Common Tax Questions Series 4 – Claims and Tax Deductions

by Guest on November 7, 2011

Don’t we all want to know about tax deductions?  It’s good to take advantage of any deductions that we possibly can.  Learn more about these deductions by checking out the commonly asked tax questions below.

Are legal fees tax deductible?

Most legal fees are not tax deductible. Legal fees associated with recovering income such as spousal support or lost wages are deductible. Otherwise, legal fees are not deductible.  A general rule of thumb is that if the settlement is taxable income, then the fees are deductible.  If the settlement is not taxable (e.g. money from a personal injury settlement) then the legal fees are not deductible.

Is my mortgage interest on my house tax deductible?

No. The tax benefit for Canadian homeowners comes when you decide to sell the home you live in. You are allowed a capital gains exemption on your principal residence.

If you have a home-based business, you could claim a portion of your mortgage interest as a business expense.  However, this claim would have to be in proportion to the amount of space your work occupies in your home. Or if you have a rental property, the mortgage interest would be considered an expense against your income on the property.

Is child support taxable? Is spousal support?

Spousal support is always taxable. Child support is not taxable if your latest court agreement is dated after May 1, 1997. If the court agreement is dated earlier than this date, the child support is taxable.

Can I claim my monthly transit passes?

Yes. The transit pass amount is a non-refundable credit designed to encourage people to take public transit. If you buy a monthly pass for public transportation or four consecutive weeks of passes, keep your receipts and passes to claim them on your tax return. If you, your spouse and/or dependants all purchase qualifying passes, you could combine the amount on one return. The credit is calculated by adding up the cost of the passes and multiplying it by 15 percent.

I am required to drive between different offices for work. Can I claim gas and parking at my workplace as a tax deduction?

Unfortunately if you are a salaried employee, you cannot claim expenses related to your job such as gas, parking and dry cleaning, even if your employer requires it. This has been challenged in Tax Court and the employee lost. However, you can claim the Canada Employment Amount, which is meant to offset some of the expenses of holding a job.

 

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