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Sharing income from a rental property with a lower income spouse is a good idea. It can help reduce the family's tax burden and increase the RRSP contribution room for both partners.

As a self-employed individual, you may hire a family member and pay them a fair wage to help out when simple jobs start to pile up. In addition to getting assistance when you need it, paying them means a tax saving business expense for you as well as accruing CPP and RRSP room benefits for your "employee". The downside is that your business will have to handle the extra administrative costs of this employee, and this person will need to report the income received when filing their tax return.

Having a home office is not only convenient, it also represents a valuable business or employment expense. (Ensure your employment contract provides for an office in the home.) As a small business owner, your income might not exceed all of your expenses, so remember to carry forward any home office expenses that remain unused.

The list of allowable home office expenses available is restricted by the type of taxpayer. A salaried person claiming home office employment expenses may not claim as much as a commissioned employee or someone who is self-employed. The program provides fields for expenses that may be claimed.

You may not be able to claim home office expenses that exceed your corresponding income. The program will carry forward for future use any home office expenses that cannot be claimed in the current year.

Most employees are not allowed to claim employment expenses. The cost of travel to and from work, tools and clothing, cannot be claimed except in very specific circumstances. If you have work-related expenses, it is always best to seek reimbursement from your employer. Full reimbursement (100%) is better than a tax deduction.

To claim employment expenses, you will need a signed T2200 Declaration of conditions of employment from your employer. If you are NetFiling your return, keep the signed declaration with all of your other supporting documents (slips, receipts, etc.)

Keeping a log of the business use of your vehicle is essential to claiming automobile expenses. Figure out the difference between your odometer reading on January 1st and on December 31st to get the total kilometres driven through the year. Enter the total number and the business use number. This will provide a percentage of business use, which will be used to calculate your total claim for business-related automobile expenses.

Are there tax benefits to leasing rather than buying the work-use vehicle? If you lease, the amount that you may deduct as your lease payment is limited by the Income Tax Act. When you purchase, your deduction is based on the amount of interest you are paying to service your automobile loan, plus the capital cost allowance (CCA). The CCA is calculated at 30% annually except for the first year where the half-year rule applies. (Be sure to determine if your vehicle is a class 10 or class 10.1 as the CCA on class 10.1 vehicles is limited to a maximum of $30,000, plus applicable sales taxes.) Before you decide to buy or lease, use the program to calculate the fiscal impact of each scenario. Combine the results with the actual out-of-pocket costs of buying or leasing. Remember, the half-year rule makes buying a car more appealing at the end of the year as you may claim up to 15% of the purchase price in the year of purchase.

If you are buying a vehicle, two important points should be considered. First, the half-year rule applies. That means that only a half-year of capital cost allowance (CCA) can be claimed for the year that you purchase the asset. If you make the purchase on December 31, , you can claim a half-year's CCA in , and a full year's CCA in . If, however, you make the same purchase on January 1, (one day later), you cannot claim CCA in and can only claim a half-year's CCA in . Therefore, you end up being one full year behind on CCA deductions by purchasing only one day later. The second point is that if your vehicle is a "passenger vehicle" rather than an "automobile", it will belong to class 10.1 rather than class 10. Class 10.1 is more restrictive and, in , it only allows you to capitalize up to $30,000, plus applicable sales taxes.

Whether you deduct CCA (capital cost allowance) or not is up to you. You may claim up to the maximum amount based on your undeducted capital cost from the previous year. If you anticipate more income next year, or if have no income against which you can claim CCA, use this field to limit your deduction. The program will carry forward the deducted balance.

You may not increase or create a loss from a rental property due to a capital cost allowance. The program will limit your CCA to comply with this rule.

Are you unsure whether a given expense is a capital expenditure or a current expense? Look at it this way: Is it improvement or maintenance? Improvement implies that the property is somehow upgraded. Maintenance is meant to return the building, room or other component to its original state or function. Improvements are capital expenditures, whereas maintenance repairs are current expenses.

In order to encourage landlords to adapt their properties to accommodate the disabled, expenditures incurred for this purpose are always considered current expenses rather than capital expenditures (CCA).

If you claim the GST rebate in this year's return, you will have to pay tax on it in next year's return. So why bother? Because you can have your GST rebate in your pocket for a full year before having to pay the tax on it.

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