expenses deduction. However, they may qualify for the children’s fitness amount or the children’s arts amount.

What is the maximum deduction?

The annual child care expense amount for each child is determined with reference to the child’s age, physical and mental condition as follows:

• For a child in respect of whom a disability tax credit may not be claimed, the annual child care expense amount is:
• $7,000 for each child under seven years of age at the end of the year;
• $4,000 for each child over six years of age at the end of the year and under 16 years of age at any time during the year; or
• $4,000 for each child over 15 years of age throughout the year who has a physical or mental infirmity and is dependent on the taxpayer, or the taxpayer’s spouse or common law partner.

For a boarding school or overnight camp, you may only claim up to $175 per week for a child under the age of 7 years, $250 per week for an eligible disabled child, or $100 per week for a child aged 7 to 16 years.

Claim your child care expense on your tax return

Use Form T778, Child Care Expenses Deduction, to calculate your allowable amount of child care expenses. Enter on line 214 of your return the amount that you can claim.

If you use your capital assets for your business, you can claim tax deduction on your capital asset. To calculate capital cost allowance tax deduction, and any recaptured CCA and terminal losses, you should use Area A on page 5 of your Form T2125.

Even if you are not claiming a deduction for CCA, you still should complete the appropriate areas of the form T2125 to show any additions and dispositions during the year.

Below, we explain how to calculate capital cost allowance.

Column 1 – Class number of your properties

If this is the first year you are claiming CCA, you can find the class number in Capital Cost Allowance Class of commonly used business asset. If you claimed CCA last year, you can get the class numbers of your properties from last year’s tax return form.

Column 2 – Undepreciated capital cost (UCC) at the start of the year

If this is the first year you are claiming CCA, skip this column. Otherwise, enter in this column the UCC for each class at the end of last year. Enter the amounts from column 10 of your last year T2215 form.

Column 3 – Cost of additions in the year

If you buy or make improvements to depreciable property in the year, CRA consider them to be additions to the class in which the property belongs. To calculate capital cost allowance for these asset additions, you should complete Area B and Area C of your Form T2125 as explained below.

• Area B – Details of equipment additions in the year

  List the details of all equipment (including motor vehicles) you purchased. Group the equipment into the applicable classes.

Column 4 – Proceeds of dispositions in the year

Enter the details of your dispositions as explained below.

If you disposed of a depreciable property, enter in column 3 of the appropriate dispositions area (Area D or Area E) one of the following amounts, whichever is less:

• your proceeds of disposition minus any related expenses; or
• the capital cost of the property.

Column 5 – UCC after additions and dispositions

You cannot claim CCA when the amount in column 5 is:

• negative (see “Recapture of CCA” below); or
• positive and you do not have any property left in that class at the end of the year.(see “Terminal loss” below).

Column 6 – Adjustment for current-year additions

In the year you acquire or make additions to a property, you can usually claim CCA on half of your net additions (the amount in column 3 minus the amount in column 4). CRA call it the half-year rule.

Column 7 – Base amount for CCA

Base your CCA claim on this amount. For a Class 10.1 vehicle you disposed, you may be able to claim 50% of the CCA that would be allowed if you still owned the vehicle at the end the year. This is known as the half-year rule on sale.

Column 8 – Rate (%)

In this column, enter the rate for each class of property in Area A.

Column 9 – CCA for the year

In column 9, enter the CCA you want to deduct for 2013. The CCA you can deduct cannot be more than the amount you get when you multiply the amount in column 7 by the rate in column.

Column 10 – UCC at the end of the year

This is the undepreciated capital cost (UCC) at the end of the year. This is the amount you will enter in column 2 when you calculate capital cost allowance claim next year.

Special rules to calculate capital cost allowance

• Recapture of CCA

  If the amount in column 5 is negative, you have a recapture of CCA. Include your recapture in your income on line 8230, “Other income” in Part 3 on page 2 of your Form T2125. A recapture of CCA can happen if the proceeds from the sale of depreciable property are more than the total of the UCC of the class at the start of the period plus the capital cost of any new additions during the period.

• Terminal loss

  If the amount in column 5 is positive and you no longer own any property in that class, you may have a terminal loss. More precisely, you may have a terminal loss when, at the end of a fiscal period, you have no more property in the class but still have an amount you have not deducted as CCA. You can usually subtract this terminal loss from your gross business or professional income in the year you disposed of the depreciable property. Enter your terminal loss on line 9270, “Other expenses,” in Part 5 on page 3 of your Form T2125.

Example on how to calculate capital cost allowance

When Cathy bought her new car in May 2014, it cost $16,000 including all charges and taxes. Since the cost of the car was $30,000 or less, she includes the car in Class 10. She was allowed a $1,000 credit when she traded in her old car (which was also in Class 10). Her UCC on the old car at the start of 2013 was $1,000. Cathy knows that her personal use of the car will vary each year.

Cathy has a desk, calculator, filing cabinets, and shelves in her store. These are Class 8 depreciable properties. The UCC of these properties at the start of 2013 is $5,000. She did not buy any Class 8 properties in 2013.

Therefore, she completes Form T2125 as follows:

Since Cathy used the car partly for personal use, she calculates the amount to include on line 9936 for her car as follows:
25,000 (business kilometres)/ 30,000 (total kilometres)× $2,550 = $2,125

She wants to claim the maximum CCA allowed to her in 2014. The most that Cathy can claim for CCA for 2013 is $2,125 for her car and $1,000 for the Class 8 properties.

She enters $3,125 on line 9936 in Part 5 on page 3 of Form T2125.

Different capital assets may belong to different capital cost allowance classes and have different CCA rates. To calculate your tax deduction of your capital cost, you need to classify your capital assets into different assets classes, and then use the different CCA rates in the calculation. The following lists the classes and CCA rates for most commonly used business assets.

Capital Cost Allowance Class 1 with CCA rate 4%

Class 1 includes most buildings acquired after 1987, unless they specifically belong in another class. Class 1 also includes the cost of certain additions or alterations you made to a Class 1 building or certain buildings of another class after 1987.

You also include in these classes the parts that make up the building, such as:

• electrical wiring;
• lighting fixtures;
• plumbing;
• sprinkler systems;
• heating equipment;
• air-conditioning equipment (other than window units);
• elevators; and
• escalators.

Note: Most land is not depreciable property. Therefore, when you acquire property, only include the cost that relates to the building.

Capital Cost Allowance Class 3 with CCA rate 5%

Most buildings acquired before 1988 are included in Class 3 or Class 6.

Include in Class 3 the cost of any additions or alterations made after 1987 to a Class 3 building that does not exceed the lesser of the following two amounts:

• $500,000; and
• 25% of the building’s capital cost (including the cost of additions or alterations to the building included in Class 3, Class 6, or Class 20 before 1988).

Any amount that exceeds the lesser amount above is included in Class 1.

Capital Cost Allowance Class 6 with CCA rate 10%

Include in CCA Class 6 with a CCA rate of 10% a building if it is made of frame, log, stucco on frame, galvanized iron, or corrugated metal.
Also include in Class 6 certain greenhouses and fences.

Capital Cost Allowance Class 8 with CCA rate 20%

Class 8 with a CCA rate of 20% includes certain property that is not included in another class. It includes:

• furniture,
• appliances,
• tools costing $500 or more per tool,
• some fixtures,
• machinery,
• outdoor advertising signs,
• refrigeration equipment,
• photocopiers, fax machines and telephone, and
• other equipment you use in business.

Capital Cost Allowance Class 10 with CCA rate 30%

It includes:

• motor vehicles,
• passenger vehicles unless they meet a Class 10.1 condition,
• computer hardware and
• systems software

Capital Cost Allowance Class 10.1 with CCA rate 30%

Include your passenger vehicle in Class 10.1 if the cost (not including HST) is more than $30,000. And you should list each Class 10.1 vehicle separately.

Example

Peter bought two passenger vehicles to use in his business. The cost for vehicle 1 is $33,000 + $4,290 (HST) = $37,290; and the cost of vehicle 2 is $28,000 + $3,640 (HST) = $31,640.

Peter should put Vehicle 1 in Class 10.1, since it cost him more than $30,000. And the capital cost for Vehicle 1 is $30,000 + $3,900(HST) = $33,900. This is because the maximum capital cost you can claim for a passage vehicle is $30,000.

Peter should put Vehicle 2 in Class 10, since it did not cost him more than $30,000. And the capital cost for Vehicle 2 is $28,000 + $3,640 (HST) = $31,640.

Capital Cost Allowance Class 12 with CCA rate 100%

Class 12 includes

• china, cutlery,
• linen,
• uniforms,
• computer software (except systems software), and
• tools, which cost is less than $500.

You can claim capital cost allowance (CCA) on depreciable assets to deduct your business income or rental income. Those depreciable assets include buildings, vehicles, furniture and equipments, that you use in your business. Those assets usually wear out several years, so you can’t deduct all their cost in one single year. Instead, you should claim capital cost allowance based on their capital cost and capital cost allowance rates.

1. Calculate the capital cost

Capital cost is the amount on which you first claim capital cost allowance. The capital cost of a property is usually the total of:

• the purchase price (not including the cost of land, which is not depreciable);
• the part of your legal, accounting, engineering, installation, and other fees that relates to buying or constructing the property (not including the part that applies to land);
• the cost of any additions or improvements you made to the property after you acquired it, if you did not claim these costs as a current expense (such as modifications to accommodate persons with disabilities); and
• for a building, soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, if these expenses have not been deducted as current expenses.

2. Understand Capital Cost Allowance (CCA)

Capital cost allowance (CCA) is the deduction you can claim over several years for the cost of depreciable property, which wears out or becomes obsolete over time such as a building, furniture, vehicle, or equipment, that you use in your business.

3. Special rules to claim capital cost allowance

Generally, you should use the declining balance method to claim capital cost allowance. This means that you claim CCA on the capital cost of the property minus the CCA you claimed in previous years, if any. The balance declines over the years as you claim CCA.

Example

Last year, Sue bought a machine for $60,000 to use in her business. On her income tax return for last year, she claimed CCA of $1,200 on the machine. This year, Sue has to base her CCA claim on the balance of $58,800 ($60,000 – $1,200).

• You do not have to claim the maximum amount of CCA in any given year. You can claim any amount you like, from zero to the maximum allowed for the year.For example, if you do not have to pay income tax for the year, you may not want to claim capital cost allowance. This is because Claiming CCA reduces the CCA available for future years.
• In the year you acquire a property you can usually claim CCA only on one-half of the cost. This is called the half-year rule.
• You cannot claim capital cost allowance on most land or on living things such as trees, shrubs, or animals. However, you can claim CCA on timber limits, cutting rights, and wood assets.
• If you claim CCA and you later dispose of the property, you may have to add an amount to your income as a recapture of CCA. Or, you may be able to deduct an additional amount from your income as a terminal loss.
• If your fiscal period is less than 365 days, you have to prorate your CCA claim. For example, if you start a business in June 1, 2013, your fiscal period is 214 days. Suppose you calculate your CCA to be $3,500. The amount of CCA you can claim is $2,052 ($3,500 × 214/365).

If you are self-employed and you use your personal vehicle to earn business income, you can claim your vehicle expenses in your income tax return. You can only claim the business portion of vehicle expenses. The personal portion of vehicle expense is not deductible. To claim your vehicle expenses correctly, please follow the following steps.

Keeping records

You can claim your motor vehicle expenses only when they are reasonable and you have receipts to support them. You should keep a record of the total kilometers you drive and the kilometers you drive to earn business income.

For each business trip, list the date, destination, purpose, and number of kilometers you drive. Record the odometer reading of each vehicle at the start and end of the fiscal period.

If you change motor vehicles during the fiscal period, record the dates of the changes and the odometer readings when you buy, sell, or trade the vehicles.

Claim your vehicle expenses, which include:

• licence and registration fees;
• fuel and oil costs;
• insurance;
• interest on money borrowed to buy a vehicle. When you use a passenger vehicle to earn income, there is a limit on the interest you can deduct. To calculate the amount of interest you can deduct, complete “Chart B – Available interest expense for passenger vehicles” on page 6 of Form T2125.
• maintenance and repairs; and
• leasing costs to lease a vehicle you use to earn income. When you use a passenger vehicle to earn income, there is a limit on the amount of the leasing costs you can deduct. To calculate your eligible leasing costs, complete “Chart C –Eligible leasing costs for passenger vehicles” on page 6 of Form T2125.

Claim capital cost allowance (CCA) on your vehicle

If you use a motor vehicle you own in your business, you might be able to claim CCA as vehicle expense in your self-employed business. To claim CCA on your vehicle, please follow the following steps.

1. What type of vehicle you own.

There are two types of vehicles:

• motor vehicles include pickup truck, van or minivan used to transport goods or equipment.
• passenger vehicles include Coupe, sedan, station wagon, sports car, or luxury car and Van or minivan with 4 to 9 seating.

2. CAA Class of your vehicle.

Motor vehicles belong to Class 10, with a CCA rate 30%. Your passenger vehicles can belong to Class 10 or Class 10.1, which all have a CCA rate 30%. If the cost of your passenger vehicle before HST is more than $30,000, it belongs to Class 10.1. You should list Class 10.1 vehicle separately. The $30,000 amount plus HST is the capital cost limit for a passenger vehicle to claim your vehicle expenses.

3. Calculate CCA as your vehicle expenses

To calculate your tax deduction for CCA, and any recaptured CCA and terminal losses, use Area A on page 5 of your Form T2125.

For example, Mike bought a passenger vehicle with a cost $33,000 plus HST $4,290. Mike has to put this vehicle in Class 10.1 since it cost him more than $30,000. The maximum capital cost he can claim for this vehicle is $33,900 ($30,000 x 1.13).

For the first year, the maximum CCA he can claim is $33,900 x 30% x 0.5=$5,085. (the half-year rule applied). The second year, the maximum CCA he can claim is ($33,900 – $5,085) x 30% =$8,644.5.

Your family’s home is generally known to be exempt from capital gains taxation because of the principal residence exemption. If the property was your principal residence for every year you owned it, you do not have to report the sale of your home on your income tax return.

To qualify for the principal residence exemption, the following conditions have to be met:

• You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year; and
• For years after 1981, each family unit may designate only one home per year as a principal residence. A family unit includes you, your spouse or common-law partner and unmarried minor children.
• The land on which your home is located can be part of your principal residence. Usually, the amount of land that you can consider as part of your principal residence is limited to one-half hectare (1.24 acres). However, if you can show that you need more land to use and enjoy your home, you can consider more than this amount as part of your principal residence.

There are three special situations you should be aware to avoid losing the principal residence exemption of your home.

1. Be careful flipping homes.

If you buy and sell your home too often, you may lose the principal residence exemption and even the 50% capital gains inclusion break if CRA thinks you are in the business of buying and selling homes.

On Sept. 6, 2012, in the case of Sylvie Giguère (tcc-cci.gc.ca), Ms. Giguère and her spouse lost a court battle on this issue. The couple had sold seven single-family residences within a six-year period, claiming the principal residence exemption on each sale.

CRA successfully argued that the profits should be taxed as business income and penalties should apply for failure to report the income.

2. Changing your principal residence to a rental property

If you move out from your principal residence and rent it out, you can make a selection to keep the property as your principal residence for up to 4 years. This means any capital gains realized on the sale of this property during those years would be sheltered from tax. To be eligible, the following conditions have to be met.

• you have to report the net rental income you earn; and
• you cannot claim capital cost allowance (CCA) on the property.
• you do not designate any other property as your principal residence for this time.

To make this election, you have to file a letter signed by you to CRA. The letter should describe the property and state that you are making an election under subsection 45(2) of the Income Tax Act.

3. Changing part of your home to rental

You can rent part of your home and the whole property is still qualified for the principal residence exemption if you meet all these following conditions

• the part you use for rental purposes is small in relation to the whole property;
• you do not make any structural changes to the property to make it more suitable for rental purposes; and
• you do not deduct any CCA on the part you are using for rental purposes.

The principal residence exemption rules and calculations are complicated. You can check more informaton on CRA website.

Continue with the previous article What you can deduct as self-employed business expenses – part 1, the following are more elf-employed business expense you can deduct on your income tax return.

Legal, accounting, and other professional fees

You can deduct the fees you for professional advice or services, including consulting fees. You can deduct accounting and legal fees to get advice and help with keeping your records. You can also deduct fees for preparing and filing your income tax and GST/HST returns.

You cannot deduct legal and other fees you incur to buy a capital property. Instead, add these fees to the cost of the property.

Management and administration fees

You can deduct management and administration fees including bank charges incurred to operate your business.

Rent as self-employed business expenses

You can deduct rent for property used in your business. For example, you can deduct rent for the land and building where your business is situated.

Maintenance and repairs

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. However, you cannot deduct the value of your own labour.

Salaries, wages, and benefits

You can deduct gross salaries and other benefits you pay to employees. Salaries or drawings paid or payable to you or your business partners are not deductible.

You can deduct the salary you pay to your child or your spousal, as long as you meet all these conditions:

• you pay the salary;
• the work your child or your spousal does is necessary for earning business or professional income; and
• the salary is reasonable when you consider your child’s age, and the amount you pay is what you would pay someone else.

Keep documents to support the salary you pay your child or your spousal.

Report the salaries you pay to your children and spouse or on T4 slips, the same as you would for other employees.

Property taxes

You can deduct property taxes you incurred for property used in your business. For example, you can deduct property taxes for the land and building where your business is situated.

Travel expenses as self-employed business expenses

You can deduct travel expenses you incur to earn business and professional income. Travel expenses include public transportation fares, hotel accommodation, and meals.

Telephone and utilities

You can deduct expenses for telephone and utilities, such as gas, oil, electricity, and water, if you incurred the expenses to earn income.

Delivery, freight, and express

You can deduct the cost incurred in the year of delivery, freight, and express that relates to your business.

Computer and other equipment leasing costs

If you lease computers, cellular telephones, fax machines, and other equipment, you can deduct the percentage of the lease costs that reasonably relates to earning your business income. You can also deduct the percentage of airtime expenses for a cellular telephone that reasonably relates to earning your business income.

Leasing costs as self-employed business expenses

You can deduct the lease payments you incurred in the year for property used in your business.

Convention expenses

You can deduct the cost of attending up to two conventions a year. The conventions have to:

• relate to your business or professional activity; and
• be held by a business or professional organization within the geographical area where the organization normally conducts its business.