Federal Income Tax and Benefit Guide - 2018 - Deductions (Net income and Taxable income)

Step 3 – Net income

Claim the deductions that apply to you on lines 205 to 235 using your information slips along with the instructions provided on your return and on any applicable worksheet, schedule, and form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

This section does not provide supplementary information for lines 205, 208, 213, 223, 231, and 235, as the instructions on the return provide the information you need.

Line 206 – Pension adjustment

If you lived in Canada and participated in a foreign pension plan in 2018, you may have to enter an amount on this line.

If you participated in a foreign employer-sponsored pension plan or in a social security arrangement (other than a United States (U.S.) arrangement), get Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement for 2018 – Non-United States Plans or Arrangements, and complete it (if applicable).

If you are temporarily working in Canada and you continue to participate in your employer’s retirement plan in the U.S., get Form RC267, Employee Contributions to a United States Retirement Plan for 2018 – Temporary Assignments, and complete it (if applicable).

If you are a Canadian resident who travels to work in  the U.S. and you participate in your employer’s retirement plan in the U.S., get Form RC268, Employee Contributions to a United States Retirement Plan for 2018 – Cross-Border Commuters, and complete it (if applicable).

Line 207 – Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts shown in box 20 of your T4 slips, in box 032 of your T4A slips, and on your union or RPP receipts. See Guide T4040, RRSPs and Other Registered Plans for Retirement, to find out how much you can deduct if any of the following apply:

  • You contributed more than $3,500 to an RPP and your information slips show a past-service amount for service before 1990
  • You contributed an amount to an RPP in an earlier year, for a period before 1990, and you have not fully deducted that amount

Note

If you made contributions to a pension plan in a foreign country, you may be able to deduct the contributions. To find out how much you can deduct, complete the applicable form referred to in line 206.

Line 210 – Deduction for elected split-pension amount

Claim the amount you are transferring to your spouse or common-law partner if you both made a joint election to split your eligible pension income by completing Form T1032, Joint Election to Split Pension Income. For more information, see Line 115.

Line 212 – Annual union, professional, or like dues

Claim the total of the following amounts related to your employment that you paid (or that were paid for you and reported as income) in the year:

  • annual dues for membership in a trade union or an association of public servants
  • professional board dues required under provincial or territorial law
  • professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law
  • parity or advisory committee (or similar body) dues required under provincial or territorial law

For more information, see interpretation bulletins IT-103, Dues paid to a union or to a parity or advisory committee, and IT-158, Employees’ professional membership dues.

Line 214 – Child care expenses

You or your spouse or common-law partner may have paid someone to look after your child so one of you could earn employment or self-employment income, go to school, or do research. The expenses are deductible only if at some time in 2018 the child was under 16 years of age or had an impairment in physical or mental functions.

Line 215 – Disability supports deduction

Claim expenses you paid for personal attendant care and other disability supports expenses allowing you to go to school or earn certain income. This includes income from employment or self-employment and a grant you received for doing research.

Note

Only the person with the impairment in physical or mental functions can claim expenses for the disability supports deduction.

Line 217 – Business investment loss

A business investment loss is a special type of capital loss and can occur, for example, when you dispose of shares or certain debts of a small business corporation. For more information, see Guide T4037, Capital Gains.

If you have a tax shelter, see Tax shelters.

Line 219 – Moving expenses

Generally, you can claim moving expenses you paid in the year if both of the following apply:

  • you moved to work or to run a business, or you moved to study courses as a full-time student enrolled in a post-secondary program at a university, a college, or another educational institution
  • you moved at least 40 kilometres closer to your new work or school

Line 220 – Support payments made

Report on line 230 of your return the total of all deductible and non-deductible support payments you made in the year for a spouse or common-law partner, or for a child. If you are the payee, report any amounts that you repaid under a court order in the year. Claim on line 220 of your return only the deductible amount. For more information, see Guide P102, Support Payments.

Line 221 – Carrying charges and interest expenses

Claim the following carrying charges and interest you paid to earn income from investments:

  • fees to manage or take care of your investments (other than any fees you paid for services in connection with your pooled registered pension plan, registered retirement income fund, registered retirement savings plan, specified pension plan, and your tax-free savings account)
  • fees for certain investment advice (see Interpretation Bulletin IT-238, Fees Paid to Investment Counsel) or for recording investment income
  • fees to have someone complete your return but only if you have income from a business or property, if accounting is a usual part of the operations of your business or property, and if you did not use the amounts claimed to reduce the business or property income you reported. See Interpretation Bulletin IT-99, Legal and Accounting Fees
  • most interest you pay on money you borrow for investment purposes but generally only if you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid
  • legal fees you incurred relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, will have to pay to you

Note

Legal fees you incurred to try to make child support payments non-taxable must be deducted on line 232 of your return. For more information, see Guide P102, Support Payments.

Policy loan interest – To claim interest paid during the year on a policy loan made to earn income, ask your insurer to complete Form T2210, Verification of Policy Loan Interest by the Insurer.

Refund interest – If the CRA paid you interest on an income tax refund, report the interest in the year you receive it on line 121 of your return. If the CRA then reassessed your return and you repaid any of the refund interest in 2018, you can claim on line 221 of your return, the amount you repaid, up to the amount you had reported as income.

You cannot claim on line 221 of your return any of the following amounts:

  • the interest you paid on money you borrowed to contribute to a registered retirement savings plan, a pooled registered pension plan, a specified pension plan, a registered education savings plan, a registered disability savings plan, or a tax-free savings account (TFSA)
  • safety deposit box charges
  • the interest part of your student loan repayments (although you may be able to claim a credit on line 319 of your Schedule 1 for this amount)
  • subscription fees paid for financial newspapers, magazines, or newsletters
  • brokerage fees or commissions you paid when you bought or sold securities. Instead, use these costs when you calculate your capital gain or capital loss. For more information, see Guide T4037, Capital Gains, and Interpretation Bulletin IT-238, Fees Paid to Investment Counsel
  • legal fees you paid to get a separation or divorce or to establish custody of, or visitation arrangements for, a child

If you have a tax shelter, see Tax shelters.

Line 222 – Deduction for CPP or QPP contributions on self-employment and other earnings

Claim contributions you:

  • have to make on self-employment and limited or non-active partnership income
  • choose to make on certain employment income (see Making additional CPP contributions under line 308)
  • choose to make on your provincial income tax return for Quebec on certain employment income (see your Quebec provincial guide)

The CPP or QPP contributions you have to make, or choose to make, will depend on how much you have already contributed to the CPP or QPP as an employee, as shown in boxes 16 and 17 of your T4 slips.

Note

Do not calculate CPP contributions for the income shown in box 81 on the T4 slips you received from a placement agency.

Making additional CPP contributions

You may be able to make CPP contributions on certain income when:

  • No contribution was made (for example, tips not shown on a T4 slip)
  • You had more than one employer in the year and the total CPP contributions on all T4 slips are less than the required amount

For more information, see Making additional CPP contributions under line 308.

How to calculate your contributions

CPP and QPP rates are different. Find your situation in the first two columns and follow the instructions in the third column.

Resident of a province other than Quebec on December 31, 2018 Resident of the province of Quebec on December 31, 2018   Complete the following to calculate your CPP or QPP contributions: 
Contributed only to CPP  Contributed only to QPP  Schedule 8  
Contributed to QPP (even if also contributed to CPP)  Contributed to CPP (even if also contributed to QPP)  Form RC381, Inter-Provincial Calculation for CPP and QPP Contributions and Overpayments for 2018  

If you were a member of a partnership, include on Schedule 8 or Form RC381 only your share of the net profit. You cannot use self-employment or partnership losses to reduce the CPP or QPP contributions you paid on your employment earnings.

Your CPP or QPP contributions must be prorated, if in 2018 one of the following situations applies:

  • You were a CPP participant and turned 18 or 70 years of age or received a CPP disability pension
  • You were a QPP participant and turned 18 years of age or received a QPP disability pension
  • You were a CPP working beneficiary (see Line 308) and elected to stop paying CPP contributions or revoked an election you made in a previous year
  • You are filing a return for a person who died in 2018

Note

If you started receiving CPP retirement benefits in 2018, the CRA may prorate your basic exemption.

Request for refund of CPP contributions

Under the CPP, all requests for a refund of CPP over-contributions must be made within four years after the end of the year for which the request is being made.

Line 224 – Exploration and development expenses

Claim this amount if you invested in petroleum, natural gas, mining or certain clean energy generation and energy conservation ventures in 2018.

For more information, call the CRA business enquiries line.

If you have a tax shelter, see Tax shelters.

Line 229 – Other employment expenses

You can claim certain expenses (including any GST/HST) you paid to earn employment income if the following two conditions apply:

  • Your employment contract required you to pay them
  • You did not receive an allowance for the expenses, or the allowance you received is reported as income

Note

Most employees cannot claim employment expenses. You cannot deduct the cost of travel to and from work or other expenses, such as clothing.

Repayment of salary or wages – You can claim salary or wages you reported as income for 2018 or a previous year if you repaid them in 2018. This includes amounts you repaid for a period when you were entitled to receive wage-loss replacement benefits or workers’ compensation benefits. However, you cannot claim more than the income you received when you did not perform the duties of your employment.

Legal fees – You can claim the legal fees you paid in the year to collect or establish a right to salary or wages owed to you. The amounts claimed are not tied to the successful outcome of your case. However, the legal expenses must be incurred by you to collect or establish a right to collect an amount owed to you that, if received by you, would have to be included in your employment income. You must reduce your claim by any amount awarded to you for those fees or any reimbursement you received for your legal expenses.

Employees profit-sharing plan (EPSP) – You may be eligible to claim as a deduction the excess EPSP amount contributed on your behalf to an EPSP. To calculate your deduction, get and complete Form RC359, Tax on Excess Employees Profit Sharing Plan Amounts.

Get and complete Form T777, Statement of Employment Expenses, to provide the details of your deductions and calculations for your expenses (except those related to an EPSP). Guide T4044, Employment Expenses, contains Form T777 and other forms you will need. The guide also explains the conditions that apply when you claim these expenses.

Line 232 – Other deductions

Claim the allowable amounts not deducted elsewhere on your return. Specify the deduction you are claiming in the space provided on the return.

If you have a tax shelter, see Tax shelters.

Income amounts repaid

If in 2018 you repaid amounts you received and reported as income (other than salary or wages) for 2018 or a previous year, you can claim most of these amounts on line 232 of your return for 2018. However, if a court order made you repay support payments you reported on line 128 of your return, claim the repayment on line 220 of your return.

If in 2018 you repaid an amount you received from a registered disability savings plan and reported it as income in 2018 or a previous year, you can claim the amount on line 232 of your return. For more information, go to Registered disability savings plan (RDSP), or see Guide RC4460, Registered Disability Savings Plan.

In 2018, you may have had an amount recovered from your gross old age security (OAS) pension (shown in a letter or in box 20 of your T4A(OAS) slip because of an overpayment you received in a previous period. If so, you can claim a deduction on line 232 of your return for the amount you repaid.

Notes

If you had to repay OAS for 2017, tax may have been withheld from your OAS benefits for 2018. The amount deducted is shown in box 22 of your T4A(OAS) slip for 2018. Do not claim that amount on line 232 of your return. Claim it on line 437 of your return. To calculate your 2018 OAS repayment, complete the chart for line 235 on the Worksheet for the return.

If you repaid employment income, see Repayment of salary or wages under Line 229. If you repaid interest earned on an income tax refund, see Refund interest under Line 221.

Employment insurance (EI) benefits – You may have received more benefits than you should have and already paid them back to the payer of your benefits. For example:

  • The payer of your benefits may have reduced your EI benefits after discovering the mistake. In this case, your T4E slip will show only the net amount you received, so you cannot claim a deduction
  • If you repaid excess benefits you received directly to the payer of your benefits, box 30 of your T4E slip will show the amount you repaid. Include that amount on line 232 of your return. This is not the same as repaying a social benefit on line 235 of your return

Legal fees

You can claim the following expenses if:

  • you paid fees (including any related accounting fees) for advice or assistance to respond to the CRA when the CRA reviewed your income, deductions, or credits for a year or to object to or appeal an assessment or decision under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan, or the Quebec Pension Plan
  • you paid fees to collect (or establish a right to) a retiring allowance or pension benefit. However, you can claim only up to the retiring allowance or pension income you received in the year, minus any part of these amounts transferred to a registered retirement savings plan or registered pension plan. You can carry forward, for up to seven years, the legal fees you cannot claim in the year
  • you incurred certain fees to try to make child support payments non-taxable

Note

Fees relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, paid to you must be claimed on line 221 of your return.

You cannot claim legal fees you incurred to get a separation or divorce or to establish custody of, or visitation arrangements for, a child. For more information, see Guide P102, Support Payments.

You can claim the legal fees you paid in the year to collect or establish a right to salary or wages owed to you. See Line 229.

You must reduce your claim by any award or reimbursements you received for these expenses. If you are awarded the cost of your deductible legal fees in a future year, report that amount in your income for that year.

For more information about other legal fees you may deduct, see Interpretation Bulletin IT-99, Legal and Accounting Fees.

Other deductible amounts

The following are examples of other amounts you can claim:

Line 236 – Net income

If the amount you calculate for line 236 of your return is negative, you may have a non-capital loss. Get and complete Form T1A, Request for Loss Carryback to calculate your loss and any amount you may want to carry back to your 2015, 2016, or 2017 return. Do not file an amended return for the year or years to which you apply the loss.

Step 4 – Taxable income

Claim the deductions that apply to you on lines 244 to 256 using your information slips along with the instructions provided on your return and on any applicable form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

This section does not provide supplementary information for lines 244, 254, and 255, as the instructions on the return provide the information you need.

Line 249 – Security options deductions

Claim the total of the amounts shown in boxes 39 and 41 of your T4 slips. In addition, if you disposed of securities for which you had previously deferred the taxable benefit, get and complete Form T1212, Statement of Deferred Security Options Benefits.

Line 250 – Other payments deduction

If you reported net federal supplements on line 146 of your return, you may not be entitled to claim the whole amount from line 147 of your return. Complete the calculation below:

  • the amount from line 234 of your return, minus
  • the amounts on lines 117 and 125 of your return, plus
  • the amounts deducted on line 213 of your return and the amount for a repayment of registered disability savings plan income included on line 232 of your return

If the result is greater than $75,910, contact the CRA to find out how much you can deduct. Otherwise, claim the amount from line 147 of your return.

Line 251 – Limited partnership losses of other years

If you had limited partnership losses in previous years, which you have not already claimed, you may be able to claim part of those losses this year. You can carry forward the losses indefinitely. You cannot use the amount shown in box 108 of your 2018 T5013 slips on your return for 2018.

Line 252 – Non-capital losses of other years

For 2018, claim the unapplied non-capital, farming, or fishing losses you reported on your 2006 to 2017 returns, which you would like to apply. Losses incurred in 2006 and later years can generally be carried forward for 20 years. Your available losses are shown on your latest notice of assessment or notice of reassessment.

There are restrictions on the amount of certain farm losses you can claim each year. If you have a farming or fishing business, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income, Guide RC4060, Farming Income and the AgriStability and AgriInvest Programs Guide, or Guide RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized Guide.

If you need more information about losses, see Interpretation Bulletin IT-232, Losses – Their Deductibility in the Loss Year or in Other Years.

Line 253 – Net capital losses of other years

Within certain limits, you can claim your net capital losses of previous years which you have not already claimed. Your available losses are shown on your notice of assessment or reassessment for 2017. You will probably have to adjust any losses you incurred after 1987 and before 2001. For more information, see Guide T4037, Capital Gains.

Line 256 – Additional deductions

In the space provided on the return, specify the deduction you are claiming.

Exempt foreign income

If you reported foreign income on your return (such as support payments you received from a resident of another country and reported on line 128 of your return) that is tax-free in Canada because of a tax treaty, you can claim a deduction for it.

Under the Canada–United States tax treaty, you can claim on line 256 of your return a deduction equal to 15% of the U.S. Social Security benefits, including U.S. Medicare premiums, which you reported as income on line 115 of your return.

If you have been a resident of Canada and have received U.S. Social Security benefits continuously during the period starting before January 1, 1996, and ending in 2018, you can claim a deduction equal to 50% of the U.S. Social Security benefits received in 2018.

This 50% deduction also applies to you if you are receiving benefits related to a deceased person and you meet all of the following conditions:

  • The deceased person was your spouse or common-law partner immediately before they died
  • The deceased person had, continuously during a period starting before January 1, 1996, and ending immediately before they died, been a resident of Canada and received benefits to which paragraph 5 of Article XVIII of the Canada-United States tax treaty applied
  • You have been, continuously during a period starting when the person died and ending in 2018, a resident of Canada and received such benefits

Vow of perpetual poverty

If you have taken a vow of perpetual poverty as a member of a religious order, you can claim the earned income and pension benefits you have given to the order. For more information, see Interpretation Bulletin IT-86, Vow of Perpetual Poverty.

Employees of prescribed international organizations

If in 2018 you were employed by a prescribed international organization, such as the United Nations, you can claim a deduction for the net employment income you report on your return from that organization. Net employment income is your employment income minus the related employment expenses you are claiming. If you do not know if your employer is a prescribed international organization, contact your employer.


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