This paper isn't an investment expense
Tax tips for investors as the filing deadline looms
Making money may be the prime goal for investors, but a close second is avoiding paying money to the tax authorities. With less than two weeks before the tax-filing deadline, following are some tips for investors when completing their 2009 returns.
Technically, any foreign income you receive must be reported in Canadian dollars using the exchange rate in effect on the day you received the income. However, you can use the average annual exchange rate if amounts were paid at various times throughout the year. You can view the 2009 rates online at the CRA website.
If foreign taxes were withheld on foreign income you received, you still have to report the "gross" income on your return, but be sure to claim the foreign tax credit to avoid paying tax twice on this income.
REPORT FOREIGN INVESTMENTS
If you received foreign income in 2009, chances are you also owned some foreign property. If the total cost of all foreign properties you own was greater than $100,000 (Canadian dollars) in 2009, you must complete Form T1135, "Foreign Income Verification Statement."
Foreign property includes, among other things, foreign bank accounts, shares and bonds of non-resident corporations.
Specifically excluded from the definition are any investments held in your registered accounts, as well as Canadian mutual funds that may contain foreign investments.
Foreign personal real estate, such as a vacation property, is also excluded. However, the cost of a foreign rental property would be included in the $100,000 total.
If you received Canadian dividends in 2009, you're eligible for the dividend tax credit, which reduces your tax rate on dividends.
You will notice that on your T3 or T5 slip there are three boxes: one showing the "actual dividends," a second titled "taxable dividends" and a third showing the "dividend tax credit."
If you use Quicktax software for 2009, you have to enter all three boxes, even though the first and third go nowhere. The software automatically calculated the dividend tax credit based on taxable dividends.
Use Line 221, "Carrying charges and interest expenses" to claim expenses such as investment counselling fees for non-registered investments, safety deposit box charges and interest you paid on money borrowed for investment purposes. Interest paid on an RRSP loan or to fund a TFSA contribution, however, is not deductible.
Finally, what about writing off the cost of this newspaper, which you use to aid your investment decisions? The CRA specifically prohibits subscription fees paid for financial newspapers, magazines or newsletters.