Delean: Timing necessary for tax functions in transfer from Ontario to Quebec


The province the place you resided or have your most necessary residential ties on Dec. 31 is the one used for the willpower of your provincial taxes

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What occurs if you earn cash in a single province and stay in one other on the finish of the yr? That was the problem raised in one among this week’s reader questions.

Q: We purchased and offered our house in Ontario in 2019 and purchased one in Quebec, however didn’t really transfer to the province till final March. Within the interim, we rented in Ontario and I continued to work there till my retirement. All I collected right here was pension cash. The place ought to I file (for tax functions)?

A: The province the place you resided or have your most necessary residential ties on Dec. 31 is the one used for the willpower of your provincial taxes, so for you that’s Quebec, that means you’ll file two tax returns for 2020: one to Canada Income Company (CRA) and one to Revenu Québec. And don’t be shocked when you owe cash to Quebec. You’ll be taxed for the total yr at Quebec charges, even on the cash you earned whereas working in Ontario, and whereas you’ll be credited on the federal return for the provincial taxes deducted out of your paycheques, the tax load usually is larger right here. That’s why a transfer from a decrease to larger tax jurisdiction isn’t advisable late within the yr.

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Q: Can I switch inventory I maintain in a non-registered account to a tax-free financial savings account (TFSA)?

A: You possibly can, however be sure to have the TFSA contribution room as a result of the deposited quantity would be the present worth of the inventory. And if the inventory has gone up in worth because you acquired it, you’ll need to pay capital-gains tax on the appreciation up to date of switch. The tax departments deal with it as a disposition at truthful market worth. Like every other capital acquire, it may be used to offset any capital losses chances are you’ll be carrying ahead. Nevertheless it’s not advisable you deposit a dropping inventory right into a TFSA as a result of that capital loss isn’t acknowledged for tax functions.

Q: The TFSA I’ve now doesn’t permit inventory trades. Can I open one other one and transfer the cash over?

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A: It may be carried out, however the way you do it might make a distinction. If the issuer of your present TFSA completes what’s often known as a “direct switch” in your behalf, it’s not thought-about a withdrawal. If you happen to pull it out of 1 TFSA and recontribute it to the opposite, it’s a withdrawal and has implications on your contribution room for that yr. You don’t wish to be paying an over-contribution penalty that might have been prevented.

Q: In 2019, for the primary time, I needed to withdraw a big amount of cash from my LIF (Life Earnings Fund) and RRIF (Registered Retirement Earnings Fund). I used to be anticipating to obtain a discover from CRA that I needed to make periodic (tax) instalment funds, however none was forthcoming. Am I lacking one thing? Ought to I make these funds regardless?

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A: You is probably not obligated to make instalment funds when you exceed the brink only one yr. But when your internet federal taxes owing on April 30 have been to exceed $1,800 (for Quebec residents) in two consecutive years, instalments most likely will likely be required. And if you realize already you’ll be over that threshold for 2021, establishing instalment funds now most likely is a good suggestion, since you’ll finally be directed to take action.

The Montreal Gazette invitations reader questions on tax, funding and private finance issues. When you’ve got a question you’d like addressed, please ship it by e mail to Paul Delean at gazpersonalfinance@hotmail.com.

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