Employee home purchase loans – If you expect interest rates in 2011 to rise, take out or replace an employee home purchase loan before January 1, 2011, to take advantage of the current prescribed rate (1% for the fourth quarter of 2010 and expected to remain 1% in the first quarter of 2011).
Stock option benefits of public companies –
If you disposed of stock options after 4:00 pm EST on March 4, 2010, be aware that: only the employer or employee (not both) can claim a tax deduction for cashed-out stock options. Ask your employer to elect to forgo the tax deduction so that you may claim it; and you can no longer defer the benefit related to exercising these options (relief may be available for previously-filed elections).
Be aware that commencing 2011, the undue hardship exemption for withholdings on stock option benefits has been eliminated; withholdings are required on these benefits unless there are other reasons for exemption.
Tax Memos “August 27, 2010 Draft Legislation Implements 2010 Budget Proposals and Other Previously Announced Measures” and “Stock Options: 2010 Federal Budget Implications for Employers”; and
podcast “2010 Federal Budget: Proposed Changes to Stock Option Rules – Perspectives from Rick Schubert.”
Reduce income tax deductions at source – If you will have excess tax deductions or non-refundable tax credits in 2011, request reductions in your payroll income tax withholdings early in 2011 (Federal Form T1213; Quebec Form TP-1016-V).
Public transit pass tax credit – Claim this federal non-refundable tax credit for the cost of public transit passes (monthly or longer) and certain weekly and electronic payment cards. Yukon has a parallel credit. Retain passes or receipts to support claims.
Company car – Try to reduce or eliminate your operating cost benefit and/or your standby charge benefit if you have a company car. Regarding the operating cost benefit:
reimburse your employer for some or all of the personal use portion of the actual operating costs; and
reduce your personal driving (to under 50% of total driving, if possible).
To reduce or eliminate your standby charge benefit: reduce the number of days the car is available to you;
have your employer sell the automobile and repurchase it or lease it back;
do not use the automobile for personal driving; and choose a less expensive vehicle.
For more information, refer to our booklet, Car Expenses and Benefits – A Tax Guide (2010).
Tracking motor vehicle use – Keep an automobile logbook to support motor vehicle expense and taxable benefit calculations. Except for Quebec, which has more stringent rules, a logbook maintained for a sample period will be sufficient to support these calculations if:
you maintain a full logbook for a 12-month “base” period (starting in 2009 or later);
you complete a sample logbook for a continuous three- month period in each subsequent year;
business usage in the sample logbook is within 10% of the results for the same three-month period in the base year; and
business usage for the entire year as extrapolated from the subsequent sample log is within 10% of the base year result.
For a paper or electronic employee log, see our booklet, Car Expenses and Benefits – A Tax Guide (2010).
Retirement savings plans and profit-sharing plans – Take advantage of higher contribution limits:
If your taxable income is below the highest tax bracket, consider maximizing your RRSP contributions each year, but delay claiming the amount as a deduction until a future year when your taxable income is in a higher tax bracket.
Personal services business – Discuss with your PwC adviser the merits of incorporating a personal services business. Income from a personal services business may be distributed as eligible dividends.
GST/HST rebate – Determine whether you can claim a GST/HST rebate to recover GST/HST included in employment expenses you have deducted (e.g., home office expenses, supplies and automobile expenses).