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<\/p>\nWith an April 30 tax-filing deadline fast approaching, you might now be starting to wonder: How much am I going to owe from all that? The answer, tax specialists say, is probably nothing.<\/p>\n
Inheritance and windfall are two examples of money streams that people in Canada typically don\u2019t pay tax on. Experts say it\u2019s important to raise awareness of those and other common tax-free income sources, especially given how difficult it can be to navigate the ins and outs of the system during the thick of tax-filing season.<\/p>\n
What counts as taxable income\u2014and what doesn\u2019t<\/p>\n
H&R Block Canada tax expert Yannick Lemay said those exemptions can add up to significant savings. \u201cWith taxes, there\u2019s a lot of nuances,\u201d he said. \u201cWe have to be careful to know exactly the nature of the amounts we have received and how it has to be reported on your tax return because there are severe penalties for not declaring all your income.\u201d<\/p>\n
Lemay said it\u2019s important to consider how certain money was earned to determine whether it\u2019s taxable. For instance, while lottery and gambling winnings for the average person in Canada aren\u2019t usually taxed\u2014something often misunderstood due to differing rules in the United States\u2014that\u2019s not the case for a professional poker player.<\/p>\n
\u201cIf, for example, you just casually go to the casino once in a while and you earn some money during the year, that is true that this money is tax-free,\u201d he said. \u201cBut for someone else, maybe the casino winnings are the main source of income.\u201d<\/p>\n
For the latter, someone who likely puts additional time and training into the craft, any winnings would be classified as business income, therefore making it taxable. \u201cSo, same source of money, same payer, but different treatment depending on who\u2019s receiving it,\u201d said Lemay.<\/p>\n
Income Tax Guide for Canadians<\/p>\n
Deadlines, tax tips and more<\/p>\n
The key is whether you\u2019re attempting to bring in \u201crecurring\u201d income, said Gerry Vittoratos, tax specialist at UFile. That comes into play for those working in the gig economy or managing a side hustle\u2014like running an Etsy store or delivering Uber Eats orders. \u201cAll of that is usually considered business income and the key is that it\u2019s recurring,\u201d he said. \u201cYou are regularly trying to earn income off of it.\u201d<\/p>\n
How to deal with gifts, inheritances, and scholarships<\/p>\n
Lemay pointed to other money sources that aren\u2019t taxable, such as gifts. No matter the size, gifted cash you receive isn\u2019t taxable\u2014however, any income generated from that sum of money would be.<\/p>\n
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Similarly, cash or property that\u2019s inherited isn\u2019t considered taxable income, however any income earned after you receive it, like interest or rental income, is taxable.<\/p>\n
Other tax-free income sources could include child support payments<\/a>, most life insurance payouts, and certain government payouts, such as the GST credit<\/a> or Canada Child Benefit<\/a>.<\/p>\n Lemay cautioned that some non-taxable amounts still need to be reported even if no tax is actually paid on it, as it can affect eligibility for such credits and benefits.<\/p>\n For young adults enrolled in academic programs, scholarships, and bursaries are a common source of money that may not be taxed. That\u2019s the case for full-time students enrolled in the current, prior, or next year, said Vittoratos. However, part-time students need to report amounts above certain thresholds.<\/p>\n \u201cIf you\u2019re a full-time student \u2026 you don\u2019t even declare it on the return. It\u2019s income that you just pocket directly,\u201d he said. \u201cIf, though, you\u2019re a part-time studentand you weren\u2019t a full-time student in one of those three years, you only get a $500 exemption. Anything above that will become taxable and you have to declare it on the return.\u201d<\/p>\n Reporting unusual income: when in doubt, declare it<\/p>\n Other income sources that don\u2019t usually get taxed include union strike pay meant to help cover living expenses, personal injury or wrongful death compensation, and workers\u2019 compensation benefits.<\/p>\n When in doubt, Vittoratos said it\u2019s better to report income than to omit information and potentially suffer the consequences. However, he noted it\u2019s possible to amend your tax return later on. \u201cThe biggest mistakes people make on their returns is omissions,\u201d he said. \u201cIt\u2019s always, \u2018Oh look I found this receipt three months later\u2019 and then I have to amend the return.\u201d<\/p>\n Vittoratos added it\u2019s important to remember that although January to April is generally considered tax season, it should never be \u201cjust a four-month process\u201d for filing. The more time you give yourself to plan before the filing deadline, the less likely you are to make such errors. \u201cJanuary to April is when you\u2019re actually filing your return, but your tax return is the year that just passed,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"With an April 30 tax-filing deadline fast approaching, you might now be starting to wonder: How much am…\n","protected":false},"author":2,"featured_media":457201,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[49,48,28088,44,39206,3322,8909],"class_list":["post-457200","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-ca","tag-canada","tag-income-tax","tag-news","tag-saving","tag-tax","tag-taxes"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/457200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=457200"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/457200\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/457201"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=457200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=457200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=457200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}