’Tis the season for giving, and sometimes for taking away

CRA saves like Scrooge


How does the Canada Revenue Agency stack up against Santa Claus in new tax presents for the 2013 tax year? 


Well, sometimes the comparison might be more appropriate with Scrooge than Santa, but some goodies have been given out along the way as well.


The Scrooge category included a decision to restrict farm losses.


Based on an interpretation of an old Supreme Court case (the Moldowan decision), CRA used to restrict farm losses where farming was not the predominant source of income for the farmer. 


The Supreme Court reversed its position in 2012 in the Craig decision, saying a full deduction of farm losses could be made where the taxpayer places significant emphasis on both farming and non-farming sources of income, even if farming is subordinate to other sources of income. 


Not at all happy with this decision, the federal government in its 2013 budget simply changed the Income Tax Act to fit its interpretation that farming must be the principal source of income to avoid restricted losses. 


Perhaps feeling a little guilty about this decision, the government proposed to increase the limit of annual deductible farm losses (actual losses incurred in the year from farming) to $17,500 from $8,750. 


In the spirit of giving, a taxpayer may be able to claim a first-time donor’s super credit (FDSC) on charitable donations for the 2013 to 2017 tax years.


Taxpayers who are first-time donors may be able to claim up to $1,000 in cash donations made after March 20, 2013. The credit is calculated by multiplying these donations by 25 percent. 


It is in addition to the credit already allowed for these same donations claimed by the taxpayer and the taxpayer’s spouse or common-law partner. 


To qualify as a first-time donor, neither the taxpayer nor taxpayer’s spouse or common-law partner can have claimed and been allowed a charitable donations tax credit after 2007. They may share the FDSC with their spouse or common-law partner, but the total combined donations claimed cannot exceed $1,000.


Another change relates to the period of time in which child adoption expenses may be claimed. Adoptive parents may claim up to a maximum of $11,669 per child under the age of 18. 


Parents can claim incurred expenses in the tax year, including the end of the adoption period. The adoption period has been extended for adoptions finalized in 2013 or later.


Pooled Registered Pension Plans (PRPPs) were also introduced last year. 


They are a new kind of deferred income plan designed to provide retirement funds for employees and self-employed individuals who don’t have access to a workplace pension. 


An employee can enroll in a PRPP if the employer chooses to participate in the plan. 


A self-employed individual and/or an individual whose employer chooses not to participate can open a PRPP account by approaching a PRPP administrator directly.


As well, the start of the overseas employment tax credit’s 2013-16 phase out period was introduced in 2013.


Grant Diamond is a tax analyst in Kelowna, B.C. with FBC, a company that specializes in farm tax. Contact: [email protected] or 800-265-1002.