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PART 3
DEDUCTIONS TO ARRIVE AT
TO NET INCOME
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PART 3
DEDUCTIONS TO ARRIVE AT TO NET INCOME
Registered Pension Plan (RPP) Deduction - Line 207
RRP contribution for the current year and for past service after 1989 are fully deductible on Line
207. If a taxpayer has no RPP contribution for past service before 1990, or the total of all
contributions is less then $3,500. then all contributions reported in Box (20) of his/her T4 slip or
Box (32) of a T4A slip are deductible. These are automatically posted to line 207 when the
information from the slips is entered on the T4 or T4A screen.
T1 – Page 3
If part of the amount in Box (20) on the T4 or Box (32) on the T4A is for service before 1990 an
amount will be shown in Box (74) or (75) on the T4 or Box (126.1) or (126.2) on the T4A.
If the total of all the RPP contributions is more than $3,500.00 and part of the contributions is
for service before 1990, the T1-RPP form must be completed to calculate the claim.
Past Service Before 1990
If the RPP contributions are for past service before 1990, the amount of the deduction is usually
based on whether the contribution was for past service while not a contributor to the current
plan, or past service while a contributor to the current plan.
Amounts in Box (74) and (126.1) – Pre 1990 - While a Contributor
Cantax will automatically post this amount to the RPP screen. If contributions for current
services plus past service since 1990 exceed $3,500.00, then no amount can be claimed for past
service contributions that apply to the pre 1990 period while a contributor. These contributions
are carried forward to be claimed in a future year.
If the taxpayer has undeducted past service contributions from previous years, that amount
should be entered on the RPP screen at field F.
Amounts in Box (75) and (126.2)– Pre 1990 - While Not a Contributor
If the taxpayer has any Pre 1990 Past Service contributions while not a contributor the RPP
screen must be completed to show the number of years to which these contributions relate and
any amounts that have been previously deducted for those years.
The maximum that can be claimed in the current year is $3,500.00. This is in addition to the
amount claimed for current services and the period while a contributor.
Excess contributions can be carried forward.
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Example:
John has 2010 T4 showing income of $60,000.00. In addition, Box (20) shows $17,000.00, Box
(74) shows $2000.00 and Box (75) shows $10,000.00. The amount in Box (75) is for 6 years
service. He has carry forward undeducted past service contributions while not a contributor of
$2,600.00. Below is the T1-PP for the 2010 tax year.
Number of year to
which these
contribution relate
$8,500. can be
claimed in the
current year
Note that none of the past service contributions for the period while a contributor can be
deducted in the current year, thus $2000.00 is carried forward. A maximum of $3,500.00 can be
claimed for past service while not a contributor thus $9,100.00 is carried forward.
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RRSP (Registered Retirement Savings Plan) Deduction - Line 208
Generally a taxpayer can deduct an amount contributed to an RRSP for his/herself and/or spouse
during the year or during the first 60 days of the following year. The total contributions (not
including transfers) cannot exceed the taxpayer's Deduction limit for the year. If the taxpayer
has contributed to an RRSP, go to the RRSP screen to enter the Deduction Limit.
Press <F4>, RRSP.
Deduction Limit – The deduction limit is based on a percentage of the taxpayer’s earnings in
previous years, less the amount that has already been claimed as an RRSP and RSP in previous
years. This limit amount is on file with CRA and can be found on the previous years Notice of
Assessment or it can be obtained from general inquiries at CRA. The limit should be entered on
the RRSP Schedule before entering the contribution amounts.
If a taxpayer has official receipts for RRSP contributions, he/she can claim it by entering the
amounts on the Receipts section on the RRSP screen. The receipt amounts can be entered, in
full, directly on this screen as shown below.
Deduction Limit
Enter Receipt No, Institution,
Contribution date, amount and Yes
or No for Spousal Plan.
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Income Eligible for Transfer to an RRSP
If a taxpayer has contributed to an RRSP and has income eligible to be designated for transfer*
to an RRSP, he/she can elect to designate some or all of the current year contributions to his or
her own plan (not spousal) as a transfer. By doing this, the deduction limit is not reduced by that
amount and thus the taxpayer can take advantage of a larger total contribution. To designate
some or all of the contributions as a transfer, expand at the Contribution Amount field on the
“Transfers from other plans (from RRSP transfers)" row and enter the amount to be
designated as a transfer.
*The type of income eligible to be designated for transfer includes (a) Retiring Allowance
{T4A Box (26), T4 Box (66) and T3 Box (36)} (b) Refund of Premiums from an RRSP due to
the death of a spouse {T4RSP Box (36)}, and (c) Certain other Lump Sum Payments from a
Non-Registered Pension plan
Example
John Taxpayer has an RRSP Deduction Limit of $10,500. He has received $12,000.00 in
eligible retiring allowance (Box (26) on a T4A slip), and he/she has contributed $4,500 (BNS)
and $14,000 (CIBC) to RRSP accounts during the year. To avoid using his total deduction limit,
John can designate $12,000 of his contributions to be a transfer. To do that the preparer must
reduce the contributions shown in the receipts section by $12,000. ($14,000 - $12,000 = $2,000).
Then expand in the Transfer from other plans row to enter the $12.000.
Expand here to designate
eligible income as a
transfer to an RRSP.
Enter the
designated
amount here
John`s deduction limit at the end of the year will be $4,000 ($10,500 - $4,500 - $2,000 = $4000)
plus any amount based on the current year's income. The $12,000 selected for transfer will not
reduce his deduction limit.
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Excess RRSP Contributions
If a taxpayer over contributes to an RRSP he/she will not be able to deduct any of the over
contribution. He/she is however allowed to have excess contributions of $2000.00, without
penalty, and can claim that $2000.00 in a future year if he/she has enough deduction limit. If
he/she has contributions that are more than $2000.00 in excess of his/her deduction limit, he/she
may have to pay a penalty of 1% per month on the amount in excess of the $2000.00 if it is not
withdrawn.
If the taxpayer has withdrawn the excess amount he/she will be issued a T4RSP slip showing the
amount of the withdrawal. In that case a form T746 - Deduction for Refund of RRSP Excess
Contributions must be completed and filed with the return to avoid paying taxes on the
withdrawn amount.
Home Buyers Plan (HBP) or Lifelong Learning Plan (LLP)
In certain cases, a taxpayer can withdraw funds form an RRSP to purchase a home or attend
school without reporting the withdrawal as income. The taxpayer, in effect, is borrowing from
his/her own RRSP. The taxpayer is then required to repay a certain amount each year or else
include in income the amount that should have been repaid. The taxpayer makes a repayment by
contributing the required amount to his RRSP. The required repayment is shown on the
taxpayer’s Notice of Assessment from the previous year or may be obtained from the General
Inquiries of CRA. The amount should be entered on the HBP or LLP Schedule.
Example: A few years ago, Fred borrowed $7,200.00 from his RRSP under the HBP. He is
required to repay $654.55 per year. During the tax year he contributed $3,000.00 into his own
RRSP. Thus the RRSP deduction on Line 208 will be reduced by $654.55 to $2,345.45.
To enter the information, expand on the line Repayment under Home Buyers Plan on the
RRSP screen, or go directly to the Home Buyers schedule by pressing <F4>, HBP.
RRSP Screen
Expand here
to go to HBP
screen
Override to enter the required repayment here.
Obtain the amount previous years NOA or from CRA
Enter the amount to designate as a HBP repayment. This amount cannot exceed the total of
the actual amount of RRSP contributions entered on the RRSP screen for the current year
and the first 60 days of the following year.
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Pension Income Splitting – Line 210
Beginning with 2007 income tax return, Canadian residents are generally be able to allocate up
to one-half of their income that qualifies for the existing Pension Income Amount to their
resident spouse (or common-law partner) for income tax purposes. The advantage for a couple is
that some of the pension income may be taxed a lower tax rate and that both may be able to take
advantage of the Pension Income Amount.
Both spouses must agree to the allocation in their tax returns for the year in question.
The election is made using form T1032 on the return of the taxpayer who received the pension.
If the returns are coupled and fully completed, Cantax will automatically calculate the best
percentage split for the couple by pressing <Shift> + <F10>.
Note that if the marital status changed during the year (including to Widowed) the claim must be
prorated to reflect the number of months the couple was married or common-law. If the date of
change of marital status is entered on the INFO screen, the numer of months will automatically
be posted to this screen.
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Eligible Pension (See chart on next page)
Eligible pension income is generally the total of the following amounts received by the pensioner
in the year (these amounts also qualify for the pension income amount):
 the taxable part of annuity payments from a superannuation or pension fund or plan; and
 if received as a result of the death of a spouse or common-law partner, or if the pensioner is
age 65 or older at the end of the year:
o annuity and registered retirement income fund (including life income fund) payments;
and
o Registered Retirement Savings Plan annuity payments.
Note: Old Age Security and Canada or Quebec Pension Plan payments do not qualify.
Income Taxes Deducted
The income tax that is withheld at source from the eligible pension income will have to be
allocated from the pensioner to the spouse or common-law partner in the same proportion as the
pension income is allocated.
Pension Income Amount
Both spouses are generally eligible to claim the Pension Income Amount on the split pension
income. However, a pension that qualifies for the pension income amount in the hands of the
pensioner may not qualify for the pension income amount in the spouse or common-law partner's
hands because eligibility can depend on age.
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Income Eligible for the Pension Income Splitting and Amount
A taxpayer is entitled to deduct up to $2000 of certain pensions reported on Line 115 or Line
129. The type of income eligible for the Pension Income amount differs depending on the
taxpayer’s age. Income that is eligible for the Pension Income Amount is also eligible for
Pension Splitting.
Eligible Pension and Annuity Income (age 65 and older)
Type of Income
Slip
Box
DPSP income
T4A
24 (Footnote code 15 in box None
38)
115
Regular annuities & IAAC
(T4A)-
T4A
24
None
115
T5
19
None
115
RPP lifetime retirement
benefits
T4A
16
None
115
T3
31
None
115
RRIF income
T4RIF
16 and 20
None
115
22
Result of death of spouse or common law
partner
115
You are the beneficiary of deceased
person's RRIF
129
None
129
16
Condition
Line
RRSP income
T4RSP
Foreign pensions (incl. US
Social Security)
The amount of foreign pension that is not deductible at line 256 is still eligible for
115
this amount.
Any amount of a foreign pension that is not taxable in Canada because of a tax treaty
and income from a United States individual retirement account are not eligible for the
pension income amount.
Eligible Pension and Annuity Income (less than age 65)
Type of Income
Slip
Box
Condition
Line
DPSP income
T4A
24 (Footnote code 15 in box
38)
Result of death of spouse or common-law
partner.
115
Regular annuities & IAAC
(T4A)-
T4A
24
Result of death of spouse or common-law
partner.
115
T5
19
Result of death of spouse or common-law
partner.
115
T4A
16
None
115
T3
31
None
115
T4RIF
16 and 20
Result of death of spouse or common-law
partner.
115
22
Result of death of spouse or common-law
partner.
115
16
Result of death of spouse or common-law
partner.
129
RPP lifetime retirement
benefits
RRIF income
RRSP income
T4RSP
Foreign pensions (incl. US
Social Security)
The amount of foreign pension that is not deductible at line 256 is still eligible for
115
this amount.
Any amount of a foreign pension that is not taxable in Canada because of a tax treaty
and income from a United States individual retirement account are not eligible for the
pension income amount.
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Annual Union Professional or Like Dues - Line 212
Union dues are generally shown on a T4 slip in Box (44). If they are not reported on the T4, the
taxpayer must provide an official receipt to substantiate the claim. To enter dues not included on
a T4 slip, expand on Line 212, page 3 of the T1 and enter the dues including the GST or HST.
Child Care Expenses - Line 214
A taxpayer can claim child care expenses (limits apply) paid for a dependent child
 under 16 years of age,
 with a disability, or
 age 16 or older with a mental or physical infirmity or impairment.
The expenses must have been paid to allow the taxpayer or supporting person to work, attend
school, carry on research, or carry on a business. Generally, the spouse with the lower earned
Income, before claiming child care expenses, must claim all child care expenses.
Deduction Limits for Child Care Expenses
CanTax will automatically calculate the maximum amounts of the payments that can be claimed.
The maximum is limited to 2/3 of the taxpayer’s earned income. In addition there is a maximum
for each child depending on the age of that child. These maximums are listed below.
a) $7,000 x each 6 years of age or younger
b) $10,000 x each eligible child for whom the disability amount can be claimed
c) $4,000 x each other eligible child who was 7 to 16 years of age on December 31, or older
than 16 with a physical or mental infirmity
Boarding School, Sports Schools and Overnight Camps
When payments are made to a boarding school, an overnight sports school, or an overnight camp
for child care, there are limits to the amount that can be deducted. See the T778 Schedule.
Allowable Child Care Payments can be made to:
 friends, neighbours or other persons;
 relatives 18 years of age or older (a related person for child care payments does not include
the niece, nephew, aunt, or uncle of the taxpayer or spouse.)
 nursery schools;
 day-care centres;
 educational institutions for child care services;
 day camps or day sports schools your child attends;
 boarding schools or sports schools where lodging is involved.
Payments made to someone who takes care of a child at lunchtime, or before and after school are
also deductible.
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To make the claim for childcare, first enter the information about the dependant children on the
Dependant Information screen.
Dependant Information Screen
Next, on the bottom of the Dependant Information screen, enter names of the children,
Organization or Name/Sin of the person to whom the expenses were paid, and the amount paid
for each child.
Dependant Information Screen
This information is usually transferred to the Child Care Expense Schedule T778 for the
spouse with the lowest earned income.
Based on the 2011 T1
T778 - Page 1
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Claim for Child Care for Spouse with Higher Net Income.
The spouse with the higher income can make the claim for child care when the spouse with the
lower income was:
a) enrolled in a full-time or part-time educational program,
b) confined, for at least two consecutive weeks of the year, to a bed, wheelchair, or as a
patient in a hospital because of a mental or physical infirmity, and was incapable of
caring for children,
c) is likely to be, incapable of caring for children for a long, indefinite period of time
because of a mental or physical infirmity
d) in prison or another penal institution for at least two weeks of the year, or
e) separated from the spouse with the higher net income for a period of at least 90 days
starting in the year, and was still separated on December 31, but reconciled within 60
days of the following year.
There are limits on Claim if Person with higher income claims Child care Expenses. See the
T778 Schedule.
To make the child care claim for the taxpayer with the higher earned income, complete "Part C
- Are you the person with the higher net income?" on page 2 of the T778 on the return of the
person with the higher net income. Any remaining child care expenses is then claimed by the
person with the lower income.
Example: Freda and John Doe have two children under age 6, Mary and Jane. John had earnings on
line 101 of $38,245.30 while Freda had earnings of $55,000.00 on line 101. They paid $3,000.00
for child care. During the year, John attended CONA for 6 weeks to upgrade his electrical skills
towards a journeymen’s certificate. How should the child care be claimed?
First the dependant screen should be completed, including the amounts paid for child care. (Note:
the dependant screen can be completed on either return)
Next go to Freda’s (Higher Income) return and complete Part C, page 2 of the T778.
Page 2, T778
Enter the number of full
weeks that John attended
school.
Freda’s claim
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The claim on the T778 on John’s return is shown below.
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John’s Return - Page 1, T778
Freda’s claim
deducted
John’s Claim
John’s Return
Freda’s Return
Parents Attending School
Single parents enrolled in a qualifying educational program or two-parent families where both
parents are enrolled in a qualifying educational program and have little or no earned income
may deduct child care expenses against other taxable income. To make the claim, complete
Part D "Were you enrolled in an educational program in 2XXX."
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Disability Supports Deduction - Line 215
A taxpayer can claim expenses incurred for disability supports prescribed by a medical
practitioner to enable the taxpayer to be employed, carry on a business, do research for which a
grant was received, or attend school. (There is no requirement that the taxpayer be eligible for
the Disability Deduction to make this claim)
This is a brief list of the eligible expenses:
 Sign-language interpretation;
 Teletypewriters;
 Equipment designed for blind individuals for operating a computer;
 Optical scanners or similar devices, and
 Electronic speech synthesizers,
 Note-taking services used by individuals with mental or physical impairments
 Voice-recognition software used by individuals with a physical impairment
 Tutoring services used by individuals with a learning disability or a mental impairment;
 Talking textbooks used by an individual with a perceptual disability for the individual's
enrolment at a secondary school in Canada or designated educational institution; and
 Full-time attendant care services provided in Canada. Part-time attendant care can only
be claimed if the taxpayer is eligible to claim the Disability Deduction. Amounts paid for
services provided by the person's spouse or common-law partner, or to someone under 18
years of age, cannot be claimed.
Attendant Care Expenses can be claimed as a Disability Supports Deduction or as a Medical
Expense on Line 330 of Schedule 1. It is generally better to claim these expenses on Line 215,
because medical expenses are reduced by 3% of Net Income in order to calculate the credit and
the credit is always at the lowest tax rate.
To make a claim for the Disability Supports Deduction, go to Form T929 by expanding on Line
215 or pressing <F4>, T929.
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Moving Expenses - Line 219
* Before continuing, read the information on the T1-M Moving Expenses Form *
A taxpayer can claim moving expenses if he/she moved and established a new home to be
employed or carry on a business. He/she can also claim moving expenses to attend a post
secondary institution as a full time student.
Expenses can only be claimed against income earned or scholarships and grants received at
the new location. This does not include Employment Insurance or Investment Income. The claim
must be reduced by any reimbursement received unless it is included in income. If the expenses,
in the year of the move, are greater than the income earned or scholarships and grants received,
the excess can be carried forward and claimed in the following year against eligible income at
the new location.
The new home must be at least 40 kilometers (by the shortest usual public route) closer to the
new place of work or educational institution than the previous home was. The taxpayer must
establish the new home as the place where he/she and members of the household ordinarily
reside. For example, a taxpayer has established a new home if he has sold or rented (or
advertised for sale or rent) the old home.
Note: A married taxpayer who travels to another province to work while his/her family remains
at home has not moved for the purpose of claiming moving expenses. A single taxpayer who
does not own a home or support a family is usually considered to have moved for the purpose of
making the claim.
Eligible Expenses
A taxpayer can claim the following expenses incurred as part of the move:
 Traveling expenses, including vehicle, meals and accommodations (can use simplified
method for meals and vehicle - see next page).
 Transportation and Storage costs
 Cost of 15 days for meals and accommodations near the old or new residence (can use
simplified method for meals – see next page).
 Cost of canceling a lease for the old residence
 Incidental costs such as the cost of changing address on legal documents, replacing driving
licenses and utility hook-ups and disconnections.
 Cost of maintaining the old residence (max $5000.00) during a period when reasonable
efforts were made to sell the home. These expenses include interest, property taxes, insurance
premiums, and heat and utilities.
In addition, if the old residence is sold as a result of the move, the following can also be claimed:
 Legal Fees for the purchase of a new residence
 Cost of selling the old residence, including advertising, legal and real estate fees, and
mortgage penalty if paid off before maturity.
The expenses associated with a move are deductible even if they are not paid until the year
after the move. These expenses should be claimed in the year they are paid. For example, if the
old house is not sold until the year after the move, the taxpayer should complete a T1-M for
that year and attach a note explaining the delay in the claim. In this case, a paper return will
have to be filed.
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Expenses that CANNOT be Deducted as Moving Expenses








Costs for work to make a home more saleable
Loss from the sale of the old house
Cost of house or job hunting trips
Value of the items mover refuses to take
Expenses to clean or repair rented residence
Expenses to replace personal-use items (i.e. firewood, drapes, tool shed etc)
Mail forwarding costs
Cost of selling old home if the sale was delayed for investment purposes or until the real estate
market improved
Simplified Method of Claiming Vehicle and Meals - Current Rates
A taxpayer can choose the detailed or simplified method of calculating vehicle and meal
expenses as part of Moving Expenses
Meals - If the taxpayer uses the detailed method to calculate his meal expenses, receipts must be
kept and presented upon request. If he chooses the simplified method, he can claim a deduction
according to a set rate of $17 per meal, to a maximum of $51 per day, without submitting
receipts for the tax year 2011.
Vehicle - If the taxpayer chooses the detailed method to calculate his vehicle operating expenses,
he must keep his receipts and maintain a record of the expenses incurred. It is not necessary to
keep receipts with the simplified method. He must, however, keep track of the number of
kilometers driven during the move. The number of kilometers is multiplied by the
cents/kilometer set by the province in which the travel started. The simplified method for
travel cannot be used for a vehicle if the taxpayer used public transportation for the trip.
2011 Application Rates According to the Region Where the Travel Started
Province or territory
Cents/kilometer
Alberta
53.0
British Columbia
52.0
Manitoba
49.0
New Brunswick
52.0
Newfoundland and Labrador 55.0
Northwest Territories
61.5
Nova Scotia
53.0
Nunavut
61.5
Ontario
57.0
Prince Edward Island
52.0
Quebec
59.0
Saskatchewan
47.5
Yukon
63.5
The rates on the left are for 2011.
These rates change each year.
The rates for the current year can be
found in Cantax Help.
Select Help, Contents and Index and
Index
Type Moving Expenses and press
Enter.
Scroll to the bottom to see the rates.
Note: These amounts are also used
when claiming Medical and Northern
Residents Travel.
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Example: On August 10 of the tax year, John Brown and his wife Mary moved from Fort
McMurray, Alberta to Grand Falls – Windsor, Newfoundland and Labrador. His address in Fort
McMurray, was 234 Long Street. Postal Code J7T 8D3. His former employer was Syncrude, 12
Main Street. His new address is 15 Grimes Ave. Postal Code T5U 4E7. His new employer is
Abitibe Price at 23 Mill Road, Postal Code T5U 3E2. This is 4 km from his new home. He began
working with Abitibe on September 15.
John and Mary were renting in Fort McMurray and had to break a lease. That cost them an addition
$1225.00.
ABC movers, at a cost of $4,567.90, moved most of their furniture. John and Mary left August 10
and drove from Fort McMurray to Grand Falls - Windsor, a distance of 6130 km. This trip took 5
days and required 4 nights in motels at a cost of $569.98. They kept receipts for meals totalling
$214.89 and gas receipts of $438.76.
They had incidental costs of $281.60 associated with the move.
When they arrive in Grand Falls – Windsor, they stayed 8 nights (8 days) in a hotel while they
searched for a new apartment. The hotel cost $487.98 and meals cost $267.45.
His Net Income for the year was $47,382.00 and his earnings while in Grand Falls – Windsor were
$5,742.00.
Top of T1M
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T1M Continued
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Box must be checked to use the
simplified method
Travel expenses are calculated automatically, based
on the province where the travel began, when the
number of KM is entered.
5 x 2 x 3 x 17 =
5x2x3=
Simplified 8 x 2 x 3 x 17
Meal expenses are calculated automatically when the
preparer enters the number of meals.
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Support Payments Paid - Line 220
Under current rules, child support is not taxable to the recipient nor is it a deduction for the
payer, whereas spousal support is taxable to the recipient and deductible for the payer. Prior to
1997, both spousal and child support were taxable to the recipient and deductible for the payer.
Some support agreements were made prior to 1997 and thus all payments are taxable to the
recipient and deductible for the payer.
To make the claim for support payments paid, override Line 230 to enter the full amount of
support payments made and override Line 220 to enter the deductible part of support payments
paid.
Cantax has a worksheet that the preparer can use to help with determining the amount to report on
Line 220. Expand at line 230 or 220 to go to the worksheet.
Carrying Charges and Interest Expenses - Line 221
A taxpayer can claim, on line 221, carrying charges and interest charges paid to earn income
from investments. Interest paid for rental or business purposes can be claimed on other
schedules. These will be discussed later.
Carrying charges include:
 fees for the management or safe custody of investments
 safety deposit box charges
 accounting fees for recording investment income and preparation of the tax return if the
taxpayer required a person to prepare the return because of investment income.
 investment counsel fees
A Taxpayer can deduct interest paid on money borrowed to earn investment income. However, if
that money borrowed is no longer used to earn income, the interest paid on that money can no
longer be deducted. For example, if a taxpayer borrows money to invest in shares and later sells
the shares but does not pay off the loan, he will not be able to claim the interest on the loan for
any period after the shares are sold.
When a taxpayer buys Canada Savings Bonds through payroll deductions, an interest charge is
included. That interest can be claimed as a deduction on the T1.
To make the claim for interest or carrying charges related to investments, expand at line 221 to
go to the Schedule 4. Enter the amounts for interest and carrying charges in Part IV of the
schedule.
Schedule 4
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CPP Premium Deduction - Line 222
If a taxpayer is reporting self-employed earnings and is not currently receiving retirement or
disability benefits from CPP, or is under age 18 or over age 70, he/she is required to contribute to
the Canada Pension Plan. The amount that must be paid depends upon the amount of self-employed
earnings and the amount of CPP contributed through regular employment for the year and shown on
the T4 slips. CanTax will automatically do the calculation when the business schedule is completed.
(Business schedules are discussed later in the course).
Exploration and Development Expenses - Line 224
If the taxpayer has received a Form T5013, or T101, enter all the information from those forms
on the T5013 or T101 screens in CanTax. This amount to be entered on line 224 will be
calculated automatically.
Other Employment Expenses - Line 229
Some taxpayers can claim certain expenses paid to earn income from employment. Most of these
will be discussed in detail later in the course.
Clergy Residence Deduction - Line 231
This deduction is available to a member of the clergy in charge of or ministering to a diocese,
parish, or congregation or engaged in full-time administrative service by appointment of a
religious order or denomination. The amount of the deduction depends on the circumstances of
the cleric's housing arrangements. The employer must certify that the cleric is eligible for the
deduction and provide a T1223 form. The claim is made based on the following criteria:
 If living accommodation is supplied to the cleric by virtue of his or her employment, the
cleric is entitled to deduct an amount equal to the value of the accommodation to the extent
that the value of the accommodation is included in income.
 If the cleric rents living accommodations, he or she may deduct an amount equal to the rent
paid for the residence.
 If a cleric occupies a residence that he or she owns, the cleric is entitled to deduct an amount
equal to the fair market rental value of the residence.
To make the claim, expand at Line 231 and complete both pages of the Schedule T1223.
The Tax Shelter Training
20
Other Deductions - Line 232
A taxpayer can claim, on line 232, certain amounts that were previously received and were
repaid during the current year because it was determined that the taxpayer was not entitled to
receive that amount. These include amounts repaid for overpayments of (a) Support Payments,
(b) Old Age Security, (c) Canada Pension Plan, and (e) Employment Insurance. Some of these
will be claimed automatically if they are included on an information slip and the information has
been entered on the screen for
that slip.
A taxpayer can also claim the
following fees on line 232:
legal and accounting fees for
advice when a he/she is under
review for Income Tax, EI or
CPP issues
legal fees to collect retiring
allowance or pension benefits
fees relating to the collection
of Support payments
To make these claims, expand at line 232 and enter the appropriate amounts.
Social Benefits Repayment - Line 235
In some cases, a taxpayer may have to repay some Employment Insurance and Old Age Pension
received because his/her net income is higher than a base amount as set out by CRA. This
repayment is different from the amount on line 232 because this is a clawback of benefits and is
repaid directly on the tax return. CanTax will calculate this repayment automatically when all the
information from the slips is entered. This amount appears on line 235 and line 422.
Lines 217 (Business Investment Loss) and Line 224 (Exploration and Development Expenses)
will be discussed later in the course.
The Tax Shelter Training
21
Part 3 Exercise
Mike Smith (111 222 999) received 2T4 slips and a T4A. One T4 is from ABC Co in Brampton,
Ont (his former employer) and the other from XYZ Co in St. John’s, NL (his current employer).
Mike was born on May 15, 1948. He is married to Eleanor (666 777 333) who was born on June
17, 1949. She works part-time and has 1 T4 slip. They currently live at 34 Upper Street, St.
John’s, A1L 5T6. This is 10 km from his new work.
The Smiths have a son, Gerald, who was born on Mar 23, 1978. Gerald has a mental infirmity
and lives at home with his parents. The Smiths pay Jean White to take care of Gerald when both
of them are working. The receipt shows that Jean received $2,700.00 for child care.
Eleanor worked on a part time basis and received the T4 as shown. She also earned interest, as
shown on the T5 slip, from money that she inherited from her father.
Mike’s RRSP Deduction Limit at the beginning of the previous year was $17,098.00.
Mike has receipts showing that he contributed the following amounts to both his and his spouses
RRSP at BNS:
His own - $10,000.00 (Jun 15 of the tax year)
His own - $ 12,000.00 (Oct 12 of the tax year)
Spousal Plan - $7,000.00 (Feb 10 of the following year)
Mike contributed to his current RPP for pre-1990 services [see Box (75) on the T4 slip]. His
contributions relate to a 5-year period. He previously contributed and claimed $3,000.00 towards
these years.
Mike had previously withdrawn funds from his RRSP under the Home Buyers Plan. He is
required to repay $587.00 annually.
Mike and Eleanor moved from 546 Water Street, Brampton, Ontario to St. John`s,
Newfoundland on June of the tax year. MSG Movers, at a cost of $5,435.00, took all their
furnishings. Mike, Eleanor and Gerald drove. They left Ont on June 4 and arrived in St. John’s
on June 10, a distance of 2135 km. They have the following receipts:
Hotels (6 nights)
Meals (7 days)
Ferry Boat
Gas, oil and minor repairs
Incidental Costs
$657.09
$412.98
$234.67
$752.01
$324.06
When they arrived in St. John’s, they stayed in a hotel for 3 nights until they could move into
their new home. Hotel cost $345.09, Meals cost $227.98.
Mike started his new job with XYZ Co on June 24, 2010.
Mike and Eleanor rented a house in Ontario but have purchased a house in St. John’s. The legal
fees for the purchase are $567.00, the survey fee is $375.00 and the appraisal fee is $275.00.
Prepare the T1 returns for Mike and Eleanor.
The Tax Shelter Training
Part 3 Exercise Continued
22
The Tax Shelter Training
Part 3 Exercise Continued
23
ABC Co
18,563.21
Smith,
Mike
26
8,147.36
3,658.14