Alberta Tax News & Tips
Capital Gains and Capital Dividend Accounts
The capital gain inclusion rate increased from 1/2 to 2/3 for capital gains realized after June 24. 2024 for corporations. The Capital Dividend Account (CDA) balance which comprises of the corporation's Non-Taxable Capital Gain (TCG) or Allowable Capital Loss (ACL) from the dispositions of any property in that year are required to be tracked in separate periods. The period before June 25, 2024 (period 1) with an inclusion rate of 1/2 of the capital gain or loss. The period after June 24, 2024 (period 2) with an inclusion rate of 1/3 of the capital gain or loss.
For individuals and certain trusts, the capital gains inclusion rate is 1/2 on the first $250,000 of capital gains earned in the year, and this threshold will not be prorated in 2024. Taxpayers will be subject to the higher inclusion rate of 2/3 of the capital gain or losses over $250,000. Capital gain and losses realized are required to be tracked separately for before June 25, 2024 (period 1) and after June 24, 2024 (period 2).
Employee stock option deductions will be reduced from 1/2 to 1/3 for taxable benefits realized after June 24, 2024.
Scientific Research & Experimental Development (SR&ED)
Certain CCPC's qualify for the enhanced SR&ED tax credit rate of 35% available on up to $3 million of qualifying expenditures. This limit is phased out when the prior year's taxable income is between $500,000 and $800,000, or if the taxable capital employed in Canada is between $10 and $50 million. The Federal budget repealed the use of taxable income as a factor in determining the SR&ED expenditure limit for tax year that end after March 18, 2019. This is good news for R&D in Canada!
Alberta Innovation Employment Grant (IEG) to support research and development (R&D) will take effect January 1, 2021
The IEG is intended to encourage investment in Alberta by supporting small and medium-sized corporations that undertake scientific research and experimental development (SR&ED) activities in Alberta. The program provides a grant of up to 20% of eligible R&D expenditures incurred in Alberta; it effectively replaces Alberta’s 10% SR&ED investment tax credit, which was scraped on December 31, 2019.
Simplified home office deductions for 2020
CRA has introduced a simplified alternate process for employees claiming home office expenses. Employees may claim $2 per day for working at home to a maximum of $400 for 2020. For employers using the standard method, the new form T2200S (a simplified version of the T2200) for employees who have work from home expenses, but no other employment expenses is available.
Employee benefits and allowances
New guidance has been published by CRA as follows re 2020: (i) reimbursement of a reasonable allowance for additional commuting costs imposed by the COVID-19 pandemic and incurred by an employee will not be considered a taxable benefit; (ii) reimbursement of commuting costs incurred by an employee to travel to his usual place of work for any purpose that enables the performance of employment duties from home (e.g. to pick up equipment from the usual workplace) will not be considered a taxable benefit; (iii) the value of an employer-provided parking spot at a workplace will not be considered a taxable benefit if the employee is not using it because the workplace is closed; and (iv) employers may reimburse up to $500 of expenses incurred by employees to acquire computer or home office equipment to carry out their employment duties, provided the employee submits receipts to the employer (the guidance does not apply to allowances).
Payment for Contracted Services
The CRA policy is unchanged and requires the issuance of T4A slips to report payments for services. Under the tax rules, when someone pays for a service, the payor is required to report the payments by issuing a Form T4A, Statement of Pension, Retirement, Annuity, and Other Income to the service provider and by filing a T4A summary with the CRA annually. These rules apply if the total of all payments to the service provider in the calendar year was more than $500.
Buying and Selling Cryptocurrency
Investors be aware that tax obligations apply when trading and investing cryptocurrencies. The CRA classifies cryptocurrency as a type of capital property subject to tax upon purchase and sale. The tax treatment for trading cryptocurrencies such as Bitcoin would be the same as if you were to trade any other commodity; you would be required to report either as income gain or loss, or as a capital gain or loss.
Passive Investments
Starting December 13, 2018 Finance moved forward with measures to limit tax deferral opportunities related to passive investments in a Canadian-controlled private corporation. Passive investment measures apply and the first $50,000 a year in passive income will be exempt. This is equivalent to a 5% return on $1 million in savings invested.
The capital gain inclusion rate increased from 1/2 to 2/3 for capital gains realized after June 24. 2024 for corporations. The Capital Dividend Account (CDA) balance which comprises of the corporation's Non-Taxable Capital Gain (TCG) or Allowable Capital Loss (ACL) from the dispositions of any property in that year are required to be tracked in separate periods. The period before June 25, 2024 (period 1) with an inclusion rate of 1/2 of the capital gain or loss. The period after June 24, 2024 (period 2) with an inclusion rate of 1/3 of the capital gain or loss.
For individuals and certain trusts, the capital gains inclusion rate is 1/2 on the first $250,000 of capital gains earned in the year, and this threshold will not be prorated in 2024. Taxpayers will be subject to the higher inclusion rate of 2/3 of the capital gain or losses over $250,000. Capital gain and losses realized are required to be tracked separately for before June 25, 2024 (period 1) and after June 24, 2024 (period 2).
Employee stock option deductions will be reduced from 1/2 to 1/3 for taxable benefits realized after June 24, 2024.
Scientific Research & Experimental Development (SR&ED)
Certain CCPC's qualify for the enhanced SR&ED tax credit rate of 35% available on up to $3 million of qualifying expenditures. This limit is phased out when the prior year's taxable income is between $500,000 and $800,000, or if the taxable capital employed in Canada is between $10 and $50 million. The Federal budget repealed the use of taxable income as a factor in determining the SR&ED expenditure limit for tax year that end after March 18, 2019. This is good news for R&D in Canada!
Alberta Innovation Employment Grant (IEG) to support research and development (R&D) will take effect January 1, 2021
The IEG is intended to encourage investment in Alberta by supporting small and medium-sized corporations that undertake scientific research and experimental development (SR&ED) activities in Alberta. The program provides a grant of up to 20% of eligible R&D expenditures incurred in Alberta; it effectively replaces Alberta’s 10% SR&ED investment tax credit, which was scraped on December 31, 2019.
Simplified home office deductions for 2020
CRA has introduced a simplified alternate process for employees claiming home office expenses. Employees may claim $2 per day for working at home to a maximum of $400 for 2020. For employers using the standard method, the new form T2200S (a simplified version of the T2200) for employees who have work from home expenses, but no other employment expenses is available.
Employee benefits and allowances
New guidance has been published by CRA as follows re 2020: (i) reimbursement of a reasonable allowance for additional commuting costs imposed by the COVID-19 pandemic and incurred by an employee will not be considered a taxable benefit; (ii) reimbursement of commuting costs incurred by an employee to travel to his usual place of work for any purpose that enables the performance of employment duties from home (e.g. to pick up equipment from the usual workplace) will not be considered a taxable benefit; (iii) the value of an employer-provided parking spot at a workplace will not be considered a taxable benefit if the employee is not using it because the workplace is closed; and (iv) employers may reimburse up to $500 of expenses incurred by employees to acquire computer or home office equipment to carry out their employment duties, provided the employee submits receipts to the employer (the guidance does not apply to allowances).
Payment for Contracted Services
The CRA policy is unchanged and requires the issuance of T4A slips to report payments for services. Under the tax rules, when someone pays for a service, the payor is required to report the payments by issuing a Form T4A, Statement of Pension, Retirement, Annuity, and Other Income to the service provider and by filing a T4A summary with the CRA annually. These rules apply if the total of all payments to the service provider in the calendar year was more than $500.
Buying and Selling Cryptocurrency
Investors be aware that tax obligations apply when trading and investing cryptocurrencies. The CRA classifies cryptocurrency as a type of capital property subject to tax upon purchase and sale. The tax treatment for trading cryptocurrencies such as Bitcoin would be the same as if you were to trade any other commodity; you would be required to report either as income gain or loss, or as a capital gain or loss.
Passive Investments
Starting December 13, 2018 Finance moved forward with measures to limit tax deferral opportunities related to passive investments in a Canadian-controlled private corporation. Passive investment measures apply and the first $50,000 a year in passive income will be exempt. This is equivalent to a 5% return on $1 million in savings invested.