: Two tax deduction questions



SixesAndSevens
2011-01-26, 10:00 AM
can someone clarify whether i can claim the following tax deductions from employment income.
i'm a full time employee in a canadian corp. in Ontario

Private health insurance premiums paid into a group health insurance plan offered by the company. employer pays 80% and employee pays 20%. is that 20% tax deducitible under medical expenses or any other category?

mortgage refinancing penalty.
i recall reading some time ago that mortgage refinacing penalty can be tax deducted equally across the amortization period of the loan.
so a $1000 penalty paid for a 20 year mortgage can yield a tax deduction of $50 every year.

thank you

MoneyGal
2011-01-26, 10:11 AM
1. Yes. See the full list of eligible medical expenses here:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/llwbl-eng.html

2. If it is for your principal residence, no.

As a general rule, when a capital transaction is not taxable, none of the expenses associated with owning (and maintaining) the capital property are deductible from income.

(Makes sense, right? Either the gain is taxable, in which case the cost base for the gain is adjusted by inputs; or the gain is not taxable, in which case there's no cost base to calculate. In either case there's no deduction from income in the way that you've suggested - because there's no income from the property.)

SixesAndSevens
2011-01-26, 10:15 AM
thank you.
regarding the medical insurance premiums : is just my 20% tax deductible or the employer's 80% as well?
i'm not being greedy :) just asking because the 80% gets added to my taxable income every year.

MoneyGal
2011-01-26, 10:22 AM
Are you in Quebec? In every other province, employer-paid health service premiums are a non-taxable benefit.

The general rule is that you can claim the benefits you actually paid.

If you are in Quebec, someone else is going to have to chime in, but I strongly suspect you can only deduct the portion you actually paid.

SixesAndSevens
2011-01-26, 10:26 AM
Are you in Quebec? In every other province, employer-paid health service premiums are a non-taxable benefit.no, this is in Ontario.
are you certain the employer portion is non taxable?
I'll double check my pay stubs and T4 from last year but i'm rather certain they added it to taxable income.
they also add the emplyer portion of group RRSP contribution as taxable income.

that aside, in ontario, you are saying I can only claim what I paid?

what about premiums for STD and LTD insurance?

thank you

MoneyGal
2011-01-26, 10:38 AM
I'm crystal clear. Here's an Ontario Revenue bulletin which spells out which benefits are taxable in Ontario:

http://www.rev.gov.on.ca/en/bulletins/eht/0296.html

Snipped from the bulletin:

Employer-paid premiums or contributions not subject to EHT

The following types of employer-paid premiums or contributions are not included in an employee's income for federal ITA [Income Tax Act] purposes and are not subject to EHT [Employer Health Tax]:

* registered pension plans
* group sickness or accident insurance plans
* private health services plans
* supplementary unemployment benefit plans
* deferred profit sharing plans
* retirement compensation arrangements.

Plugging Along
2011-01-26, 04:30 PM
Moneygal is correct. Only the portion you pay is tax deductable. The employer portion is considered a taxable benefit, but because you did not pay for it, you cannot deduct it

SixesAndSevens
2011-01-26, 04:38 PM
Moneygal is correct. Only the portion you pay is tax deductable. The employer portion is considered a taxable benefit, but because you did not pay for it, you cannot deduct itwell, what you said is different from what Money Gal said.
she said, employer portion of insurance premium is not a taxable benefit. you say it is.

in any case it sounds like I can only claim my portion of the premium and not the employer's.

cardhu
2011-01-31, 02:00 AM
Here's an Ontario Revenue bulletin which spells out which benefits are taxable in Ontario ......
The Ontario government has no authority to decide what is and what isn’t a taxable benefit. That's up to the feds, and their definitive reference is here (http://www.cra-arc.gc.ca/E/pub/tg/t4130/t4130-10e.pdf). Your employer's contribution to a private health insurance plan is not a taxable benefit.


they also add the emplyer portion of group RRSP contribution as taxable income.
Yes, the employer’s contribution to your GRSP is part of your compensation, so it should rightly appear as a taxable benefit, in box 14 of your T4 ... you also receive a corresponding receipt for those contributions, which exactly cancels out the tax owing on that amount.

Plugging Along
2011-01-31, 10:47 AM
Sorry my mistake about the taxable benefit portion. I was thinking life insurance premiums which are taxable.

SaveURFinances
2011-02-09, 01:48 PM
MoneyGal, is there some confusion here between private medical plan premiums and provincial public plan premiums?

From the CRA site (employers' section)
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/hlth/prvncl-eng.html


Premiums under provincial hospitalization, medical care insurance, and certain Government of Canada plans:

You may be paying premiums or contributing to a provincial or territorial hospital or medical care insurance plan for an employee. If this is the case, the amount you pay is considered a taxable benefit to the employee.

If you have to make payments to such a plan for amounts other than premiums or contributions for the employee, they are not considered a taxable benefit to the employee.


and then there is......
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/hlth/prvt-eng.html

Premiums under a private health services plan:

If you make contributions to a private health services plan (such as medical or dental plans) for employees, there is no taxable benefit to the employees.

Note
Employee-paid premiums to a private health services plan are considered qualifying medical expenses and can be claimed by the employee on his or her income tax and benefit return.


For example, in BC our provincial Medical Services Plan (a public,provincially run program) is a taxable benefit, but if the employer offers a private "extended health or dental" plan, those premiums are not taxable (and the portion the employee pays is an eligible medical expense).

MoneyGal
2011-02-09, 02:14 PM
I'm not really sure how to answer this other than to say there's no confusion on my end. :)

SaveURFinances
2011-02-09, 02:27 PM
no, this is in Ontario.
are you certain the employer portion is non taxable?
I'll double check my pay stubs and T4 from last year but i'm rather certain they added it to taxable income.


thank you

So, were your employer-paid premuims for a PRIVATE plan, or a PUBLIC provincial plan?

MoneyGal
2011-02-09, 02:31 PM
The first post says he's asking about


Private health insurance premiums paid into a group health insurance plan offered by the company

SaveURFinances
2011-02-09, 02:40 PM
OK, maybe it should have been directed to everyone, not just you....for the greater good, it was meant!

GrossmanCGA
2011-02-10, 10:59 AM
If we simply look at the Medical Expense Tax Credit provisions of the Income Tax Act , we find there what we need to answer this question:


(3) For the purposes of subsection 118.2(1) [which allows the medical expense the tax credit],

(a) any amount included in computing an individual’s income for a taxation year from an office or employment in respect of a medical expense described in subsection 118.2(2) [which provides the list of expenses that are eligible for the tax credit] paid or provided by an employer at a particular time shall be deemed to be a medical expense paid by the individual at that time...
In other words, translating into English: If your employer pays 80% of private health insurance premiums (which are eligible expenses under 118.2(2)) and this 80% is included on your T4 as taxable income, then you can claim the 80% (and the original 20%, of course) for the tax credit.

This makes common sense, since the end state is that you have paid 100% of the insurance premiums from your own after-tax dollars, just as if you had paid a dentist or laboratory for their services.

Now for the fee I charge for this learned advice:

No one who is self-employed, a partner or business owner should have medical receipts deducted at Line 332 (http://bit.ly/Line332) on their personal tax return: aquilian.ca (http://www.aquilian.ca)

Best regards,

Eric Grossman, CGA

SixesAndSevens
2011-03-05, 09:07 AM
I'm raking this thread up again : a related question:
are the co-pays we pay for prescription drugs tax deductible, too?
The CRA rule states:
Prescriptions drugs and medications - acquired lawfully for use if prescribed by a medical practitioner and recorded by a pharmacist. You cannot claim over-the-counter medications, vitamins, and supplements, even if prescribed by a medical practitioner.

now, my employer drug plan pays for most of the prescription cost, but I do pay co-pay (which includes the pharmacy service fee, too).
is the co-pay tax deductible?

GrossmanCGA
2011-03-06, 03:24 PM
Yes, the co-pays are eligible for the Medical Expense Tax Credit. You need only provide the insurer's statement that shows the amount they did not pay.

Your employer can save money and give you 100% reimbursement of your medical expenses by replacing their standard benefits plan with an Aquilian PHSP.

Best regards,
Eric Grossman, CGA
www.grossmancga.com (http://www.grossmancga.com)

SixesAndSevens
2011-03-07, 09:49 AM
hmm, so i did claim the insurance premiums as deductions but it didn't make any difference to the net refund.
is there a certain dollar amount or % after which it makes a difference?

also is employee paid LTD and STD insurance premium tax deductible like extended health care premium is?

GrossmanCGA
2011-03-07, 05:32 PM
1. For 2010, the Medical Expense Tax Credit threshhold is the lesser of $2024 and 3% of taxable income. That is, you don't get any credit for expenses under that limit. That's one reason the self-employed and business owners choose to set up a PHSP: All their medical expenses are then 100% deductible against business income.

2. Employee-paid LTD and STD disability premiums are not tax deductible. Only employer-paid premiums are deductible, to the employer of course. Any benefits paid from employer-paid plans are taxable in the hands of the receiving employee.

However, if the entire short-term or long-term disability premium is paid by the employee, then any benefits paid to them are non-taxable to them. Where the costs of the short-term or long-term disability plan are shared between employer and employee, the employee is entitled to receive benefits equal to his/her contributions on a non-taxable basis.

Eric Grossman, CGA

dmcpherson
2011-05-18, 02:06 AM
Along the same lines as what's been asked here.... I'm in BC and employed at a US company recently started up branches in Canada. I believe that they are not handling the Medical Services Plan benefits correctly on the paystubs, but I need confirmation from somewhere.....I've tried various sites, and this site seems to come the closest to supplying the answer I need.

The company says that they are paying our BC MSP premiums, but I believe that they are just paying the MSP premiums for us, and coding them as BCMEDTB. They probably didn't research what they need to do in order for it to be calculated properly.

The paystub lists:
REGULAR
OVERTIME
STAT HOL
BCMEDTB (they have divided the premium amount into 2)
TOTAL EARNINGS
LESS TAXABLE BENEFITS (this lists the same amount in BCMEDTB line
TOTAL GROSS

They list the Deductions separately:
CPP DED
FEDL TAX

It looks like they add the BCMEDTB premium amount to the earnings and then minus it again for the total gross line.

I've never seen it listed this way on a stub before. They've always been listed in a benefits section. Listing it in with the earnings makes it look like we're paying the premium and not them.

Are the premium amounts supposed to be added to the earnings for a tax calculation? or should it be a percentage of that premium for tax purposes?

Is there any source I can look at that shows how provincial medical service plan premiums are supposed to be shown on paystubs as benefits?

HELP... and thanks

warp
2011-05-18, 02:20 PM
All these replies, and the associated hair-pulling associated with them , just shows again, how convoluted, complicated and stupid our tax system is.

I will repeat....if filing tax returns and paying taxes are a legal requirement, it is ludicrous that a citizen should need a lawyer to read and understand the tax code. ( Note that lawyers get it all wrong too, on regular basis)

Absolute lunacy

MoneyGal
2011-05-18, 02:47 PM
Shoot! I wrote a reply that got lost.

I'm not sure what you think is being coded or calculated incorrectly. It doesn't sound as though you think the amount being identified as the contribution on your behalf is incorrect.

An employer-paid benefit is part of your total compensation so it is appropriate that it be included in earnings.

As you point out, the amount is then minused-out so it does not form part of your total compensation.

This is a standard way to report this benefit on employee paystubs, in my experience. You can ask your payroll clerk for more information.

dmcpherson
2011-05-18, 05:03 PM
I've never seen the benefits listed on a paystub in the way this company lists them, and I've been in the workforce since the late 70's.

EARNINGS in one square
DEDUCTIONS in another square
BENEFITS in a third square

It's definitely less confusing.

I guess I find it weird that they add it to the earnings and then minus it. Just used to seeing the benefits in a separate area.

The amount is another issue.... to convince the payroll person of that has become the other issue.

Thanks