Well dear Canadians, please tell me you have finished your income tax submission and submitted them (and if you owe paid up)? If not just a reminder that they are due tomorrow on April 30, 2019.
I fully admit I ended up procrastinating on doing my income tax this year as I really don’t like the pain of having to gather and calculate everything for two home based businesses and investments. It typically ends up taking me like four or five hours to do all of it. But I eventually got it completed and it went partly as expected and partly had a few surprises for me.
First off I more or less expected that all the money I paid in withholding tax on my RRSP withdrawal last year ended up be refunded. This occurred since my taxable income was under the basic deduction therefore I pay zero income tax on the withdrawal (at least eventually…as you can’t get around the withholding tax when you initially take the money out). Also, as per normal, my wife actually didn’t pay income tax but she did owe money for her Canada Pension Plan (CPP) contribution (~$300) on her business income (I didn’t owe any CPP as I actually had a loss in my business for 2018). Thus we did achieve one objective I had from my early retirement plan to keep our income tax bill as low as possible (in 2018 it was actually zero).
Newer readers might be a bit confused on how it is possible to have taxable income of around $19K but actually spend about $35K per year so let me explain. Any withdrawals from our TFSA accounts are tax free thus don’t increase our taxable income. Also any dividends my wife receives in her taxable account also end up being not added to our taxable income as the tax credit gets is greater than the taxes owing on that income. So that ends adding $10K a year to our income but it doesn’t show up as taxable income. Then finally we used some savings and last year’s tax refund to bridge the rest of the spending.
Then of course as I previously had touched on our Child Tax Benefit is going to go up considerably as of mid 2019 since our taxable income in 2018 was so low. In the end it ends up being close to $933 per month starting in July, which should give our investments some time to grow for the next couple of years while we qualify for that benefit. An important note about this additional income it is a tax free benefit.
Finally, there were a few surprises for me while filing our taxes. First up was the fact we would qualify for a GST Credit benefit as I haven’t gotten that credit in likely close to two decades as I earned too much to qualify for it. So that will give us a quarterly payment of just over two hundred dollars which will be a nice bonus. The second surprise was the Working Income Tax benefit, which I basically forgot even existed since I was never closed to qualifying for it until now. It is benefit meant to encourage low income people to work and you need a family income of at least $3000 and it should give us a few hundred dollars of extra income per quarter.
While I’m still waiting for my assessment to be completed and sent back I am projected to get around $2600 of a refund back. So overall it is a bit higher than I expected but not huge amount like last year when I was using up as much RRSP contribution room as possible prior to leaving work in 2017.
So how did you taxes go this year? Did you learn anything new?