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Alberta -Rental Income

Rental income is any payment you receive for the use or occupation of property.

Table of contents

Is this guide for you?

Use this guide if you had rental income from real estate or other property. The information in this guide relates mainly to renting real estate, but some of the information also applies to other types of rental property.

This guide will help you determine your gross rental income, the expenses you can deduct, and your net rental income or loss for the year. It will also help you fill in form T776, Statement of Real Estate Rentals.

To determine if your income is from property or from a business, see Chapter 1.

To find out if you are a partner of a partnership or a co-owner, see Are you a co-owner or a partner of a partnership?

If you are looking to report income or expenses from accommodation sharing, search accommodation sharing at canada.ca.

We have defined some of the terms used in this guide in Definitions. You may want to read them before you start.

Throughout this guide, we refer to other guides, forms, interpretation bulletins, information circulars, and income tax folios.

What’s new for 2019?

New capital cost allowance (CCA) classes: Class 54 (30%) and Class 55 (40%) for business investment in zero-emission vehicles

Two new capital cost allowance (CCA) classes have been created for zero emission vehicles acquired after March 18, 2019, Class 54 and Class 55.

Class 54 has a rate of 30% and includes zero emission vehicles that would normally be included in Class 10 or 10.1.

Class 55 has a rate of 40% and includes zero emission vehicles that would normally be included in Class 16.

A zero emission vehicle has to be acquired, and become available for use, after March 18, 2019, and before 2028 to be eligible for the first year enhanced CCA deduction. These new classes will have an enhanced first year CCA deduction of 100% for zero emission vehicles that become available for use before 2024. CCA will still be calculated on a declining balance basis, and a phase out will begin for property that becomes available for use after 2023.

For more information see Classes of depreciable property.

Change in use rules for part of property such as multi-unit residential properties

Under proposed legislation, a taxpayer can elect that the deemed disposition that normally arises on a change in use of part of a property not apply in respect of changes in the use of property that occur on or after March 19, 2019. As a result, any accrued capital gain on the property can be deferred until the property is disposed of in the future. For more information, see Changing part of your principal residence to a rental property or vice versa.

Definitions

Accelerated Investment Incentive Property (AIIP) – Property that is eligible for an enhanced first year allowance that is subject to the capital cost allowance (CCA) rules. The property may be eligible if it is acquired after November 20, 2018, and becomes available for use before 2028. For more information about AIIP, go to Accelerated Investment Incentive.

Arm’s length – refers to a relationship or a transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

“Related persons” are not considered to deal with each other at arm’s length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

“Unrelated persons” may not be dealing with each other at arm’s length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm’s length:

  • whether there is a common mind which directs the bargaining for the parties to a transaction
  • whether the parties to a transaction act in concert without separate interests; “acting in concert” means, for example, that parties act with considerable interdependence on a transaction of common interest
  • whether there is de facto control of one party by the other because of, for example, advantage, authority or influence

For more information, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm’s length.

Available for use – you can claim capital cost allowance (CCA) on a rental property only when it becomes available for use.

A rental property, other than a building, usually becomes available for use on the earliest of:

  • the date you first use it to earn income
  • the second year after the year you acquired the rental property
  • the time just before you dispose of the property

A rental property that is a building, or part of a building, usually becomes available for use on the earliest of:

  • the date when a fully constructed building is purchased or construction of the building is completed
  • the date that you rented out 90% or more of the building
  • the second year after the year you acquired the building
  • the time just before you dispose of the building

When determining the available for use date, a renovation, an alteration, or addition to a building should be considered as a separate building.

You may be able to claim CCA on a building that is under construction, renovation, or alteration before it is available for use. You can deduct CCA that you have available on such a building when you have net rental income from it. The CCA that you can deduct is restricted to the amount of net rental income you have after you deduct any soft costs for constructing, renovating, or altering the building. For an explanation of soft costs, see Construction soft costs.

Capital cost – the amount on which you first claim capital cost allowance (CCA). The capital cost of a property is usually the total of the following:

  • the purchase price (not including the cost of land, which is not depreciable)
  • the part of your legal, accounting, engineering, installation, and other fees that relate to buying or constructing the property (not including the part that applies to land)
  • the cost of any additions or improvements you made to the property after you acquired it, if you did not claim these costs as a current expense (such as modifications to accommodate persons with disabilities)
  • for a building, soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, if these expenses have not been deducted as current expenses

For more information on current expenses, see Current or capital expenses.

Legal and accounting fees for buying a rental property are allocated between the cost of the land and the capital cost of the building. If land is acquired for rental purposes or for constructing a rental property, the legal and accounting fees apply to the land.

Capital cost allowance (CCA) – you may have acquired depreciable property like a building, furniture, or equipment to use in your rental activity. You cannot deduct the initial cost of these properties in the calculation of the net income of the rental activities for the year. However, since these properties wear out or become obsolete over time, you can deduct the cost over a period of several years. This deduction is called CCA.

Capital property – generally any property, including depreciable property, you buy for investment purposes or to earn business income. Common types of capital property include principal residences, cottages, stocks, bonds, land, buildings, and equipment used in a business or rental operation.

Common-law partner – this applies to a person who is not your spouse with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. They:

  • have been living with you in a conjugal relationship, and this current relationship has lasted at least 12 continuous months

Note

The term “12 continuous months” includes any period that you were separated for less than 90 days because of a breakdown in the relationship.

  • Footnote1 are the parent of your child by birth or adoption
  • have custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent onthat person for support

Depreciable property – the property on which you can claim CCA. It is usually capital property from a business or property. The capital cost can be written off as CCA over a number of years. You usually group depreciable properties into classes. Diggers, drills, and tools that cost $500 or more belong in Class 8. You have to base your CCA claim on the rate assigned to each class of property.

Fair market value (FMV) – generally, the highest dollar value you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm’s length with each other.

Multiple-unit residential building (MURB) – a rental property in either Class 31 or 32 that has at least two self-contained residential units.

Motor vehicle – an automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated only on rails.

Non-arm’s length – generally refers to a relationship or transaction between persons who are related to each other.

However, a non-arm’s length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of “Arm’s length”.

Passenger vehicle – a motor vehicle that is owned by the taxpayer (other than a zero-emission vehicle) or that is leased, and is designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles.

Passenger vehicles and zero-emission passenger vehicles are subject to limits on the amount of CCA, interest, and leasing costs that may be deducted. They do not include:

  • an ambulance
  • a clearly marked police or fire emergency response vehicle
  • a motor vehicle you bought to use more than 50% as a taxi, a bus used in the business of transporting passengers, or a hearse used in a funeral business
  • a motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business
  • a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers
  • a van, pick up truck, or similar vehicle that seats no more than the driver and two passengers and that, in the tax year you bought or leased it, was used more than 50% to transport goods and equipment to earn income
  • a van, pick up truck, or similar vehicle that, in the tax year you bought or leased it, was used 90% or more to transport goods, equipment, or passengers to earn income
  • a pick up truck that, in the tax year you bought or leased it, was used more than 50% to transport goods, equipment, or passengers to earn or produce income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community with a population of at least 40,000
  • a clearly marked emergency medical service vehicle used to carry paramedics and their emergency medical equipment

Proceeds of disposition – the amounts you receive, or that we consider you to have received, when you dispose of your property (usually the selling price of the property). Proceeds of disposition is also defined to include, amongst other things, compensation received for property that has been destroyed, expropriated, damaged, or stolen.

Rental income – income you earn from renting a property that you own.

Rental operation – services you provide within your rental property to your tenants such as heat, lighting, laundry, cleaning or security.

Rental property – generally, a building or certain leasehold interests owned by a taxpayer(s) or a partnership that is mainly used to generate gross revenue from rent.

Spouse – a person to whom you are legally married.

Undepreciated capital cost (UCC) – generally, the amount left after you deduct CCA from the capital cost of a depreciable property. Each year, the CCA you claim reduces the UCC of the property.

Zero-emission passenger vehicle (ZEPV) – an automobile that is owned by the taxpayer and is included in Class 54 (but would otherwise be included in Class 10 or 10.1). The rules that apply to the definition of passenger vehicles apply to ZEPVs as well. Note that although a ZEPV does not include a leased passenger vehicle, such vehicles that would otherwise qualify as ZEPVs if owned by the taxpayer, are subject to the same leasing deduction restrictions as passenger vehicles.

Zero-emission vehicle (ZEV) – is a motor vehicle that is owned by the taxpayer where all of the following conditions are met:

  • is a plug-in hybrid with a battery capacity of at least 7kWh or is either fully:
    • electric
    • powered by hydrogen
  • is acquired, and becomes available for use, after March 18, 2019 and before 2028
  • has not been used for any purpose before it was acquired by the taxpayer
  • is a vehicle for which:
    • an election has not been made to forgo the Class 54 or 55 treatment
    • assistance has not been provided by the Government of Canada under the new incentive announced on March 19, 2019
    • an amount has not been deducted as CCA and a terminal loss has not been claimed by another person or partnership

Chapter 1 – General information

This chapter explains the general information you need to have before you fill in form T776, Statement of Real Estate Rentals.

Rental income is income you earn from renting property that you own. You can own the property by yourself or with someone else. Rental income includes income from renting:

  • houses
  • apartments
  • rooms
  • space in an office building
  • other real or movable property

Rental income can be either income from property or business. Income from rental operations is usually income from property. Use this guide only if you have rental income from property.

Do you have rental income or business income?

To determine whether your rental income is from property or business, consider the number and types of services you provide for your tenants.

In most cases, you are earning an income from your property if you rent space and provide basic services only. Basic services include heat, light, parking, and laundry facilities. If you provide additional services to tenants, such as cleaning, security, and meals, you may be carrying on a business. The more services you provide, the greater the chance that your rental operation is a business.

For more information about how to determine if your rental income comes from property or a business, see Interpretation Bulletin IT-434, Rental of Real Property by Individual, and its Special Release.

If your rental operation is a business, do not use this guide. Instead, see guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Goods and services tax/harmonized sales tax GST/HST new residential rental property rebate

Section 256.2 of the Excise Tax Act allows landlords who buy or build new residential housing, substantially renovate existing housing, build an addition to multiple-unit housing, or convert a commercial property into housing, to get a GST/HST new residential rental property rebate.

To qualify for this rebate, landlords must rent out housing for long-term use by individuals as their primary place of residence. The rebate may also be available to persons who provide land leases for residential use. This can include the lease of sites in a residential trailer park.

For more information, see guide RC4231, GST/HST New Residential Rental Property Rebate.

If you are applying for a new residential rental property rebate, use form GST524, GST/HST New Residential Rental Property Rebate Application. If you are claiming a rebate for multiple unit housing, such as an apartment building or a triplex (excluding condominium units and a duplex), you also need to fill in form GST525, Supplement to the New Residential Rental Property Rebate Application – Co-op and Multiple Units.

GST/HST rebate for partners

To determine if you are a partner, see Are you a co-owner or a partner of a partnership?

If you are an individual who is a member of a partnership, you may be able to get a rebate for the GST/HST you paid on certain expenses. The rebate is based on the GST/HST you paid on expenses you deducted from your share of the partnership income on your income tax return. However, special rules apply if your partnership paid you an allowance for those expenses.

As an individual who is a member of a partnership, you may qualify for the GST/HST partner rebate if you meet the following conditions:

  • the partnership is a GST/HST registrant
  • you personally paid GST/HST on expenses that:
    • you did not incur on behalf of the partnership
    • you deducted from your share of the partnership income on your income tax return

However, special rules apply if the partnership reimbursed you these costs.

Examples of expenses subject to the GST/HST are vehicle costs and certain business-use-of-home expenses. The rebate may also apply to the GST/HST you paid on motor vehicles, musical instruments, and aircraft, for which you deducted CCA.

The eligible part of the CCA is the part that you deduct on your tax return in the tax year that relates specifically to a motor vehicle, musical instrument, or aircraft on which you paid GST/HST. It would also be eligible for the rebate, to the extent that the partnership used the property to make taxable supplies.

You can also get a GST/HST rebate calculated on the CCA you claimed on certain types of property. For example, you can generally claim the rebate based on the CCA you deducted for a vehicle you bought to earn partnership income if you paid GST/HST when you bought it.

If you deduct CCA on more than one property of the same class, separate the part of the CCA of the property that qualifies for the rebate from the CCA on the other property. If any part of the rebate relates to the CCA deduction for a motor vehicle, a musical instrument or an aircraft, you have to reduce the undepreciated capital cost (UCC) of that property by the amount that is part of the rebate.

Complete form GST370, Employee and Partner GST/HST Rebate Application, to claim your GST/HST rebate for partners. You have to include this rebate in your income for the tax year in which you receive it.

For example, if in 2019 you receive a GST/HST rebate for the 2018 tax year, you have to include the amount of the rebate on your income tax return for 2019:

  • Report, as an expense, at line 9974 of form T776 the GST/HST rebate amount for partners that pertains to eligible expenses other than the CCA.
  • In column 2 of Area A – Calculation of CCA claim, reduce the UCC for the beginning of 2019 by the rebate part that relates to the eligible CCA.

For more information about the GST/HST rebate, go to GST/HST rebate for employees and partners.

Keeping records

Keep detailed records of all the rental income you earn and the expenses you incur. You have to support your purchases and operating expenses with:

  • invoices
  • receipts
  • contracts
  • other supporting documents

Do not send your records with your income tax return. Keep them in case we ask to see them. We may not allow all or part of your expenses if you do not have receipts or other documents to support them.

For more information on operating expenses, see Chapter 3 – Expenses.

Generally, you must keep your records for six years from the end of the tax year to which they relate. For more information about keeping records, go to Keeping records.

Chapter 2 – Calculating your rental income or loss

If you received income from renting real estate or other real property, you have to file a statement of income and expenses.

Even though we accept other types of financial statements, we encourage you to use form T776.

Form T776 includes areas for you to enter your gross rents, your rental expenses, and any CCA. To calculate your rental income or loss, fill in the areas of the form that apply to you.

This chapter explains how to calculate your rental income or loss, as well as fill in the “Income” and “Expenses” parts of the form.

Rental losses are not allowed if your rental operation is a cost-sharing arrangement rather than an operation to make a profit.

Filling out form T776, Statement of Real Estate Rentals

If you are a sole proprietor, fill in all the parts and lines on the form that apply to you.

You only have to fill in this form if you have a rental operation and you are reporting a rental income or loss.

Part 1 – Identification

Fill in this part to identify yourself and your real estate rentals. The last two lines of part 1 are for the person or firm preparing this form in case it is someone other than the owner of the rental property.

Fiscal period

If this  is the first year of operation, enter the year, month, and day you began your rental operation. Otherwise, enter January 1 of the current year.

All rental properties have a December 31 year-end. In the “to” field, enter the current tax year.

Are you a co-owner or a partner of a partnership?

Most of the time, if you own the rental property with one or more persons, we consider you to be a co-owner. For example, if you own a rental property with your spouse or common-law partner, you are a co-owner.

In some cases, if you are a co-owner, you have to determine if a partnership exists. A partnership is a relationship between two or more people carrying on a business, with or without a written agreement, to make a profit. If there is no business in common, there is no partnership. That is, co-ownership of a rental property as an investment does not make a partnership. To help you determine if you are in a partnership, see the partnership law for your province or territory. For more information, see Income Tax Folio S4-F16-C1, What is a Partnership?

A partnership that carries on a business in Canada, or a Canadian partnership with Canadian or foreign operations or investments, has to file a T5013 partnership information return for its fiscal period if either of the following occur:

  • at the end of the fiscal period, the partnership has an absolute value of revenues plus an absolute value of expenses of more than $2 million, or has more than $5 million in assets
  • at any time during the fiscal period:
    • the partnership is a tiered partnership (has another partnership as a partner or is itself a partner in another partnership), or
    • the partnership has a corporation or a trust as a partner, or
    • the partnership invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership, or
    • the Minister of National Revenue requests one in writing

If you are a partner in any of these types of partnerships, you should get two copies of a T5013 slip, Statement of Partnership Income.

For more information on this return, go to Sole proprietorships and partnerships or see guide T4068, Guide for the Partnership Information Return (T5013 forms).

If you determine that you are a partner in a partnership and you received a T5013 slip, fill in only the following fields on form T776:

  • enter your nine-digit partnership business number
  • enter your rental property ownership percentage in the “Percentage of ownership” box
  • enter the amount from box 110 (or 107 if it is a limited partnership) of your T5013 slip at amount 10

You may need to adjust your share of the net partnership income (loss) on amount 10 if one of the following apply:

Enter your net income (loss) at line 9946 by subtracting your expenses from the personal portion of the expenses.

If you are in a partnership and you do not receive a T5013 slip, or if you are a co-owner, fill in all of the parts in form T776 that apply to you. Follow the special instructions in this chapter to fill in lines 8299, 9369, 9936, 9943, and 9946. Fill in Part 2 – “Details of other co-owners and partners” on the form.

Tax shelter identification number

If you have a tax shelter, enter your tax shelter identification number (8 digit number found on your T5013 slip) on the proper line.

We consider a tax shelter to include an investment that can be reasonably expected, based on any statement, representation, or promotional literature, to provide federal tax credits, or a combination of federal tax credits and losses or deductible amounts that are equal to or over a buyer’s net cost in any of the first four years.

The total of the federal tax credits and losses or other deductible amounts would be equal to, or greater than, the cost of your share of the investment after deducting the prescribed benefits.

The cost of your interest in the property has to be reduced by the prescribed benefits you or a person with whom you do not deal at arm’s length will receive or benefit from. Prescribed benefits include provincial or territorial tax credits, revenue guarantees, contingent liabilities, limited recourse debt, and rights of exchange or conversion.

To claim deductions or losses from tax shelter investments, attach to your income tax return the T5003 slip, Statement of Tax Shelter Information, and the T5013 slip, if applicable. Also attach a completed form T5004, Claim for Tax Shelter Loss or Deduction. Make sure your form identifies your tax shelter identification number.

Note

Tax shelter numbers are used for identification purposes only. They do not guarantee that taxpayers are entitled to receive the proposed tax benefits.

If this is the first year you are making a claim for your tax shelter, include a copy of form T5003 with your income tax return. If the tax shelter is a partnership, include a T5013 slip with your return.

For more information on tax shelters, go to Tax shelters.

Part 2 – Details of other co-owners and partners

Fill in this part if you are a co-owner or a partner in a partnership.

Part 3 – Income

List the address of your rental property and the number of units you rented.

You can receive rental income in the form of:

  • cash or cheques
  • kind (goods or commodities instead of cash)
  • services

If your tenant pays you in cash or by cheque, include the total rents you earned in the year at line 8141 in the “Gross rents” column. If your tenant pays you in kind or with services, report their fair market value at Line 8230 – Other income on form T776.

Example

Glenn is a tenant in an apartment building. He owns a truck with a plow on it. His landlord, Sonya, asked him to plow the parking lot after every snowfall. Sonya does not pay Glenn cash for his work, but she reduces his monthly rent accordingly.

Sonya reports the rent she charges Glenn at line 8141, as “Gross rents,” and the fair market value of Glenn’s services as “Other related income,” at line 8230. She then claims the fair market value of Glenn’s snowplowing services as an expense that relates to her rental operation.

How to calculate your rental income

Report the rental income you earned in the calendar year from January 1 to December 31.

In most cases, you calculate your rental income using the accrual method. For this method you:

  • report rental income in the fiscal period you earn it, no matter when you receive it
  • deduct expenses in the fiscal period you incur them, whether or not you pay them in that period

Incur usually means you either paid or will have to pay the expense.

If you have almost no amounts receivable and no expenses outstanding at the end of the year, you can use the cash method.

For this method you:

  • report rental income in the fiscal period you receive them
  • deduct expenses in the fiscal period you pay them

If you use the cash method and receive a post dated cheque as security for a debt, include the amount in income when the cheque is payable.

You can use the cash method only if your net rental income or loss would be almost the same if you were using the accrual method.

We use the accrual method for the examples in this guide.

Who reports the rental income or loss?

The person who owns the rental property has to report the income or loss. If you are a co-owner of the rental property, your share of the rental income or loss will depend on your share of ownership.

The rental income or loss percentage you report should be the same for each year unless the percentage of your ownership in the property changes.

Note

As the owner, you are the only one who can use the related interest expense to calculate your rental income or loss, even if someone else guaranteed your loan or mortgage. For more information, see Line 8710 – Interest and bank charges.

For more information on reporting rental income between family members, see Interpretation Bulletin IT-510, Transfers and Loans of Property Made After May 22, 1985 to a Related Minor, and Interpretation Bulletin IT-511, Interspousal and Certain Other Transfers and Loans of Property.

Line 8230 – Other income

On line 8230, enter the total income you received from other sources. Some examples of other income are:

Premiums and leases – You may receive an amount for one of the following:

  • granting or extending a lease or sublease
  • permitting a sublease
  • cancelling a lease or sublease

Report all or part of these amounts as “Other related income” at line 8230.

Sharecropping – You can earn income from renting farmland either in cash or as a share of the crop. Report any cash payments as rent in the “Gross rents” column, and report the fair market value of any crop share you earn on a sharecrop basis as “Other income” at line 8230.

Line 8299 – Gross rental income

Your gross rental income is your total “Gross rents,” on form T776. Enter this amount at line 12599 of your income tax return. If you are a co-owner of the rental property or a partner in a partnership that does not need to provide you with a T5013 slip, enter the gross rental income for the entire property at line 12599. Do not split the gross income according to your ownership share.

Uncollectible rent

You can have losses from uncollectible debts or a portion of an uncollectible debt. You can deduct this amount from your gross rental income.

To be eligible, the debt must:

  • be owing to you at the end of the tax year
  • have become uncollectible during the tax year
  • have been included or deemed to have been included in your income for the year or a previous tax year

Proof is required to determine an uncollectible debt. This could be a notice to creditors from the trustee in bankruptcy, correspondence from the tenant, or some other assurance that the tenant was pursued without success of receiving a payment from them. Only debts that are certain of being uncollectible are to be considered bad debts.

You may have a case where you do not receive payment for rent, which is referred to as a bad debt. If, during the year, you receive any payment that you wrote off in a previous year as bad debt, you have to include the amount in your income for the current year.

Notes

If you are reporting income on a cash basis, there should be no receivables and no claim for uncollectible rents.

If you are not dealing at arm’s length with the tenant, the factors used to establish the uncollectible amount would need to be verified.

For more information, see Interpretation Bulletin IT-442, Bad debts and reserves for doubtful debts.

Chapter 3 – Expenses

You can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are:

  • current expenses
  • capital expenses

Current expenses are recurring expenses that provide a short-term benefit. For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you acquired it. You can deduct current expenses from your gross rental income in the year you incur them.

As for capital expenses, they provide a benefit that usually lasts for several years. For example, costs to buy or improve your property are capital expenses. Generally, you cannot deduct the full amount of these expenses in the year you incur them. Instead, you can deduct their cost over a period of several years as CCA. For more information on CCA, see Chapter 4.

Capital expenses can include:

  • the purchase price of rental property
  • legal fees and other costs connected with buying the property
  • the cost of furniture and equipment you are renting with the property

Current or capital expenses

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property’s market value because of an expense is not a major factor in deciding whether the expense is capital or current. To decide whether an amount is a current expense or a capital expense, consider your answers to the questions provided in the following chart.

CriteriaCapital expenses
(see Capital expenses – Special situations)		Current expenses
Does the expense provide a lasting benefit?A capital expense generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden house is a capital expense.A current expense is one that usually recurs after a short period. For example, the cost of
painting the exterior of a wooden house is a current expense.
Does the expense maintain or improve the property?The cost of a repair that improves a property beyond its original condition is probably a capital expense. If you replace wooden steps with concrete steps, the cost is a capital expense.An expense that simply restores a property to its original condition is usually a current
expense. For example, the cost of repairing wooden steps is a current expense.
Is the expense for a part of a property or for a separate asset?The cost of replacing a separate asset within a property is a capital expense. For example, the cost of buying a refrigerator to use in your rental operation is a capital expense. This is the case because a refrigerator is a separate asset and is not a part of the building.The cost of repairing a property by replacing one of its parts is usually a current expense. For instance, electrical wiring is part of a building. Therefore, an amount you spend to rewire is usually a current expense, as long as the rewiring does not improve the property
beyond its original condition.
What is the value of the expense? (Use this test only if you cannot determine whether an expense is capital or current by considering the three previous tests.)Compare the cost of the expense to the value of
the property. Generally, if the cost is of considerable value in relation to the property, it
is a capital expense.		This test is not a determining factor by itself. You might spend a large amount of money for maintenance and repairs to your property all at once. If this cost was for ordinary maintenance that was not done when it was necessary, it is a maintenance expense, and you deduct it as a current expense.
Is the expense for repairs made to used property you acquired to put it in a suitable condition for use?The cost of repairing used property you acquired to put it in a suitable condition for use in your business is considered a capital expense even though in other circumstances it would be treated as a current operating expense.Where the repairs were for ordinary maintenance of a property you already had in
your business, the expense is
usually current.
Is the expense for repairs made to an asset in order to sell it?The cost of repairs made in anticipation of selling a property, or as a condition of sale, is regarded as a capital expense.Where the repairs would have been made anyway, but a sale was negotiated during the course of the repairs or after their completion, the expense is considered current.

You were asking?

Q. My brother and I own an old apartment building that we have been renting for several years. In the current tax year, we had the roof and outside walls repaired. The repairs to the roof involved waterproofing and re-shingling several patches that had developed leaks. The building is made of brick, and the outside walls were redone using the original bricks. Can we deduct these expenses in calculating our rental income for the year?

A. Yes. The repairs to the building simply restored it to its original condition. As a result, they are current expenses.

If you need more information on the difference between current expenses and capital expenses, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Capital expenses – Special situations

Modifications to rental properties to accommodate persons with disabilities

You can deduct expenses you incur for eligible disability-related modifications made to a building in the year you paid them. You can do this instead of adding them to the capital cost of your building. Eligible disability-related modifications include changes you make to accommodate wheelchairs, such as:

  • installing hand-activated power door openers
  • installing interior and exterior ramps
  • modifying a bathroom, elevator, or doorway

You can also deduct expenses you pay to install or get the following disability-related devices and equipment:

  • elevator car-position indicators (such as braille panels and audio indicators)
  • visual fire-alarm indicators
  • listening or telephone devices for people who have a hearing impairment
  • disability-specific computer software and hardware attachments

Renovating an older building

Renovations or repairs are usually considered to be a current expense. When you renovate or repair an older building that you bought to make it suitable to rent, the cost of the work is considered a capital expense.

Construction soft costs

You may have certain costs relating to the period you were constructing, renovating, or altering your rental building to make it more suitable to rent. These expenses are sometimes called soft costs. They include:

  • interest
  • legal fees
  • accounting fees
  • property taxes

Soft costs for the period of construction, renovation, or alteration of a building are made up of the soft costs related to the building and ownership of the related land. The building’s related land consists of the land:

  • that is under the building
  • that is just beside the land under the building; used or intended for use for a parking area, driveway, yard, garden, or any other similar use; and necessary for the use or intended use of the building

Depending on your situation, soft costs may be deductible as a current expense or added to the cost of the building.

Soft costs related to the building may be deductible as a current expense if they relate to:

  • only the construction, renovation, or alteration of the building
  • the time period it took place in

We consider the period of construction, renovation, or alteration to be completed on whichever date is earlier:

  • the date the work is completed
  • the date you rent 90% or more of the building

When these conditions are met, the amount of soft costs related to the building that you can deduct is limited to the amount of rental income earned from the building.

Soft costs that do not meet the above conditions can be added to the capital cost of the building and not the land.

CCA, landscaping costs, and disability-related modifications to the buildings’ costs are not subject to the soft-cost rules.

For more information on CCA, see Chapter 4.

For more information on landscaping costs, see Landscaping costs.

For more information on costs for disability-related modifications, see Modifications to rental properties to accommodate persons with disabilities.

Personal portion

If you rent part of the building where you live, you can claim the amount of your expenses that relate to the rented area of the building. You have to divide the expenses that relate to the whole property between your personal part and the rented area. You can split the expenses using square metres or the number of rooms you are renting in the building.

For example, if you rent 4 rooms of your 10-room house, you can deduct:

  • 100% of the expenses that relate only to the rented rooms, such as repairs and maintenance of the rooms; plus
  • 40% (4 out of 10 rooms) of the expenses that relate to the whole building, such as taxes and insurance.

If you rent rooms in your home to a lodger or roommate, you can claim all of the expenses for the part you are renting. You can also claim a portion of the expenses for the rooms in your home that you are not renting that both you and your lodger or roommate use. You can use factors such as availability for use or the number of persons sharing the room to calculate the allowable expenses. You can also calculate these amounts by estimating the percentage of time the lodger or roommate spends in these rooms (for example, the kitchen and living room).

Fill in “Part 4 – Expenses” on form T776 as follows:

  • enter the full amount of each expense under “Total expenses”
  • enter the part of each expense that was for personal use under “Personal portion”
  • add up the amounts in each column and enter the result for “Total Expenses” on amount A, and enter the “Personal portion” on line 9949
  • subtract the personal portion total from the total expenses to get your total deductible expense. Enter this result on amount 4

If you are a co-owner or partner in a partnership, enter the personal portion of the expenses for all co-owners or partners at line 9949.

You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit.

For more information on renting part of your personal residence, see Changing part of your principal residence to a rental property. For more information on business-use-of-home expenses, see Line 9945 in guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Example

Patrick rents out 3 rooms of his 12-room house. He is not sure how to split the expenses when he reports his rental income. His expenses were property taxes, electricity, insurance, and the cost of advertising for tenants in the local newspaper.

Patrick can claim the part of his expenses that relate to the area of the property he rented in the current tax year. Since he rented 25% of his residence (3 out of 12 rooms), he can deduct 25% of his property taxes, electricity, and insurance costs from his rental income. He can deduct the full amount of the advertising expense, since this expense relates only to the rented area.

When he completes form T776, Patrick enters the full amount of each expense in the “Total expense” column. Then, in the “Personal portion” column, he shows the part of each expense that relates to his personal use. In this case, he enters 75% of the property taxes, electricity, and insurance costs for the property. He will not enter anything for advertising in the “Personal portion” column.

Patrick can also claim CCA on the rented area of the property if it does not create or increase a rental loss and he is not designating the building as his principal residence.

Expenses you can deduct

Prepaid expenses

A prepaid expense is an expense you paid for ahead of time. Under the accrual method of accounting, claim the expense you prepay in the year or years in which you get the related benefit.

Under the cash method of accounting, you cannot deduct a prepaid expense amount (other than for inventory) relating to a tax year that is two or more years after the year the expense is paid. However, you can deduct the part of an amount you paid in a previous year for benefits received in the current tax year. These amounts are deductible as long as you have not previously deducted them.

Example

Catherine paid $2,100 for insurance on her rental property. The insurance was for the current tax year and the two following years. Although she paid the insurance for three years, she can deduct only the part that applies to the current tax year from her gross rental income.

Catherine can deduct $700 in the current tax year and $700 in each of the following two years.

For more information, see Interpretation Bulletin IT-417, Prepaid Expenses and Deferred Charges.

Line 8521 – Advertising

You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder’s fee.

Line 8690 – Insurance

You can deduct the premiums you pay on your rental property for the current year. If your policy gives coverage for more than one year, deduct only the premiums related to the current year. Deduct the remaining premiums in the year(s) to which they relate.

Line 8710 – Interest and bank charges

You can deduct the interest charge on money you borrow to buy or improve your rental property. If you have interest expenses that relate to the construction or renovation period, see Construction soft costs.

You can also deduct interest charges you paid to tenants on rental deposits. If you are claiming interest as a rental expense on form T776, do not include it as a carrying charge on form 5000 D1, Federal Worksheet – Common to all except for non-residents.

Do not deduct in full for the year any lump-sum amount paid for interest or a fee paid to reduce the interest rate on a mortgage. You prorate these amounts for the rest of the original term of the mortgage or loan. You also prorate a penalty or bonus paid to a financial institution to pay off your mortgage loan before it is due.

For example, if the term of your loan or mortgage is five years and in the third year you pay a fee to reduce your interest rate, treat this fee as a prepaid expense and deduct it over the remaining term of the loan or mortgage.

You can deduct certain fees when you get a mortgage or loan to buy or improve your rental property. If the loans relate to the construction or renovation period, first read about soft costs.

Loan fees include:

  • mortgage applications, appraisals, processing, and insurance fees
  • mortgage guarantee fees
  • mortgage brokerage and finder’s fees
  • legal fees related to mortgage financing

You deduct these fees over a period of five years, regardless of the term of your loan. Deduct 20% (100% divided by five years = 20%) in the current tax year and 20% in each of the following four years. The 20% limit is reduced proportionally for fiscal periods of less than 12 months.

If you repay the loan before the end of the five year period, you can deduct the remaining financing fees then. The number of years for which you can deduct these fees is not related to the term of your loan.

If you incur standby charges, guarantee fees, service fees, or any other similar fees, you may be able to deduct them in full in the year you incur them. For more information, see Interpretation Bulletin IT-341, Expenses of Issuing or Selling Shares, Units in a Trust, Interests in a Partnership or Syndicate, and Expenses of Borrowing Money.

You can choose to treat finance fees you paid and the interest on money you borrowed to acquire depreciable property as capital expenses.

If you refinance your rental property to get money for a business or other investments, you may be able to claim the interest expenses on form 5000 D1, Federal Worksheet – Common to all except for non residents. See line 22100 in the Federal Income Tax and Benefit Guide, or the “Expenses” chapter in guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income. If the funds are for personal use, you cannot deduct the interest expenses.

You were asking?

Q. I own and rent a semi-detached house. This year, I refinanced the property to increase the mortgage because I needed money for a down payment on my personal residence. Can I deduct the additional interest on the mortgage against my rental income?

A. No. You are making personal use of the funds you got from refinancing your rental property. As a result, you cannot deduct the additional interest when you calculate your net income or loss from your rental property.

Line 8810 – Office expenses

You can deduct the cost of office expenses. These include small items such as pens, pencils, paper clips, stationery, and stamps. Office expenses do not include capital expenditures to acquire capital property such as calculators, filing cabinets, chairs, and a desk. These are capital items.

Line 8860 – Professional fees (includes legal and accounting fees)

You can deduct fees for legal services to prepare leases or collect overdue rents. If you incur legal fees to buy your rental property, you cannot deduct them from your gross rental income. Instead, divide the fees between land and building and add them to their respective cost. For example, you buy a property worth $200,000 ($50,000 for the land and $150,000 for the building) and incur legal fees of $10,000. Split the $10,000 proportionately between the land and building. In this case, $2,500 is added to the cost of the land (for a total of $52,500) and $7,500 is added to the cost of the building (for a total of $157,500). For more information, see Land.

Note

The legal fees you paid when selling your rental property are deducted from your proceeds of disposition when calculating your capital gain or loss. The deduction for legal fees also applies when calculating a recapture of CCA or a terminal loss.

You can also deduct expenses you had for bookkeeping services, audits of your records, and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax return and any related information returns.

Line 8871 – Management and administration fees

You can deduct the amounts paid to a person or a company to manage your property. You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.

If you paid commissions to a real estate agent when selling your rental property, include them as “Outlays and Expenses” on Schedule 3, Capital Gains (or Losses), when you report the disposition of your property.

Line 8960 – Repairs and maintenance

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. You cannot deduct the value of your own labour.

You cannot deduct costs you incur for repairs that are capital in nature. However, you can claim capital cost allowance.

Line 9060 – Salaries, wages, and benefits

You can deduct amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property. You cannot deduct the value of your own services.

As the employer, you must deduct your part of CPP or QPP contributions and employment insurance premiums. You can also deduct workers’ compensation amounts payable on employees’ remuneration and Provincial Parental Insurance Plan (PPIP) premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec. For more information on making payroll deductions, see Payroll.

You can also deduct any insurance premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.

For more information on wages, see guide T4001, Employer’s Guide – Payroll Deductions and Remittances.

Line 9180 – Property taxes

You can deduct property taxes you incurred for your rental property for the period it was available for rent. For example, you can deduct property taxes for the land and building where your rental property is situated. For more information, see Vacant land and Construction soft costs.

Line 9200 – Travel

You can deduct travel expenses you incur to collect rents, supervise repairs, and manage your properties. Travelling expenses include the cost of getting to your rental property but do not include board and lodging, which we consider to be personal expenses. To claim the travel expenses you incur, you need to meet the same requirements discussed at Line 9281 – Motor vehicle expenses.

Line 9220 – Utilities

You can deduct expenses for utilities, such as gas, oil, electricity, water, and cable, if your rental arrangement specifies that you pay for the utilities of your rental space or units.

Line 9281 – Motor vehicle expenses (not including CCA)

You can deduct motor vehicle expenses in the following circumstances:

  • If you own one rental property:

    You can deduct reasonable motor vehicle expenses if you meet all of the following conditions:
  • you receive income from only one rental property that is in the general area where you live
  • you personally do part, or all, of the necessary repairs and maintenance on the property
  • you have motor vehicle expenses to transport tools and materials to the rental property


You cannot deduct motor vehicle expenses you incur to collect rents. These are personal expenses.

  • If you own two or more rental properties:

    In addition to the expenses listed above, you can deduct reasonable motor vehicle expenses you incur to do any of the following:
    • collect rents
    • supervise repairs
    • manage the properties

This applies whether your rental properties are located in or outside the general area where you live. Your rental properties have to be located in at least two different sites, away from your principal residence. The motor vehicle expenses that we consider to be reasonable depend on the circumstances of your situation.

For the definition of motor vehicle, see Definitions.

For information on how to calculate the motor vehicle expenses, see guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Line 9270 – Other expenses

There are expenses you can incur to earn rental income other than those listed on form T776. We cover some of them in the following sections. Enter on this line the total of other expenses you incurred to earn income, as long as you did not include them on a previous line.

Landscaping costs

You can deduct the cost of landscaping the grounds around your rental property only in the year you paid the cost, even if you use the accrual method for calculating your rental income.

Lease cancellation payments

You can deduct amounts paid or payable to tenants to cancel their leases. The deductible amount is calculated as follows:

If you made the cancellation payment in the year:

Cancellation payment × Number of days to the end of the year when payment is made ÷ Number of days left on the lease

If you made the cancellation payment in a previous year:

Cancellation payment × Number of days in the year left on the lease ÷ Number of days left on the lease

For this calculation, the life of the lease (including all renewal periods) cannot be longer than 40 years.

Example

Samir is a landlord. He paid his tenant $1,000 to cancel a lease on August 18 of the current tax year. The lease was due to expire on December 31 of the next year. When he made the payment, there were 135 days left in the current year and 500 days left on the lease.

For the current tax year, Samir deducts $270, calculated as follows:

$1,000 × 135 ÷ 500 = $270

For the next year, Samir deducts $730 calculated as follows:

$1,000 × 365 ÷ 500 = $730

If you dispose of the property, the tax treatment will vary depending on your situation. For more information, see Interpretation Bulletin IT-359, Premiums and Other Amounts With Respect to Leases.

Condominium fees

If you earn rental income from a condominium unit, you can deduct the expenses that you would usually deduct from it. You can also deduct condominium fees that represent your share of the upkeep, repairs, maintenance, and other current expenses of the common property. For more information, see Interpretation Bulletin IT-304, Condominiums.

Vacant land

You might earn rental income from vacant land. You can deduct your operating expenses from this income. There are limits on how much you can deduct for both:

  • interest on money you borrowed to acquire the land, or on an amount payable for the land
  • property taxes on the land assessed by a province or territory and a Canadian municipality, including assessments for school taxes and local improvements

The amount you can deduct for these two expenses is limited to the amount of rental income left after you have deducted all other expenses. You cannot create or increase a rental loss, or reduce other sources of income, by claiming a deduction for interest or property taxes. They can be added to the cost of the land. This will decrease your capital gain or increase your capital loss when you dispose of the land.

You cannot deduct your mortgage interest and property taxes for vacant land if you are not earning any income from that land. You cannot add these expenses to the adjusted cost base of your land. In addition, you cannot deduct income taxes, profit taxes, or land transfer taxes you have for the vacant land.

For more information on vacant land, see Interpretation Bulletin IT-153, Land Developers – Subdivision and Development Costs and Carrying Charges on Land, and Interpretation Bulletin IT-456, Capital Property – Some Adjustments to Cost Base, and its Special Release.

You were asking?

Q. In 1995, I bought vacant land as an investment. In the current tax year, I rented this land to a farmer for pasture. Can I deduct my mortgage interest and property taxes from my rental income?

A. Yes. After deducting all your other allowable expenses, you can deduct the amount of your mortgage interest and property taxes for the year that you need to reduce your remaining rental income to zero. If you do not need to use the full amount of your taxes and interest, you can add the rest to the adjusted cost base of the land.

Expenses you cannot deduct

Land transfer taxes

You cannot deduct land transfer taxes you paid when you bought your property. Add these amounts to the cost of the property.

Mortgage principal

You cannot deduct the repayments of principal on your mortgage or loan on your rental property. For more information about the interest part of your mortgage, see Line 8710 – Interest and bank charges.

Penalties

You cannot deduct any penalties shown on your notice of assessment or notice of reassessment.

Value of your own labour

You cannot deduct the value of your own services or labour.

Line 9949 – Total personal portion of expenses

Enter the total amount from the column called “Personal portion.” For more information, see Personal portion.

Deductible expenses

Your deductible expenses are your total expenses minus your total personal expenses.

Line 9369 – Net income (loss) before adjustments

Enter the gross income minus the deductible expenses (amount 8299 minus amount 4). This amount is the net rental income of all co-owners or partners before any claim for CCA.

Co-owners – Your share of line 9369

If you are a co-owner, enter your share of the amount from line 9369 on amount 5. This amount is based on your share of ownership of the rental property. 

If you are a co-owner or partner, also fill in Part 2 – Details of other co-owners and partners.

Line 9945 – Other expenses of the co-owner

Enter the amount of deductible expenses you have as a co-owner that you did not deduct elsewhere.

Line 9947 – Recaptured CCA

If you had a recapture of CCA, enter that amount at this line. If you are a co-owner, enter your share of the amount.

Line 9948 – Terminal loss

Enter any terminal loss amount you had on the sale of rental property at this line. If you are a co-owner, enter your share of the amount.

Line 9936 – Capital cost allowance

Enter the amount of your total CCA claim for the year from amount B in Area A. For information on how to calculate CCA, see Chapter 4.

If you are a partner in a partnership that does not need to issue you a T5013 slip, enter the total CCA allocated on the financial statements the partnership gave you.

Do not use the amount at line 9936 if you are a member of a partnership that has to file form T5013 Summary, Information Return of Partnership Income. Your CCA amount is already included in box 110 of your T5013 slip.

Net income (loss)

Enter your net income (loss) at amount 9, which is amount 8 minus the amount at line 9936.

Amount 10 – Partnerships

If you are a member of a partnership, enter your share of amount 9 or the amount from box 107 or 110 from your T5013 slip.

Line 9974 – GST/HST rebate for partners received in the year

If you received a GST/HST rebate for partners, report the amount of the rebate that relates to the eligible expenses other than the CCA at line 9974.

Line 9943 – Other expenses of the partner

Enter the amount of deductible expenses you have as a partner that you did not deduct elsewhere on form T776.

Line 9946 – Your net income (loss)

This is the amount of your net income or loss for the tax year. Enter the amount from line 9946 on line 12600 of your income tax return.

Rental losses

You have a rental loss if your rental expenses are more than your gross rental income. If you incur the expenses to earn income, you can deduct your rental loss against your other sources of income.

Renting below fair market value

You can deduct your expenses only if you incur them to earn an income. In certain cases, you may ask your son or daughter, or anyone else living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries. You do not report this amount in your income, and you cannot claim rental expenses. This is a cost-sharing arrangement, so you cannot claim a rental loss.

If you lose money because you rent a property to a person you know for less money than you would to a person you do not know, you cannot claim a rental loss. When your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because your rental operation is not considered to be a source of income. You can claim a rental loss if you are renting the property to a relative for the same rate as you would charge other tenants and you expect to make a profit.

Chapter 4 – Capital cost allowance

What is capital cost allowance?

You might acquire a depreciable property, such as a building, furniture, or equipment, to use in your rental activities. You cannot deduct the cost of the property when you calculate your net rental income for the year.

However, since these properties may wear out or become obsolete over time, you can deduct their cost over a period of several years. The deduction is called capital cost allowance (CCA).

You can usually claim CCA on a property when it becomes available for use (see Definitions).

How much CCA can you claim?

The CCA you can claim depends on the type of property you own and the date you acquired it. Group the depreciable property you own into classes. A specific rate of CCA generally applies to each class. We explain the most common classes of depreciable rental property and the rates that apply to each class under Classes of depreciable property in this guide.

For the most part, use the declining balance method to calculate your CCA, as it is the most common one. This means that you apply the CCA rate to the capital cost of the depreciable property. Over the life of the property, the rate is applied against the remaining balance. The remaining balance declines each year that you claim CCA.

Example

Last year, Abeer bought a rental building for $60,000. On her income tax return for last year, she claimed CCA of $1,200 on the building. This year, Abeer bases her CCA claim on her remaining balance of $58,800 ($60,000 – $1,200).

You do not have to claim the maximum amount of CCA in any given year. You can claim any amount you like, from zero to the maximum allowed for the year. If you do not have to pay income tax for the year, you may not want to claim CCA. Claiming CCA reduces the balance of the class by the amount of CCA claimed. As a result, the amount of CCA available for you to claim in future years will be reduced.

Note

If you are a partner in a partnership, the amount of CCA you can claim has already been determined by the partnership. If you receive a T5013 slip, your CCA amount is already included in box 110. If you are a partner in a partnership that does not need to issue this slip, the total partnership CCA will be shown on the financial statements you receive.

Limits on CCA

In the year you acquire rental property, you can usually claim CCA only on one-half of your net additions to a class. This is the half-year rule (also known as the 50% rule) which we explain under Column 9 – Adjustment for current year additions subject to the half year rule. The available-for-use rules may also affect the amount of CCA you can claim.

In the year you dispose of rental property, you may have to add an amount to your income as a recapture of CCA or deduct an amount from your income as a terminal loss. We explain recapture and terminal loss under Column 6 – Undepreciated Capital Cost (UCC) after additions and dispositions.

If you own more than one rental property, you have to calculate your overall net income or loss for the year from all your rental properties before you can claim CCA. If you are a partner, include the net rental income or loss from your T5013 slip in the calculation. Combine the rental income and loss from all your properties, even if they belong to different classes. This also applies to furniture, fixtures, and appliances that you use in your rental building. You can claim CCA for these properties, the building, or both.

You cannot use CCA to create or increase a rental loss. Do not apply the half year rule to accelerated investment incentive properties or zero emission vehicles.

Example

Salvador owns three rental properties. Two of these properties are Class 1 buildings and one is a Class 3 building. All the buildings contain Class 8 appliances. Salvador’s net rental income from these properties is as follows:

BuildingNet rental income (or loss)
1 (Class 1)$1,500
2 (Class 1)$2,000
3 (Class 3)($4,000)
Total($500)

Salvador has an overall net loss of $500. Since he is not allowed to increase his rental loss by claiming CCA, he cannot claim any CCA on his rental buildings or appliances.

For more information about loss restrictions on rental and leasing properties, see Interpretation Bulletin IT-195, Rental Property – Capital Cost Allowance Restrictions, and Interpretation Bulletin IT-443, Leasing Property – Capital Cost Allowance Restrictions, and its Special Release.

Classes of depreciable property

This section explains the most common classes of depreciable rental property and the rates that apply to each class.

If you need more information, see Interpretation Bulletin IT-79, Capital Cost Allowance – Buildings or Other Structures.

A condominium unit in a building belongs to the same class as the building. For example, if you own a condominium in a building that is a Class 3 property, the unit in the building is a Class 3 rental property. If the whole building qualifies as a Class 31 or Class 32 rental property (a MURB), then each unit within the building is a Class 31 or 32 rental property.

For more information on CCA and condominiums, see Interpretation Bulletin IT-304, Condominiums.

Leasehold interest in real property that is a rental property

A leasehold interest is the interest of a tenant in any leased tangible property.

If you are a taxpayer or partnership and own a leasehold interest in a real property that is a rental property, include the leasehold interest in Class 1, 3, 6, or 13 (or Class 3, 6, or 13 for tax years before 1988).

It may be necessary in some situations to divide the capital cost of a leasehold interest into more than one prescribed class. For example, where you expend an amount to obtain a leasehold interest in land and construct a building that falls into Class 3, the capital cost of acquiring the lease will be included in Class 13 and the capital cost of the building will be included in Class 3.

Class 1 (4%)

A rental building may belong to Classes 1, 3, 6, 31, or 32, depending on what the building is made of and the date you acquire it. You also include in these classes the parts that make up the building, such as:

  • electric wiring
  • lighting fixtures
  • plumbing
  • sprinkler systems
  • heating equipment
  • air-conditioning equipment (other than window units)
  • elevators
  • escalators
Note

Most land is not depreciable property. When you acquire property, only include the cost that relates to the building in Area A and Area C. Enter at line 9923 in Area F the cost of all land additions in the year. For more information, see Area F – Land additions and dispositions in the year and Column 3 – Cost of additions in the year.

Class 1 includes most buildings acquired after 1987, unless they specifically belong to another class. Class 1 also includes the cost of certain additions or alterations you made after 1987 to a Class 1 building or certain buildings of another class.

The CCA rate for eligible non-residential buildings acquired by a taxpayer after March 18, 2007, and used in Canada to manufacture or process goods for sale or lease includes an additional allowance of 6% for a total rate of 10%. The CCA rate for other eligible non-residential buildings includes an additional allowance of 2% for a total rate of 6%.

To be eligible for one of the additional allowances, you must elect to put a building in a separate class. To make the election, attach a letter to your return for the tax year in which you acquired the building. If you do not file an election to put it in a separate class, the 4% rate will apply.

The additional allowance applies to buildings acquired after March 18, 2007, (including a new building, if any part of it is acquired after March 18, 2007, when the building was under construction on March 19, 2007) that have not been used or acquired for use before March 19, 2007.

To be eligible for the additional 6% allowance you must use at least 90% of the building (measured by square footage) in Canada for the designated purpose at the end of the tax year. Manufacturing and processing buildings that do not meet the 90% used test are eligible for the additional 2% allowance. Eligibility applies if at least 90% of the building is used in Canada for non-residential purposes at the end of the tax year.

Class 3 (5%)

Most buildings acquired before 1988 are included in Class 3 or Class 6.

If you acquired a building before 1990 that does not fall in Class 6, you can include it in Class 3 with a CCA rate of 5% if one of the following situations applies:

  • you acquired the building under the terms of a written agreement entered into before June 18, 1987
  • the building was under construction by you or for you on June 18, 1987

Include in Class 3 the cost of any additions or alterations made after 1987 to a Class 3 building that does not exceed the lesser of the following two amounts:

  • $500,000
  • 25% of the building’s capital cost (including the cost of additions or alterations to the building included in classes 3, 6, or 20 made before 1988)

Any amount that exceeds the lesser amount above should be included in Class 1.

Class 6 (10%)

Buildings made of frame, log, stucco on frame, galvanized iron, or corrugated metal should be included in Class 6 with a CCA rate of 10%. In addition, one of the following conditions has to apply:

  • you acquired the building before 1979
  • the building has no footings or other base supports below ground level
  • the building is used to gain or produce income from farming or fishing. Farming and fishing income is not rental income

If any of the above conditions apply, add to Class 6 the full cost of all the building’s additions and alterations.

If none of the above conditions apply, include the building in Class 6 if one of the following situations applies:

  • you entered into a written agreement before 1979 to acquire the building, and the footings or other base supports of the building were started before 1979
  • you started construction of the building footings and other base supports before 1979 (or it was started under the terms of a written agreement you entered into before 1979)

Include in Class 6 certain greenhouses and fences.

For additions or alterations to such buildings:

  • Add to Class 6:
    • the first $100,000 of additions or alterations made after 1978
  • Add to Class 3 the cost of additions or alterations that are made after:
    • 1978 and before 1988, and over $100,000
    • 1987, and over $100,000 but no more than $500,000 or 25% of the building’s capital cost, whichever is less
  • Add to Class 1 any additions or alterations over these limits

For more information, see Interpretation Bulletin IT-79, Capital Cost Allowance – Buildings or Other Structures.

Class 8 (20%)

Class 8 with a CCA rate of 20% includes certain property that is not included in another class. Examples include furniture, household appliances, a tool costing $500 or more, some fixtures, machinery, outdoor advertising signs, refrigeration equipment, and other equipment you use in your rental operation.

Photocopiers and electronic communications equipment, such as fax machines and electronic telephone equipment are also included in Class 8.

Note

If this equipment costs $1,000 or more, you can elect to have it included in a separate class. The CCA rate will not change but a separate CCA deduction can now be calculated for a five-year period. When all the property in the class is disposed of, the undepreciated capital cost (UCC) is fully deductible as a terminal loss. Any UCC balance left in the separate class at the end of the fifth year has to be transferred back to the general class in which it would belong. To make an election, attach a letter to your income tax return for the tax year in which you acquired the property. If you are filing electronically, mail your letter to your tax centre. You can find your tax centre’s address at Tax services offices and tax centres.

Class 10 (30%)

Class 10 with a CCA rate of 30% includes general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment, if you acquired them either:

  • before March 23, 2004
  • after March 22, 2004, and before 2005, and you made an election

Class 10 also includes motor vehicles, as well as some passenger vehicles. 

Include passenger vehicles in Class 10 unless they meet the Class 10.1 conditions.

Eligible zero emission vehicles are now included in Class 54.

Class 10.1 (30%)

Your passenger vehicle can belong to either Class 10 or Class 10.1.

To determine the class your passenger vehicle belongs to, you have to use the cost of the vehicle before you add the GST/HST or the provincial sales tax (PST).

Include your passenger vehicle in Class 10.1 if you bought it in your 2019 fiscal period and it cost more than $30,000. List each Class 10.1 vehicle separately.

We consider the capital cost of a Class 10.1 vehicle to be $30,000, plus the related GST/HST, or PST. The $30,000 amount is the capital cost limit for a passenger vehicle.

Note

Use the GST rate of 5% and the appropriate PST rate for your province or territory. If your province is a participating province, use the appropriate HST rate. For more information on the GST and the HST, see guide RC4022, General Information for GST/HST Registrants.

The following chart will help you to determine if you have a motor vehicle or a passenger vehicle. The chart does not cover every situation, but it gives some of the main definitions for vehicles bought or leased and used to earn income. For more information, see “Keeping motor vehicle records” in guide T4002, Self employed Business, Professional, Commission, Farming, and Fishing Income.

Type of vehicleSeating (includes driver)Business use in year bought or leasedVehicle definition
Coupe, sedan, station wagon, sports car, or luxury car1 to 91% to 100%passenger
Pick-up truck used to transport goods or equipment1 to 3more than 50%motor
Pick-up truck (other than above)1 to 31% to 100%passenger
Pick-up truck with extended cab used to transport goods, equipment, or passengers4 to 990% or moremotor
Pick-up truck with extended cab (other than above)4 to 91% to 100%passenger
Sport utility vehicle used to transport goods, equipment, or passengers4 to 990% or moremotor
Sport utility vehicle (other than above)4 to 91% to 100%passenger
Van or minivan used to transport goods or equipment1 to 3more than 50%motor
Van or minivan (other than above)1 to 31% to 100%passenger
Van or minivan used to transport goods, equipment, or passengers4 to 990% or moremotor
Van or minivan (other than above)4 to 91% to 100%passenger

Eligible zero emission vehicles can now be included in Class 54.

Class 13

The capital cost of a leasehold interest of Class 13 property includes an amount that a tenant spends:

  • on improvements or alterations to a leased property that is capital in nature, other than improvements or alterations that are included as part of the building or structure
  • to obtain or extend a lease or sublease of the property and pays it to the landlord

The maximum CCA rate depends on the type of leasehold interest and the terms of the lease.

Certain amounts are not included in the capital cost of a leasehold interest. These include:

  • an amount paid by a tenant to cancel a lease
  • an amount paid by a tenant instead of rent or as a prepayment of rent

For more information on leasehold interests, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Class 16 (40%)

Class 16 includes taxis, vehicles you use in a daily car rental business, coin operated video games or pinball machines acquired after February 15, 1984, and freight trucks acquired after December 6, 1991, that are rated above 11,788 kg.

Eligible zero emission vehicles are now included in Class 55 at a rate of 40%.

Class 31 (5%) and Class 32 (10%)

Class 31 and Class 32 include multiple-unit residential buildings (MURB) certified by the Canada Mortgage and Housing Corporation (CMHC) to which all of the following conditions apply:

  • they are located in Canada
  • they contain two or more units
  • they provide their occupants with a relatively permanent residence

If the entire MURB qualifies under Class 31 or 32-rental property, then each unit within the building falls under the same class.

To be included in Class 31 with a CCA rate of 5%, the building must have been acquired after 1979 and before June 18, 1987.

To be included in Class 32 with a CCA rate of 10%, the building must have been acquired before 1980.

Note

For 1994 and following years, you can no longer create or increase a rental loss by claiming CCA on a Class 31 or Class 32 property.

When a MURB no longer qualifies as a Class 31 or Class 32 rental property, you have to transfer it to the correct class.

For more information about the 1994 change in the CCA limit on MURBs, see Interpretation Bulletin IT-195, Rental Property – Capital Cost Allowance Restrictions.

Class 43.1 (30%)

Include in Class 43.1 with a CCA rate of 30% electrical vehicle charging stations (EVCSs) set up to supply more than 10 kilowatts but less than 90 kilowatts of continuous power. This is for property acquired after March 21, 2016, that has not been used or acquired for use before March 22, 2016.

Class 43.2 (50%)

Include in Class 43.2 with a CCA rate of 50% electrical vehicle charging stations (EVCSs) set up to supply 90 kilowatts and more of continuous power. This is for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016.

Class 50 (55%)

Include in Class 50 with a CCA rate of 55% property acquired after March 18, 2007, that is general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment.

Do not include property that is included in Class 29 or Class 52 or that is mainly or is used mainly as:

  1. electronic process control or monitor equipment
  2. electronic communications control equipment
  3. systems software for equipment referred to in a) or b)
  4. data handling equipment (other than data handling equipment that is ancillary to general-purpose electronic data processing equipment)

Class 53 (50%)

Include in Class 53 with a CCA rate of 50% eligible machinery and equipment that is acquired after 2015 and before 2026 (that would generally otherwise be included in Class 29) to be used in Canada primarily in the manufacturing or processing of goods for sale or lease.

Class 54 (30%) and Class 55 (40%) – Zero-emission vehicles

For zero-emission vehicles acquired after March 18, 2019, two new CCA classes are added. Class 54 was created for zero emission vehicles that would otherwise be included in Class 10 or 10.1, with the same CCA rate of 30%. Class 55 was created for zero emission vehicles otherwise included in Class 16, with the same CCA rate of 40%. The CCA still applies on a declining balance basis.

An enhanced first year CCA deduction with the following phase out period is available:

  • 100% after March 18, 2019, and before 2024
  • 75% after 2023 and before 2026
  • 55% after 2025 and before 2028

The enhanced first year allowance will be calculated by:

  • increasing the net capital cost addition, to the new class for property that becomes available for use before 2028, and applying the prescribed CCA rate for the class as described below:
    • For Class 54, applying the prescribed CCA rate of 30% to:
      • 2 1/3 times the net addition to the class for property that becomes available for use before 2024
      • 1 1/2 times the net addition to the class for property that becomes available for use in 2024 or 2025
      • 5/6 times the net addition to the class for property that becomes available for use after 2025 and before 2028
    • For Class 55, applying the prescribed CCA rate of 40% to:
      • 1 1/2 times the net addition to the class for property that becomes available for use before 2024
      • 7/8 times the net addition to the class for property that becomes available for use in 2024 or 2025
      • 3/8 times the net addition to the class for property that becomes available for use after 2025 and before 2028
  • Suspending the existing CCA half year rule

The CCA will be applicable on any remaining balance in the new classes using the specific rate for the new class.

A taxpayer may elect to not include in Class 54 or 55 a vehicle that would otherwise be a zero emission vehicle or a zero emission passenger vehicle. When such an election is filed, the vehicle will no longer be considered to be a zero emission vehicle or a zero emission passenger vehicle. As a result, the vehicle will be included in its usual CCA Class 10, 10.1 or 16 as the case may be. Such vehicles will not qualify for the enhanced first year CCA under the ZEV rules. However those vehicles, that will be included in Class 10, 10.1 or 16, may be eligible for enhanced CCA under the AIIP rules.

The election must be filed with the Minister of National Revenue in your income tax return for the taxation year in which the vehicle is acquired. There is no provision for late filing or amended elections.

Class 54 (30%)

Include in Class 54 zero emission vehicles that are not included in class 16 or 55 and would normally be included in Class 10 or 10.1.

There is a limit of $55,000 (plus federal and provincial sales taxes), for 2019, on the capital cost for each zero emission passenger vehicle in class 54. The limit will be reviewed annually. Class 54 may include both zero emission passenger vehicles that do and do not exceed the prescribed threshold. However, unlike Class 10.1, Class 54 does not establish a separate class for each vehicle whose cost exceeds the threshold.

If a zero emission passenger vehicle is disposed of to a person or partnership with whom you deal at arm’s length, and its cost exceeds the prescribed amount, the proceeds of disposition will be adjusted based on a factor equal to the prescribed amount as a proportion of the actual cost of the vehicle. For dispositions made after July 29, 2019, based on proposed legislation, the actual cost of the vehicle will also be adjusted for the payment or repayment of Government assistance.

Example

First-year enhanced allowance
Acquisition cost$60,000
First-year CCA$55,000 × 100% = $55,000
Undepreciated capital cost (UCC)$55,000 ? $55,000 = 0
Proceeds of disposition$30,000
Part of proceeds of disposition to be deducted from the UCC$30,000 × ($55,000 ÷ $60,000) = $27,500
Class 55 (40%)

Include in Class 55 zero emission vehicles that would normally be included in Class 16.

How to calculate your CCA

To calculate your current year deduction for CCA, and any recaptured CCA and terminal losses, use Area A of your form. Include only the rental property part.

You may have acquired or disposed of buildings or equipment during your fiscal period. If so, fill in the applicable Area B, C, D, or E, whichever applies, before completing Area A.

Note

Even if you are not claiming a deduction for CCA for 2019, fill in the appropriate areas of the form to show any additions or disposals during the year. For more information, see the following section.

Area A – Calculation of CCA claim

The Government of Canada’s 2018 Fall Economic Statement was tabled on November 21, 2018. As a result, columns 4, 7, and 8 have been added to Area A to accommodate the legislation. For more information on how this could affect your CCA calculations, go to Accelerated Investment Incentive.

Column 1 – Class number

Enter in this column the class numbers of your properties. If this is the first year you are claiming CCA, see Column 3 – Cost of additions in the year below before completing column 1. If you claimed CCA last year, you can get the class numbers of your properties from last year’s form.

We discuss the more common types of depreciable properties in Classes of depreciable property.

Separate classes

Generally, if you own several properties in the same CCA class, combine the capital cost of all these properties into one class. Then enter the total of the combined properties that are represented under one class in Area A’s calculation table. If you acquired a rental property after 1971 and it had a capital cost of $50,000 or more, you have to put it in a separate class. Calculate your CCA separately for each rental property that is in a separate class. Do this by listing the rental property on a separate line in Area A’s calculation table. For CCA purposes, the capital cost is the part of the price that relates to the building only.

When you dispose of a rental property that you have set up in a separate class in Area A’s calculation table, you base any CCA recapture or terminal loss only on the disposition of that rental property. When calculating these amounts, do not consider any other rental property you own that has the same class number as the rental property you disposed of. For more information on recapture of CCA and terminal losses, see Column 6 – Undepreciated Capital Cost (UCC) after additions and dispositions. 

For more information about CCA for rental properties with a capital cost of over $50,000, see Interpretation Bulletin IT-274, Rental Properties – Capital Cost of $50,000 or More.

Column 2 – Undepreciated capital cost (UCC) at the start of the year

If this is the first year you are claiming CCA, skip this column. Otherwise, enter in this column the UCC for each class at the end of last year. Enter these amounts from column 13 from your 2018 form.

From your UCC at the start of 2019, subtract any investment tax credit (ITC) you claimed or were refunded in 2018. Also, subtract any 2018 ITC you carried back to a year before 2018.

In 2018, you may have received a GST/HST input tax credit for a passenger vehicle you used less than 90% of the time for your business. In this case, subtract the amount of the credit you got from your 2019 opening UCC. See Grants, subsidies, and other incentives or inducements.  

Note

In 2019, you may be claiming, carrying back, or getting a refund of an ITC. If you still have depreciable property in the class, you have to adjust, in 2020, the UCC of the class to which the property belongs. To do this, subtract the amount of the credit from the UCC at the start of 2020. When there is no property left in the class, report the amount of the ITC as income in 2020.

Column 3 – Cost of additions in the year

If you acquire or make improvements to depreciable property in the year, we consider them to be additions to the class in which the rental property belongs. You should:

  • fill in Areas B and C on your form, if applicable
  • for each class, enter in column 3 of Area A’s calculation table the amounts from column 5 for each class in areas B and C

If a chart asks for the personal part of a property, this refers to the part you use personally, separate from the part you use for business. For example, if you use 25% of the building you live in for your business, your personal part is the remaining 75%.

Do not include the value of your labour in the cost of a rental property you build or improve. Include the cost of surveying or valuing a rental property you acquire. Remember that a rental property usually has to be available for use before you can claim CCA.

If you received insurance proceeds to reimburse you for the loss or destruction of depreciable property, enter the amount you spent to replace the property in column 3 of Area A, as well as in Area B or C, whichever applies.

Include the amount of insurance proceeds considered as proceeds of disposition in column 5 of Area A, as well as in column 4 of Area D or E, whichever applies.

If you replaced lost or destroyed property, special rules for replacement property may apply. The replacement property must be acquired within two years of the end of the tax year in which it was lost or destroyed. For more information, see Income Tax Folio S3-F3-C1, Replacement Property.

To find out if any of these special situations apply, see Special situations.  

Area B – Equipment additions in the year

List all equipment or other property you acquired or improved in the current tax year. Group them into the applicable classes, and put each class on a separate line. Equipment includes appliances (such as a washer and dryer), maintenance equipment (such as a lawn mower or a snow blower), and other property (such as furniture and some fixtures) you acquire to use in your rental operation. Enter at line 9925 the total rental portion of the cost of the equipment or other property. See also Grants, subsidies, and other incentives or inducements.

Area C – Building additions in the year

List the details of all buildings you acquired or improved in 2019. Group the buildings into the applicable classes and put each class on a separate line.

Enter on line 9927 the total business part of the cost of the buildings. The cost includes the purchase price of the building, and any related expenses you should add to the capital cost of the building, such as legal fees, land transfer taxes, and mortgage fees.

Land

Generally, land is not a depreciable property. Therefore, you cannot claim CCA on its cost. If you acquire a rental property that includes both land and a building, enter in column 3 of Area C only the cost that relates to the building. To calculate the building’s capital cost, you have to split any fees that relate to the buying of the rental property between the land and the building. Related fees may include legal and accounting fees.

Calculate the part of the related fees you can include in the capital cost of the building as follows:

Building value÷Total purchase price×Legal, accounting, or other fees=The part of the fees you can include in the building’s cost

You do not have to split a fee if it relates only to the land, or only to the building. In this case, you would add the amount of the fee to the cost to which it relates; either the land or the building.

Area F – Land additions and dispositions in the year

Enter on line 9923 the total cost of acquiring land in 2019. The cost includes the purchase price of the land plus any related expenses you should add to the capital cost of the land, such as legal fees, land transfer taxes, and mortgage fees.

You cannot claim CCA on land. Do not enter this amount in column 3 of Area A.

Column 4 – Cost of additions from column 3 which are eligible accelerated investment incentive properties (AIIPs) or zero emission vehicles (ZEVs)

Enter in column 4 the cost of additions from column 3 that are eligible accelerated investment incentive property (AIIP) or zero emission vehicles (ZEVs) from class 54 or 55. These properties must have become available for use in the year and be eligible for the enhanced allowance or accelerated investment incentive. AIIPs must be acquired after November 20, 2018 and ZEVs must be acquired after March 18, 2019. This number is a part of the total cost of additions in column 3 and cannot be higher than the number in column 3.

If no AIIPs and ZEVs were acquired, enter “0” in this column.

Column 5 – Proceeds of dispositions in the year

Enter the details of your 2019 dispositions on your form, as explained below.

If you disposed of depreciable property in the current tax year, you should:

  • complete, for each class, Areas D and E, if applicable
  • enter in column 5 of the calculation table in Area A the amounts for each class from column 5 of Areas D and E

When completing the tables in Areas D and E, enter in column 3 of the table the lesser of:

  • your proceeds of disposition minus any related expenses
  • the capital cost of the rental property
Note

If a chart asks for the personal part of a property, this refers to the part you use personally, separate from the part you use for business. For example, if you use 25% of the building you live in for business, your personal part is the other 75%.

Enter in column 5 of Area A for each class, the amount from column 5 of Area D and Area E for the class.

If you received insurance proceeds to reimburse you for the loss or destruction of depreciable property, enter the amount you paid to replace the property in column 5 of Area A, as well as in column 4 of Area B or C, whichever area applies.

Include the amount of insurance proceeds considered as proceeds of disposition in column 5 of Area A, as well as in column 4 of Area D or E, whichever applies. This could include compensation you receive for property that someone destroys, expropriates, steals, or damages.

If you dispose of a property for proceeds that are more than it cost you to acquire it (or you receive insurance proceeds for a property that was lost or destroyed that exceed the cost of the property), you will have a capital gain and possibly a recapture of CCA. You may be able to postpone or defer recognition of a capital gain or recapture of CCA in computing income if, among other things, the property disposed of is replaced within certain specified time limits. For more information, see Replacement property and Income Tax Folio S3-F3-C1, Replacement Property.

Special rules may apply if you dispose of a building for less than both its UCC and your capital cost. If this is the case, see Special rules for disposing of a building in the year in guide T4002. If you dispose of a depreciable property for more than its cost, you will have a capital gain. For more information on capital gains, see Chapter 7. You cannot have a capital loss when you sell depreciable property. However, you may have a terminal loss. For an explanation of terminal losses, see Column 6 – Undepreciated Capital Cost (UCC) after additions and dispositions below.

For more information on proceeds of disposition, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Area D – Equipment dispositions in the year

List the details of all equipment (including motor vehicles) you disposed of in your 2019 fiscal period. Group the equipment into the applicable classes and put each class on a separate line. Enter on line 9926 the total business part of the proceeds of disposition of the equipment. 

Area E – Building dispositions in the year

List all buildings and leasehold interests you disposed of in the current tax year. Group the buildings and leasehold interests into the applicable classes, and put each class on a separate line. Enter at line 9928 the total amount for the rental portion from the proceeds of disposition of the buildings and leasehold interests.

Area F – Land additions and dispositions in the year

Enter on line 9924 the total of all amounts you received or will receive for disposing of land in the fiscal period.

Column 6 – Undepreciated Capital Cost (UCC) after additions and dispositions

The undepreciated capital cost (UCC) amount for column 6 is the initial UCC amount at the start of the year in column 2 plus the cost of additions in column 3 minus the proceeds of dispositions in column 5.

You cannot claim CCA when the amount in column 6 is:

  • negative (see Recapture of CCA)
  • positive and you do not have any property left in that class at the end of your 2019 fiscal period (see Terminal loss)

In either case, enter “0” in column 13.

Recapture of CCA

If the amount in column 6 is negative, you have a recapture of CCA. Enter your recapture amount on line 9947 “Recaptured capital cost allowance” in Part 4 of form T776.

A recapture of CCA can happen if the proceeds from the sale of depreciable rental property are more than the total of the following amounts:

  • the UCC of the class at the start of the period
  • the capital cost of any new additions during the period

A recapture of CCA can also occur, for example, when you get a government grant or claim an investment tax credit.

In some cases, you may be able to postpone a recapture of CCA. For example, you may sell a property and replace it with a similar one, someone may expropriate your property, or you may transfer property to a corporation, a partnership, or your child.

Terminal loss

If the amount in column 6 is positive and you no longer own any property in that class, you may have a terminal loss. More precisely, you may have a terminal loss when, at the end of a fiscal period, you have no more property in the class, but still have an amount that you have not deducted as CCA. You can usually subtract this terminal loss from your rental income. If the loss is more than your rental income, you can create a rental loss. Enter your terminal loss on line 9948, Terminal loss.

For more information on recapture of CCA and terminal loss, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Note

The rules for recapture of CCA and terminal loss do not apply to passenger vehicles in Class 10.1. To calculate your CCA claim, see the comments in Column 10 – Base amount for CCA.

Column 7 – Proceeds of dispositions available to reduce additions of AIIP and ZEV

This column calculates the adjustments under certain circumstances to the additions for the year where there is also a disposition in the year.

When an AIIP and non-AIIP of the same class are purchased during the year and a disposition occurs, the disposition first reduces the undepreciated capital cost of the non-AIIP before reducing the undepreciated capital cost of the AIIP.

To determine which part of your proceeds of dispositions, if any, will reduce the cost of your AIIP or ZEV additions, take the proceeds of disposition in column 5 minus the cost of additions in the year in column 3 plus the cost of additions for AIIP or ZEVs in column 4. If the result is negative enter “0.”

If no AIIPs and ZEVs were acquired, you do not need to use this column.

Column 8 – Undepreciated capital cost (UCC) for current year additions of AIIP and ZEV

This column calculates the enhanced UCC amount used to determine the additional CCA for AIIP or ZEVs.

For this column, reduce the cost of AIIP or ZEV additions in column 4 by the proceeds of disposition available to reduce the AIIP or ZEV additions as calculated in column 7. Multiply the result by the following factor:

  • 1 for Classes 43.2 and 53
  • 1 1/2 for Class 55
  • 2 1/3 for Class 43.1 and 54
  • 0 for Class 12 and 13
  • 1/2 for the remaining AIIP

These factors will change for properties that become available for use after 2023 and the incentive is completely phased out for properties that become available for use after 2027.

If no AIIPs and ZEVs were acquired, enter “0” in this column.

Column 9 – Adjustment for current year additions subject to the half year rule

Generally, in the year you acquire or make additions to a property, you can usually claim CCA on half of your net additions. We call this the half-year rule. You calculate your CCA only on the net adjusted amount. For example, if before November 20, 2018, you acquired a property for $30,000, you would base your CCA claim on $15,000 ($30,000 × 50%) in the year you acquired the property. However, the half-year rule does not apply to AIIP or to ZEVs.

Calculate the net first-year additions that are subject to the half-year rule by taking the cost of total additions in column 3, minus AIIP and ZEV additions in column 4, minus proceeds of dispositions in column 5. Enter 50% of the result in column 9. If the result is negative, enter “0.”

There are circumstances where the half-year rule does not apply. For example, in a non-arm’s length transaction you may buy depreciable property that the seller continuously owned from the day that is at least 364 days before the end of your 2019 fiscal period to the day the property was acquired. However, if you transfer personal property, such as a car or a personal computer, into your business, the half-year rule applies to the particular property transferred.

Also, some properties are not subject to the half-year rule. Some examples are those in Classes 13, 14, 23, 24, 27, 34, and 52, as well as some of those in Class 12, such as small tools. The half-year rule does not apply when the available for use rules denies a CCA claim until the second tax year after you acquire the property.

For more information on the special rules that apply to Class 13, see Interpretation Bulletin IT-464, Capital Cost Allowance – Leasehold Interests. For more information on the half-year rule, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Column 10 – Base amount for CCA

The base amount for CCA is the undepreciated capital cost (UCC) amount after additions, dispositions and the current year adjustments. This is the amount in column 6 plus the amount in column 8 minus the amount in column 9. The CCA rate is applied to this amount.

For a Class 10.1 vehicle you disposed of in your 2019 fiscal period, you may be able to claim 50% of the CCA that would be allowed if you still owned the vehicle at the end of your 2019 fiscal period. This is known as the half year rule on sale.

You can use the half year rule on sale if, at the end of your 2018 fiscal period, you owned the Class 10.1 vehicle you disposed of in 2019. If this applies to you, enter 50% of the amount from column 2 (for Class 10.1 vehicles) in column 10.

Column 11 – CCA Rate (%)

Enter the prescribed CCA rate (percentage) for each property class you have listed in Area A column 1.

For more information on certain kinds of property, see Classes of depreciable property.

Column 12 – CCA for the year

In column 12, enter the CCA you want to deduct for 2019. You can claim the CCA for the year up to the maximum amount allowed. In Area A, you calculate the maximum amount for column 12 by multiplying the amount in column 10 by the amount in column 11.

In your first year of business, you may have to prorate your CCA claim.

To get your CCA yearly total, add up all amounts in column 12. Enter this result on line 9936, Capital cost allowance (CCA). If you are a co-owner, enter only your share of the CCA. To find out how to calculate your CCA claim if you are using the property for both business and personal use, see Personal use of property in guide T4002.

Column 13 – UCC at the end of the year

The final result in column 13 is the undepreciated capital cost (UCC) at the end of the year. This is the result of the UCC after additions and dispositions in column 6, minus the amount for capital cost allowance claimed for the year in column 12. The amount in column 13 is the starting UCC balance you will use when you calculate your CCA claim next year. Next year, enter this amount in column 2. If you have a terminal loss or a recapture of CCA, enter “0” in column 13.

The example at the end of this chapter sums up CCA.

Special situations

This section describes the special situations and how the tables in Areas B, C, D and E help break down and display the calculations for these situations.

Changing from personal to rental use

If you bought a property for personal use and then changed the use to a rental in your rental operation in the current tax year, there is a change in use of the property. You need to determine the capital cost of the property at the moment of this change.

If the FMV of a depreciable property (such as equipment or a building) is less than its original cost when you change its use, the amount you put in column 3 of Area B or C is the FMV of the property (excluding the land value if the property includes land and a building). If the FMV is more than the original cost of the property when you change use, use the following chart to determine the amount to enter in column 3.

Note

We consider you to have acquired the land for an amount equal to the FMV when you changed its use. Enter this amount at line 9923 in Area F, “Land additions and dispositions in the year.”

Capital cost calculation (change in use)

Actual cost of the property $Blank space for dollar valueLine1

FMV of the property$Blank space for dollar valueLine2

Amount from line 1$Blank space for dollar valueLine3

Line 2 minus line 3 (if negative, enter “0”)$Blank space for dollar valueLine4

Enter any capital gains deduction claimed for the amount at line 4.Footnote1$Blank space for dollar value× 2 =$Blank space for dollar valueLine5

Line 4 minus line 5 (if negative, enter “0”)$Blank space for dollar value× ½ =$Blank space for dollar valueLine6

Capital cost
Line 1 plus line 6 $Blank space for dollar valueLine7Footnote 1

Enter the amount that relates only to the depreciable property.

Return to footnote1Referrer

Enter the capital cost of the property from line 7 in column 3 of Area B or C.

Grants, subsidies, and other incentives or inducements

If you get a grant, subsidy, or rebate from a government or a government agency to buy depreciable property, subtract the amount of the grant, subsidy, or rebate from the property’s capital cost. Do this before you enter the capital cost in column 3 of Area B or C.

For example, you buy a rental property at a cost of $200,000 ($50,000 for the land and $150,000 for the building) and receive a $50,000 grant. The $50,000 grant is split in a similar way between the land and building. The total cost of the purchase is reduced to $150,000: $37,500 for the land and $112,500 for the building. Enter the reduced capital cost in column 3 of Area B or C. For more information, see Interpretation Bulletin IT-273, Government Assistance – General Comments.

In this case, you can include the amount in your rental income or you can deduct the amount from the capital cost of the rental property. You may get an incentive from a non-government agency to buy depreciable property. For example, you may receive a tax credit that you can use to reduce your income tax payable.

If the purchase price of your property was reduced due to poor quality or for other reasons, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance, for more information about how to calculate your capital cost.

Non-arm’s length transactions

When you acquire rental property (depreciable property) in a non-arm’s length transaction, there are special rules for determining the property’s capital cost. These special rules do not apply if you get the property because of someone’s death.

You can acquire depreciable property in a non?arm’s length transaction from:

  • an individual resident in Canada
  • a partnership with at least one partner who is an individual resident in Canada
  • a partnership with at least one partner who is another partnership

If you pay more for the rental property than the seller paid for the same rental property, calculate the cost as follows:

Capital cost calculation (non-arm’s length transaction – resident of Canada)

The seller’s cost or capital cost $Blank space for dollar valueLine1

The seller’s proceeds of disposition$Blank space for dollar valueLine2

Amount from line 1$Blank space for dollar valueLine3

Line 2 minus line 3 (if negative, enter “0”)$Blank space for dollar valueLine4

Enter any capital gains deduction claimed for the amount at line 4.$Blank space for dollar value× 2 =$Blank space for dollar valueLine5

Line 4 minus line 5 (if negative, enter “0”)$Blank space for dollar value× ½ =$Blank space for dollar valueLine6

Capital cost
Line 1 plus line 6 $Blank space for dollar valueLine7

Enter this amount in column 3 of either Area B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land at line 9923, “Total cost of all land additions in the year” in Area F of your form.

You can also acquire depreciable property in a non?arm’s length transaction from:

  • a corporation
  • an individual who is not a resident in Canada
  • a partnership with no partners who are individuals resident in Canada or with no partners that are other partnerships

If you pay more for the rental property than the seller paid for the same rental property, calculate the capital cost as follows:

Capital cost calculation (non-arm’s length transaction – non-resident of Canada)

The seller’s cost or capital cost $Blank space for dollar valueLine1

The seller’s proceeds of disposition$Blank space for dollar valueLine2

Amount from line 1$Blank space for dollar valueLine3

Line 2 minus line 3 (if negative, enter “0”)$Blank space for dollar value× ½ =$Blank space for dollar valueLine4

Capital cost
Line 1 plus line 4 $Blank space for dollar valueLine5

Enter this amount in column 3 of either Areas B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land at line 9923, “Total cost of all land additions in the year” in Area F of your form.

If you acquire depreciable property in a non-arm’s length transaction and pay less for it than the seller paid, your capital cost is the same amount as the seller paid. The difference between what you paid and what the seller paid is considered to be deducted as CCA. Enter the amount you paid in column 3 of Area A. Enter the same amount in Area B or C, whichever applies.

Example

Teresa bought a refrigerator from her father, Roman, for $400 to use in her rental operation. Roman paid $1,000 for the refrigerator and was using it in his rental operations. Since the amount Teresa paid is less than the amount Roman paid, we consider Teresa’s cost to be $1,000. We also consider that Teresa has deducted CCA from the amount of $600 in the past ($1,000 ? $400).

  • In Area B, Teresa enters $1,000 in column 3, “Total cost.”
  • In Area A, she enters $400 in column 3, “Cost of additions in the year,” as the addition for the current tax year.

For more information on non-arm’s length transactions, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm’s length.

Selling your rental property

If you sell a rental property for more than it cost, you may have a capital gain. List the dispositions of all your rental properties on Schedule 3, Capital Gains (or Losses). For information on how to calculate your taxable capital gain, see guide T4037, Capital Gains.

If you are a member of a partnership that has a capital gain, the partnership will allocate part of that gain to you. The gain will show on the partnership’s financial statements or in box 151 of your T5013 slip. Report the gain at line 17400 of Schedule 3, Capital Gains (or Losses).

Note

You cannot have a capital loss when you sell depreciable property. However, you can have a terminal loss, see Column 6 – Undepreciated Capital Cost (UCC) after additions and dispositions.

Disposing of a building

If you disposed of a building in the current tax year, special rules may apply making the proceeds of disposition an amount other than the actual proceeds of disposition. This happens when you meet both the following conditions:

  • you disposed of the building for an amount less than its cost amount, as calculated below, and its capital cost to you
  • you, or a person with whom you do not deal at arm’s length, owned the land the building is on, or the land next to it, which was necessary for the building’s use

To calculate the cost amount:

  • if the building was the only property in the class, the cost amount is the UCC of that class before you disposed of the building
  • if more than one property is in the same class, you have to calculate the cost amount of each building as follows:

           Capital cost of the building ÷ Capital cost of all properties in the class not previously disposed of × UCC of the class = Cost amount of the building

Note

If a building acquired in a non-arm’s length transaction was previously used for something other than producing income, the capital cost of the property will need to be recalculated to determine the cost amount of the building.

If you disposed of a building under these conditions, and you or a person with whom you do not deal at arm’s length disposed of the land in the same year, calculate your deemed proceeds of disposition as shown in Calculation A below.

If you, or a person with whom you do not deal at arm’s length, did not dispose of the land in the same year as the building, calculate your deemed proceeds of disposition for the building as shown in Calculation B.

Calculation A – Land and building disposed of in the same year

1. FMV of the building when you disposed of it$Blank space for dollar valueLine1

2. FMV of the land just before you disposed of it+Blank space for dollar valueLine2

3. Line 1 plus line 2= $Blank space for dollar value>$Blank space for dollar valueLine3

4. Seller’s adjusted cost base of the land$Blank space for dollar valueLine4

5. Total capital gains (without reserves) from any disposition of the land (such as a change in use) by you, or by a person not dealing at arm’s length with you, in the three-year period before you disposed of the building, to you or to another person not dealing at arm’s length with you? $Blank space for dollar valueLine5

6. Line 4 minus line 5 (if negative, enter “0”)= $Blank space for dollar valueLine6

7. Line 2 or line 6, whichever amount is less? $Blank space for dollar valueLine7

8. Line 3 minus line 7 (if negative, enter “0”)= $Blank space for dollar valueLine8

9. Cost amount of the building just before you disposed of it$Blank space for dollar valueLine9

10. Capital cost of the building just before you disposed of it$Blank space for dollar valueLine10

11. Line 9 or line 10, whichever amount is less$Blank space for dollar valueLine11

12. Line 1 or line 11, whichever amount is more$Blank space for dollar valueLine12

Deemed proceeds of disposition for the building

13. Line 8 or line 12, whichever amount is less (enter this amount from line 13 in column 3 of Area E and include it in column 5 of Area A)$Blank space for dollar valueLine13

Deemed proceeds of disposition for the land

14. Proceeds of disposition of the land and building$Blank space for dollar valueLine14

15. Amount from line 13? $Blank space for dollar valueLine15

16. Line 14 minus line 15 (enter this amount at line 9924 of Area F)= $Blank space for dollar valueLine16

If you have a terminal loss on the building, include it at line 9948, Terminal loss.

Calculation B – Land and building disposed of in different years

1. Cost amount of the building just before you disposed of it$Blank space for dollar valueLine1

2. FMV of the building just before you disposed of it$Blank space for dollar valueLine2

3. Line 1 or line 2, whichever amount is more$Blank space for dollar valueLine3

4. Actual proceeds of disposition, if any? $Blank space for dollar valueLine4

5. Line 3 minus line 4= $Blank space for dollar valueLine5

6. Amount from line 5$Blank space for dollar value× ½= $Blank space for dollar valueLine6

7. Amount from line 4+ $Blank space for dollar valueLine7

Deemed proceeds of disposition for the building

8. Line 6 plus line 7 (enter this amount in column 3 of Area E and include it in column 5 of Area A)= $Blank space for dollar valueLine8

If you have a terminal loss on the building, include it at line 9948, Terminal loss.

Usually, you can deduct 100% of a terminal loss, but only 50% of a capital loss. Calculation B makes sure you use the same percentage to calculate both a terminal loss on a building and a capital loss on land. As a result of this calculation, you add 50% of the amount on line 5 to the actual proceeds of disposition from the building (see Terminal loss).

Replacement property

In some cases, you can postpone or defer including a capital gain or recapture of CCA in calculating income. Your property might be stolen, destroyed, or expropriated, and you replace it with a similar one. To defer reporting the gain or recapture of CCA, you (or a person related to you) must acquire the replacement property within the specified time limits and use the new property for the same or similar purpose.

You can also defer a capital gain or recapture when you transfer rental property to a corporation, a partnership. For more information, see:

Example

During the current tax year, Paul bought a house to use for rental purposes. For CCA purposes, the building is classified as Class 1 with a 4% rate. It is his only rental property. The total cost was $95,000 (the sum of the $90,000 total purchase price plus $5,000 total expenses connected with the purchase). The details are as follows:

Building value (Class 1) $75,000
Land value+$15,000
Total purchase price=$90,000
Expenses connected with the purchase  
Legal fees $3,000
Land transfer taxes+$2,000
Total fees=$5,000

Paul’s rental activity is reported on a December 31 year?end basis. Paul’s rental income was $6,000 and his rental expenses were $4,900. Therefore, his net rental income before deducting CCA was $1,100 ($6,000 – $4,900). Paul wants to deduct as much CCA as he can.

Before Paul can fill in his CCA schedule in Area A, he has to calculate the capital cost of the building. Since land is not depreciable property, he has to calculate the part of the expenses connected with the purchase that relates only to the building. To do this, he has to use the following formula.

Part of the fees Paul can include in the building’s cost= Building value÷ Total purchase price× Expenses 
 =  $75,000÷ $90,000× $5,000= $4,166.67

This $4,166.67 represents the part of the $5,000 in legal fees and land transfer taxes that relates to the purchase of the building. The remaining $833.33 relates to the purchase of the land. Therefore, the capital cost of the building is:

Building value (Class 1)Related expensesCapital cost of the building
$75,000.00+ $4,166.67= $79,166.67

Paul enters $79,166.67 in column 3 of Area C and $15,833.33 ($15,000 + $833.33) on line 9923 of Area F as the capital cost of the land.

Note

Paul did not own rental property before the current year. Therefore, he has no UCC to enter in column 2 of Area A.

Paul acquired his rental property during the current year. Therefore, he is subject to the half-year rule explained in Column 9 – Adjustment for current-year additions subject to the half year rule.

His net rental income before CCA is $1,100. Paul cannot claim CCA for more than $1,100 because he cannot use his CCA to create a rental loss (see Limits on CCA). This is the case even though he would otherwise be entitled to claim $1,583.33 [($79,166.67 × 50%) × 4%].

Chapter 5 – Principal residence

When you sell your home, you may realize a capital gain. If the property was used solely as your principal residence for every year you owned it, you do not have to pay tax on the gain. If at any time during the period you owned the property, it was not your principal residence, or used solely as your principal residence, you may have to pay tax on all or part of the capital gain.

If you sold property in 2019 that was, at any time, your principal residence, you must report the sale on Schedule 3, Capital Gains (or Losses) in 2019 and form T2091(IND) Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust). See Schedule 3, form T2091(IND), and guide T4037 Capital Gains for additional information on how to report the disposition of your principal residence.

If you want more information after reading this chapter, see Income Tax Folio S1-F3-C2, Principal Residence.

What is your principal residence?

Your principal residence can be any of the following types of housing units:

  • a house
  • a cottage
  • a condominium
  • an apartment in an apartment building
  • an apartment in a building such as a duplex or triplex
  • a trailer, mobile home, or houseboat

A property qualifies as your principal residence, for any year, if it meets all of the following conditions:

  • it is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation
  • you own the property alone or jointly with another person
  • you, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year
  • you designate the property as your principal residence

The land on which your home is located can be part of your principal residence. Usually, the amount of land that you can consider as part of your principal residence is limited to one-half hectare (1.24 acres). If you can show that you need more land to use and enjoy your home, you can consider more than 1.24 acres as part of your principal residence. For example, this may happen if the minimum lot size imposed by a municipality at the time you bought the property is larger than one-half hectare.

Designating a principal residence

You designate your home as your principal residence when you sell or are considered to have sold all or part of it. You can designate your home as your principal residence for the years that you own and use it as your principal residence. However, in some situations you may choose not to designate your home as your principal residence for one or more of those years. For more information, see form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust), and form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual.

Can you designate more than one principal residence?

For years before 1982, more than one housing unit per family can be designated as a principal residence. Therefore, a husband and wife can designate different principal residences for these years. However, a special rule applies if members of a family designate more than one home as a principal residence. For more information, see Income Tax Folio S1 F3 C2, Principal Residence.

For 1982 and later years, you can only designate one home as your family’s principal residence for each year. For more information, see Income Tax Folio S1-F3-C2, Principal Residence.

For 1982 to 2000, if you had a spouse or were 18 or older, your family included:

  • you
  • a person who throughout the year was your spouse (unless you were separated for the entire year under the terms of a court order or a written agreement)
  • your children (other than a child who had a spouse during the year or who was 18 or older)

If you did not have a spouse and were not 18 or older, your family also included:

  • your mother and father
  • your brothers and sisters (who did not have spouses and were not 18 or older during the year)

For 1993 to 2000, since a spouse included a common-law spouse, common-law spouses could not designate different housing units as their principal residences for any of those years.

Note

If you elected to have your same-sex partner considered as your common-law partner for 1998, 1999, or 2000, then, for those years, your common-law partner also could not designate a different housing unit as his or her principal residence.

After the year 2000, the above definition applies except that the reference to spouse is replaced by “spouse or common-law partner”. Neither spouses nor common-law partners (see Definitions) can designate different housing units as their principal residence.

Disposition of your principal residence

When you sell your home or when you are considered to have sold it, usually you do not have to pay tax on any gain from the sale. This is the case if the property was used solely as your principal residence for every year you owned it or for all years except one year, being the year in which you replaced your principal residence. If you sold your home in 2019 and it was your principal residence you have to report the sale and designate the property on Schedule 3, Capital Gains (or Losses). In addition, you also have to complete form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust). Complete only page 1 of form T2091 if the property you sold was your principal residence for all the years you owned it, or for all years except one year, being the year in which you replaced your principal residence.

For the sale of a principal residence in 2019, we will only allow the principal residence exemption if you report the disposition and designation of your principal residence on your income tax return. If you forget to make this designation in the year of the disposition, it is very important to ask us to amend your income tax return for that year. The CRA can accept a late designation in certain circumstances, but a penalty may apply. For more information, see guide T4037, Capital Gains.

If your home was not your principal residence for every year that you owned it, you have to report the amount of the capital gain on the property that relates to the years you did not designate it as your principal residence. To do this, fill in form T2091(IND) (see the next section). You are also required to complete the applicable sections of Schedule 3 as indicated on page 2 of the schedule.

If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, you have to split the selling price and the adjusted cost base between the part you used for your principal residence and the part you used for other purposes, such as rental or business. You can do this by using square metres or the number of rooms, as long as the split is reasonable. Report on line 13800 of Schedule 3 only the gain on the part you used to produce income. For more information, see Income Tax Folio S1-F3-C2, Principal Residence. You are also required to complete page 2 of Schedule 3 to report the sale of your principal residence.

There are certain situations in which we will consider the entire property maintains its nature as a principal residence in spite of the fact that you have used it for income producing purposes. However, all of the following conditions must be met:

  • The income producing use is ancillary to the main use of the property as a residence.
  • There is no structural change to the property.
  • No capital cost allowance is claimed on the property.

This situation could occur, for example, where the property is used as a home day care. For more information, see Income Tax Folio S1-F3-C2, Principal Residence.

If you sold more than one property in the same calendar year and each property was, at one time, your principal residence, you must show this by completing a separate form T2091(IND) for each property to designate what years each was your principal residence and to calculate the amount of capital gain, if any, to report on line 15800 of Schedule 3, Capital Gains (or Losses) in 2019.

For more information on how to report the capital gain resulting from the disposition of your principal residence, see guide T4037, Capital Gains.

Form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust), and form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual

Use form T2091(IND) to designate a property as a principal residence. This form will help you calculate the number of years that you can designate your home as your principal residence, and the part of the capital gain, if any, that you have to report. Fill in this form if you:

  • sold, or were considered to have sold, your principal residence or any part of it
  • granted someone an option to buy your principal residence or any part of it
Note

A legal representative of a deceased person (executor, administrator, or a liquidator in Quebec) must use form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual, to designate a property as a principal residence for the deceased.

Did you or your spouse or common-law partner file form T664 or form T664 (Seniors)?

Use form T2091(IND) to calculate the capital gain if you sell, or are considered to have sold, a property for which you or your spouse or common-law partner previously filed form T664 or form T664 (Seniors), Election to Report a Capital Gain on Property Owned at the End of February 22, 1994, and:

  • the property was your principal residence for 1994
  • you are designating it in the current tax year as your principal residence for any year

Use form T2091(IND)-WS, Principal Residence Worksheet, to calculate a reduction from the capital gains election. If the property was designated as a principal residence for the purpose of the capital gains election, you have to include those previous years it was designated in the current year.

Note

If, at the time of the election, the property was designated as a principal residence for any tax year other than 1994, you can choose to designate it again as your principal residence when you sell it or are considered to have sold it. If you choose to designate it again, you have to include those previously designated tax years as part of your principal residence designation in the current tax year.

If the property was not your principal residence for 1994 and you are not designating it in 2019 as your principal residence for any tax year, do not use form T2091(IND) and form T2091(IND) WS to calculate your capital gain. Instead, calculate your capital gain, if any, in the regular way (proceeds of disposition minus the adjusted cost base and outlays and expenses).

Change in use

You can be considered to have sold all or part of your property even though you did not actually sell it.

For example, this is the case when:

  • you change all or part of your principal residence to a rental property
  • you change your rental property to a principal residence
  • you stop using a property to earn or produce income

Every time you change the use of a property, you are considered to have sold the property at its fair market value and to have immediately reacquired the property for the same fair market value, unless you make an election as described below. The resulting capital gain or capital loss (in certain situations) must be reported in the year the change of use occurs.

If the property was your principal residence for any year you owned it before you changed its use, you do not have to pay tax on any gain that relates to those years. You only have to report the gain that relates to the years your home was not your principal residence.

Note

Your home is personal-use property for your own use. If you have a loss when we consider you to have sold your home because of a change in use, you are not allowed to claim the loss.

Special situations

There are situations to which the change-in-use rules stated above do not apply. The following are some of the more common situations.

Changing all your principal residence to a rental property

When you change your principal residence to a rental property, you can make an election not to be considered as having started to use your principal residence as a rental property. This means you do not have to report any capital gain when you change its use. If you make this election:

  • you have to report the net rental income you earn
  • you cannot claim CCA on the property

While your election is in effect, you can designate the property as your principal residence for up to four years, even if you do not use your property as your principal residence. You can only do this if you do not designate any other property as your principal residence for that same time period.

You can extend the four-year limit for an unlimited time if all of the following conditions are met:

  • you live away from your principal residence because your employer, or your spouse’s or common-law partner’s employer, wants you to relocate
  • you and your spouse or common-law partner are not related to the employer
  • you return to your original home while you or your spouse or common-law partner are still with the same employer or before the end of the year after the year in which this employment ends, or you die during the term of employment
  • your original home is at least 40 kilometres (by the shortest public route) farther than your temporary residence from your or your spouse’s or common-law partner’s new place of employment

If you make this election, there is no immediate effect on your tax situation when you move back into your residence. If you change the use of the property again and do not make this election again, any gain you have from the sale of the property is a capital gain and may be subject to tax.

To make this election, attach a letter signed by you, and send it with your income tax return. If you are filing your taxes electronically, send this letter to your tax centre. To find your tax centre go to Tax services offices and tax centres. The letter must describe the property and state that you are making an election under subsection 45(2) of the Income Tax Act.

If you started to use your principal residence as a rental or business property in the year, you may want information on how you should report your business or property income. If so, see guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Changing all your rental property to a principal residence

When you change your rental property to a principal residence, you can elect to postpone reporting the disposition of your property until you actually sell it. However, you cannot make this election if you, your spouse or common law partner, or a trust under which you or your spouse or common law partner is a beneficiary has deducted CCA on the property for any tax year after 1984, and on or before the day you change its use.

This election only applies to a capital gain. If you claimed CCA on the property before 1985, you have to include any recapture of CCA in your rental income. Include the income in the year the property use was changed:

  • You cannot make this election if you or your spouse or common-law partner, or a trust under which you, your spouse or common-law partner is a beneficiary, has deducted CCA on the property for any tax year after 1984 and on or before the day you change its use.
  • To make this election, attach a letter signed by you, and send it with your income tax return. If you are filing your return electronically, send the letter to your tax centre. To find the address for your tax centre, go to Tax services offices and tax centres. The letter should describe the property and state that you are making an election under subsection 45(3) of the Income Tax Act.
  • You have to make this election by the earlier of the following dates:
    • 90 days after the date we ask you to make the election
    • the date you have to file your income tax return for the year in which you sell the property

If you make this election, you can designate the property as your principal residence for up to four years before you occupy it as your principal residence

Changing part of your principal residence to a rental property or vice versa

Before March 19, 2019, you could not elect to avoid the deemed disposition that occurs on a partial change in the use of a property. However, starting on March 19, 2019, the budget proposes that depending on your situation, you can elect under subsection 45(2) or 45(3) of the Income Tax Act that the deemed position that normally arises on a partial change in use of property not apply.

Even if you do not make the election, if you started to use part of your principal residence for rental or business purposes, the CRA usually considers you to have changed the use of that part of your principal residence unless all of the following conditions apply:

  • your rental or business use of the property is relatively small in relation to its use as your principal residence
  • you do not make any structural changes to the property to make it more suitable for rental or business purposes
  • you do not deduct any CCA on the part you are using for rental or business purposes

Generally, if you do not meet all of the above conditions, you will have a deemed disposition of the portion of property that had the change of use, and immediately after,  you will be deemed to have reacquired that portion of property. The proceeds of disposition and the cost of the reacquisition will be equal to the proportionate share of the FMV of the property, determined at that time. Additionally, in the year the partial change in use occurs, you can make a principal residence designation (for the portion of the property that had the change in use), by completing page 2 of Schedule 3, Capital Gains (or Losses) and page 1 of form T2091 (IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust).

Subsequently, when you actually sell the property you have to take all of the following actions:

  • split the selling price between the part you used for your principal residence and the part you used for rental or business purposes. The CRA will accept a split based on square metres or the number of rooms as long as the split is reasonable
  • report any capital gain on the part you used for rental or business purposes. You can also make a principal residence designation for the portion of the property for which there was no change in use as your principal residence, by completing Schedule 3 and form T2091(IND), in order to claim the principal residence exemption for that portion of the gain

For more information, see “Real estate, depreciable property, and other properties” on page 16 of guide T4037, Capital Gains.

Online services

Handling business taxes online

Use the CRA’s online services for businesses throughout the year to:

  • make payments to the CRA by setting up pre-authorized debit agreements in My Business Account or by using the My Payment service
  • file a return, view the status of filed returns, and amend returns online
  • send documents to the CRA
  • authorize a representative for online access to your business accounts
  • register to receive email notifications and to view mail from the CRA in My Business Account
  • change addresses
  • manage direct deposit information
  • view account balance and transactions
  • calculate a future balance
  • transfer payments and immediately view updated balances
  • add another business to your account
  • send account related enquiries and view answers to common enquiries
  • send an enquiry about your audit
  • download reports

To log in to or register for the CRA’s online services, go to:

For more information, go to E-services for Businesses.

CRA BizApp

CRA BizApp is a mobile web app for small business owners and sole proprietors. The app offers secure access to view accounting transactions, pay outstanding balances, make interim payments, and more.

You can access CRA BizApp on any mobile device with an Internet browser—no app stores needed! To access the app, go to Mobile apps – Canada Revenue Agency.

Receiving your CRA mail online

Sign up for email notifications to get most of your CRA mail, like your notice of assessment, online.

For more information, go to My Account for Individuals.

Authorizing the withdrawal of a pre-determined amount from your Canadian chequing account

Pre-authorized debit (PAD) is a secure online, self-service, payment option for individuals and businesses. This option lets you set the payment amount you authorize the CRA to withdraw from your Canadian chequing account to pay your tax on a specific date or dates you choose. You can set up a PAD agreement using the CRA’s secure My Business Account service at My Business Account, or the CRA BizApp at Mobile apps – Canada Revenue Agency.You can use My Business Account to view historical records, modify, cancel, or skip a payment. PADs are flexible and managed by you. For more information, go to Make a payment to the Canada Revenue Agency and select “Pre authorized debit.”

Electronic payments

Make your payment using:

For more information

What if you need help?

If you need more information after reading this guide, visit our website or call 1-800-959-8281.

Direct deposit

Direct deposit is a fast, convenient, and secure way to get your CRA payments directly into your account at a financial institution in Canada. For ways to enrol for direct deposit or more information, go to Direct deposit.

Forms and publications

To get our forms and publications, go to Forms and publications or call 1-800-959-8281.

Electronic mailing lists

The CRA can notify you by email when new information on a subject of interest to you is available on the website. To subscribe to the electronic mailing lists, go to Electronic mailing lists.

Tax Information Phone Service (TIPS)

For personal and general tax information by telephone, use our automated service, TIPS, by calling 1-800-267-6999.

Teletypewriter (TTY) users

If you have a hearing or speech impairment and use a TTY, call 1-800-665-0354.

If you use an operator-assisted relay service, call our regular telephone numbers instead of the TTY number.

Service-related complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. See the Taxpayer Bill of Rights.

If you are not satisfied with the service you received, try to resolve the matter with the CRA employee you have been dealing with or call the telephone number provided in the CRA’s correspondence. If you do not have contact information, go to Contact information.

If you still disagree with the way your concerns were addressed, you can ask to discuss the matter with the employee’s supervisor.

If you are still not satisfied, you can file a service complaint by filling out Form RC193, Service-Related Complaint. For more information on how to file a complaint, go to Make a service complaint.

If the CRA has not resolved your service-related complaint, you can submit a complaint with the Office of the Taxpayers’ Ombudsman.

Formal disputes (objections and appeals)

If you disagree with an assessment, determination, or decision, you have the right to register a formal dispute.

Reprisal complaints

If you have previously submitted a service related complaint or requested a formal review of a CRA decision and feel that, as a result, you were treated unfairly by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information about complaints and disputes, go to Reprisal Complaints.

Due dates

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, we consider your payment to be on time if we receive it on the next business day. Your return is considered on time if we receive it or if it is postmarked on or before the next business day.

For more information, go to Important dates for Individuals.

Cancel or waive penalties or interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties or interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2019 must relate to a penalty for a tax year or fiscal period ending in 2009 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2019 must relate to interest that accrued in 2009 or later.

To make a request, fill out form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.

Original Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income-2016.html

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Canada Income Tax Act

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Table of Contents

Related Information

Regulations made under this Act

Original Source: https://laws-lois.justice.gc.ca/eng/acts/I-3.3/index.html

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Information for Canadian Small Businesses

Corporate Tax

At BOMCAS Top Accounting Firm Edmonton we bring our tax accountant expertise to assist both domestic and multi-national corporations with services that include, but are not limited to:

  • Corporate income tax preparation and filing of returns
  • GST/HST compliance
  • Financial statement preparation
  • Tax dispute resolution consultations
  • Assistance with design & implementation of international tax programs
  • Payroll planning and remittance – domestic and cross-border
  • Tax treaty review

Address: 181 Meadowview Bay, Sherwood Park, Alberta T8H 1P7
Phone: 780-953-5250
Email: info@bomcas.ca

Digital services for businesses

Digital services help businesses by streamlining communications with the CRA and simplifying the preparation and submission of tax information. For more information, go to E-services for Businesses.

Registering your business

Business Registration Online is a CRA web page that is a one-stop registration service that lets you apply for a business number (BN) and register for programs administered by British Columbia, Nova Scotia, and Ontario.

You can also use this online service if you have a BN and need to register for any of the four common program accounts (GST/HST, payroll deductions, corporate income tax, and import/export). Businesses with a physical address in Quebec that need a GST account will be linked automatically to the Revenu Québec website. For more information, go to Business Registration Online (BRO).

Filing returns

File your income tax and benefit return using NETFILE

NETFILE is one of our digital tax-filing options. This service lets you file your income tax return with us using the Internet. You can only send your own return to us using NETFILE. Authorized representatives cannot send returns for their clients through NETFILE. When you use this service, you cannot change any of your personal information such as your name, address, date of birth, or direct deposit information.

If you have registered with the My Account service, you can change your address before using NETFILE by going to My Account for Individuals.

If you are not registered, call 1-800-959-8281 to make the necessary changes to your address before using NETFILE.

File your corporate income tax return over the Internet

You can file your corporation income tax return with us online. All corporations with annual gross revenue of more than $1 million mustfile their corporate income tax return online. Businesses can use our corporate Internet filing service or file through My Business Account, and authorized representatives can file through Represent a Client without a web access code.

Mandatory digital filing for GST/HST registrants 

Some GST/HST registrants have to file their GST/HST return online. Your filing options, however, depend on your reporting circumstances.

For more information on options for the digital filing of GST/HST returns, go to File a GST/HST return.

You may also be able to file your return online and make your payment through a participating financial institution or third-party service provider. Contact your local branch or service provider to see if they offer this service, or go to GST/HST EDI filing and remitting.

Note

Eligible T2 corporation income tax, GST/HST, and information returns can be filed online by business owners using our online services:

The GST/HST Registry

The GST/HST Registry is an online service that you can use to validate the GST/HST number of a business. This ensures that the ITCs you claim only include GST/HST charged by GST/HST registrants.

For more information, go to Confirming a GST/HST account number.

You can validate a Quebec sales tax (QST) registration number for a person who is registered for the QST, other than a selected listed financial institution (SLFIs), by accessing the QST registry on the Revenu Québec website at Validation of a QST Registration Number.

Note 

The CRA administers the QST for selected listed financial institutions.

Getting help

To get help using My Business Account, GST/HST NETFILE, GST/HST TELEFILE, Information Returns, Digital Filing, Represent a Client, and the Payroll deductions online calculator, you or your authorized representative can call Business enquiries at 1-800-959-5525. To find other telephone numbers go to Telephone numbers.

Note

The e-Services Helpdesk is not available on weekends, statutory, or civic holidays.

For help with Corporate Internet Filing, call 1-800-959-2803.

For general business enquiries, call 1-800-959-5525.

For more information about our digital services for businesses, go to e-services for Businesses.

Advance income tax rulings and interpretations

An advance income tax ruling is a written statement from CRA that says how we will interpret and apply Canadian income tax law to transactions a taxpayer is considering.  

Ruling for a Canada Pension Plan (CPP) or employment insurance (EI)

You can ask for a ruling on the status of a worker or workers under the Canada Pension Plan or the Employment Insurance Act, using the Request a CPP/EI ruling service by using our online services:

To ask for a ruling for a given year, you have to send your request by June 29 of the next year.

GST/HST rulings and interpretations

You can ask for a written ruling or interpretation on how the GST/HST applies to your operations or transactions. We will provide guidance, and as much certainty as possible, about how the GST/HST applies and the consequences of your transactions or proposed transactions. If you need general information about GST/HST, go to Goods and services tax/harmonized sales tax (GST/HST) or call 1-800-959-5525.

We provide our GST/HST rulings and interpretations service from rulings centres across Canada (except in Quebec). You or your authorized representative can call us at  1-800-959-8287. For service in Quebec, call Revenu Québec at 1-800-567-4692.

For more information, see Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation and GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

Excise duty rulings and interpretations

You can ask for a written ruling or interpretation on how excise duties apply to certain goods such as alcohol and tobacco products. For more information, contact a regional excise duty office. For a listing of their numbers, see Excise Duty Memoranda EDM1-1-2, Regional Excise Duty Offices, at Forms and publications.

Excise taxes and other levies rulings and interpretations

You can ask for a written ruling or interpretation on how the excise tax or air travellers security charge applies to your operations or transactions. For more information on requesting an excise tax or other levies ruling, go to Excise Taxes – Contacts.

Scientific Research and Experimental Development (SR&ED) Program

The Scientific Research and Experimental Development (SR&ED) Program is a federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada. Whether you are a first-time claimant, or need help to understand the requirements of the program, we have various free services and tools that can help you. For more information on this credit and these sessions, go to Scientific Research and Experimental Development Tax Incentive Program or call 1-800-959-5525.

Canada business service centres

On the Government of Canada website, you can find a list of links to the websites of Government of Canada departments, agencies, and Crown corporations. You can also find links to websites maintained by organizations for which federal departments and agencies are responsible.

Innovation, Science and Economic Development Canada

To access Innovation, Science and Economic Development Canada’s extensive expertise and information resources, visit Innovation, Science and Economic Development Canada.

Your rights, entitlements, and obligations

The CRA operates on the fundamental belief that taxpayers are likely to comply with the law if they are treated fairly and have the information, advice, and services they need to meet their obligations. These obligations may include filing required returns, paying taxes, providing information, and properly declaring imported or exported goods.

What is the Voluntary Disclosures Program?

The Voluntary Disclosures Program allows you to come forward and correct inaccurate or incomplete information or to disclose information you had not previously reported to us.

You may avoid penalties and prosecution if you make a valid disclosure before you become aware of any compliance action being initiated against you by us. You will only have to pay the taxes owing plus interest.

A disclosure is valid if it:

  • is voluntary
  • contains complete information
  • involves the application or the potential application of a penalty
  • generally includes information that is more than one year overdue

The Voluntary Disclosure Program provides an avenue for you to correct past errors and omissions and become compliant with tax laws.

For more information, go to Voluntary Disclosures Program or see Information Circular IC00-1R5, Voluntary Disclosures Program, or GST/HST Memorandum 16.3, Cancellation or Waiver of Penalties and/or Interest.

Cancel or waive penalties or interest

The CRA administers legislation, commonly called the taxpayer relief provisions, that gives the CRA discretion to cancel or waive penalties or interest when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2018 must relate to a penalty for a tax year or fiscal period ending in 2008 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2018 must relate to interest that accrued in 2008 or later.

To make a request, fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.

Original Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4070/information-canadian-small-businesses-chapter-8-your-service.html

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Virtual Accounting Firm

Virtual Accounting Firm located in Edmonton:

 Personal Tax

At BOMCAS Top Accounting Firm Edmonton our tax experts are dedicated to remaining current with the constantly changing Canadian tax laws. We take the time to understand the unique situation of each of our clients in our service areas of Sherwood Park, Edmonton and surrounding communities, and ensure they are following the latest Canadian tax laws, while paying the least amount of tax possible.

  • Individual Canadian Tax Return Preparation and filing
  • Personal Tax Planning
  • Immigration and Emigration Tax Planning
  • T3 – Trust Income and Information Return
  • Final Income Tax Returns for Deceased Taxpayers
  • Estate Planning
  • Voluntary Disclosures for unreported income or information forms not filed

Virtual Accounting Firm in Edmonton:

 Corporate Tax

At BOMCAS Top Accounting Firm Edmonton we bring our tax accountant expertise to assist both domestic and multi-national corporations with services that include, but are not limited to:

  • Corporate income tax preparation and filing of returns
  • GST/HST compliance
  • Financial statement preparation
  • Tax dispute resolution consultations
  • Assistance with design & implementation of international tax programs
  • Payroll planning and remittance – domestic and cross-border
  • Tax treaty review

Bookkeeping

We provide continuing bookkeeping maintenance in the background while you focus on your core business operations which helps making us into the top accounting in firm in the region.  As experienced bookkeeping and tax professionals, we’ll help you with all the data entry and bank reconciliations that are required, all on a remote basis. Contact us today and see how we can help you.

Payroll

Our bookkeeping advisers provide Canadian payroll processing services for growing businesses, assisting in government remittances and year end T4 filings. With years of experience, our experts have the knowledge and expertise and qualification needed to handle any situation.

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Virtual Bookkeeping Business & FARMERS AND FISHERS

We provide continuing bookkeeping maintenance in the background while you focus on your core business operations which helps making us into the top accounting in firm in the region.  As experienced bookkeeping and tax professionals, we’ll help you with all the data entry and bank reconciliations that are required, all on a remote basis. Contact us today and see how we can help you.

Contact BOMCAS today and we will be happy to take care of your bookkeeping service virtually. Call 780-953-5250 or email info@bomcas.ca

Eligible capital expenditures – farmers and fishers

You may buy property that has no physical existence, but gives you a lasting economic benefit. Some examples include milk and egg quotas, goodwill, franchises, concessions, or licences for an unlimited time period. This kind of property is eligible capital property. The price you pay to buy this kind of property is an eligible capital expenditure.

As of January 1, 2017, the eligible capital property (ECP) system was replaced with the new capital cost allowance (CCA) class 14.1 with transitional rules. Under the old system, eligible capital expenditures are added to the cumulative eligible capital pool at a 75% inclusion rate, and the rate of depreciation of those expenditures is 7% on a declining-balance basis. Under the new system, newly-acquired eligible properties will be included in class 14.1 at a 100% inclusion rate with a 5% capital cost allowance rate on a declining-balance basis.

Property that was ECP will be depreciable property and expenditures and receipts that were accounted for under the ECP rules will be accounted for under the rules for depreciable property and capital property included in class 14.1.

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Eligible capital expenditure

You may buy property that does not physically exist but gives you a lasting economic benefit.

This kind of property is eligible capital property. The price you pay to buy this type of property is an eligible capital expenditure.

We consider franchises, concessions, or licences with a limited period to be depreciable properties, not eligible capital properties. As of January 1, 2017, the eligible capital property (ECP) system was replaced with the new capital cost allowance (CCA) class 14.1 with transitional rules. For details on depreciable properties, go to Chapter 4 of guide T4002 , Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Annual allowance

You cannot fully deduct an eligible capital expenditure because the expenditure is considered to be capital and provides a lasting economic benefit. However, you can deduct part of its cost each year. We call the amount you can deduct your annual allowance.

CEC account

This is the bookkeeping record you establish to determine your annual allowance. You also use your cumulative eligible capital (CEC) account to keep track of the property you buy and sell. We call the property in your CEC account your eligible capital property. You base your annual allowance on the balance in your account at the end of your fiscal period. Keep a separate account for each business. Include all eligible capital property for the one business in the same CEC account.

Transitional rules – Undepreciated capital cost balance

Generally, the undepreciated capital cost (UCC) of the new class in respect of a business at the beginning of January 1, 2017 is equal to the amount that would have been the cumulative eligible capital (CEC) balance in respect of the business at the beginning of January 1, 2017.

Generally, the total capital cost of all property in Class 14.1 at the beginning of that day is deemed to be 4/3 of the total of the amount that would have been the CEC balance at the beginning of that day and past depreciation claimed that has not been recaptured before that day.

There are also rules for allocating total capital cost between goodwill property and each identifiable property in the new class that was an eligible capital property.

An amount is deemed to have been allowed as capital cost allowance before January 1, 2017, such that the UCC balance at the beginning of January 1, 2017 is equal to the amount that would have been the CEC balance at the beginning of January 1, 2017.

The determination of the total capital cost and the allocation of the capital cost of each property that was an eligible capital property before January 1, 2017 is relevant to the calculation of recaptured capital cost allowance and capital gain in respect of the disposition of such a property on or after January 1, 2017. It is not necessary to determine the total capital cost, or to allocate a capital cost to each property, to determine the amount that may be deducted.

Transitional rules – Deemed gain immediately before January 1, 2017

You may be able to include an amount in your income in a tax year that straddles January 1, 2017. The amount of the income inclusion, if any, is relevant to the calculation of the final CEC balance for the purpose of determining the total capital cost of the class. An income inclusion may be required if you receive proceeds in that tax year and prior to January 1, 2017, such that there would have been an income inclusion if the tax year had instead ended immediately before January 1, 2017. You may choose to have the income inclusion reported as business income or as a taxable capital gain.

An election to defer this income inclusion is available in a manner that is similar to the manner in which income inclusions could be deferred under the ECP rules. Where, on or after January 1, 2017 and in that tax year you acquired a property of the new class or you are deemed to have acquired goodwill, you may elect to reduce the income inclusion by up to half of the capital cost of the new property. In this case, the capital cost of the new property is then reduced by twice the amount by which the income inclusion is reduced.

Transitional rules – Dispositions of former ECP

Receipts related to expenditures incurred before January 1, 2017 cannot result in excess recapture when applied to reduce the balance of the new CCA class. Certain qualifying receipts reduce the UCC of the new CCA class at a 75% rate (the rate at which eligible capital expenditures were added to CEC). Receipts that qualify for the 75% rate are generally receipts from the disposition of a property that was an ECP and receipts that do not represent the proceeds of disposition of property. This is achieved by increasing the UCC of the new class by, generally, 25% of the lesser of the proceeds of disposition and the cost of the property disposed of.

Transitional rules – Non-arm’s length dispositions of former ECP

Although changes to the rules increases the UCC balance of the new class for, generally, 25% of the proceeds of disposition of property that was ECP before January 1, 2017, the new rules also prevent the use of non-arm’s length transfers to increase the amount that can be depreciated in respect of the new class. Generally, when you acquire a property of the new class, only 3/4 of the capital cost of the property is included in the UCC in respect of the class if the following conditions apply:

  • the property or a similar property was previously an eligible capital property of yourself or a person or partnership not dealing at arm’s length with the taxpayer
  • the UCC was increased in respect of an earlier disposition of the property or similar property by yourself or the non-arm’s length person or partnership

This effect is achieved by deeming you to have claimed CCA in respect of the new class equal to the lesser of 1/4 of the cost of the property acquired and the amount that was deemed to have been added to the UCC of the new class of yourself or another person or partnership.

For more information about the old ECP rules, see the 2016 version of this guide.

For more information on changes to the ECP system, go to Explanatory Notes – Eligible Capital Property.

Eligible capital property of a deceased person

When a person dies, we deem that the person has disposed of all capital property right before death. Also, right before death, we deem that the person has received the deemed proceeds of disposition. For more information, go to Deemed disposition of property.

Partnerships

A partnership can own eligible capital property and ask to deduct an annual allowance for that property. Any income from the sale of eligible capital property the partnership owns is income of the partnership. For more information about eligible capital expenditures, go to Chapter 5 of guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Forms and publications

Related links

Original Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/farmers-fishers/eligible-capital-expenditures-farmers-fishers.html

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Understanding Alberta Personal Tax Credits Return: A Comprehensive Guide

Filing taxes can be a complex process, but it’s an essential aspect of financial responsibility. In Alberta, Canada, taxpayers have the opportunity to maximize their financial returns through various tax credits. One such credit is the Alberta Personal Tax Credits Return. In this article, we’ll delve into the intricacies of the Alberta Personal Tax Credits Return, helping you understand its importance, eligibility criteria, and how to make the most of it.

What is the Alberta Personal Tax Credits Return?

The Alberta Personal Tax Credits Return is a form that allows taxpayers to claim tax credits that may reduce the amount of tax deducted from their paychecks throughout the year. This form essentially helps individuals ensure that the right amount of tax is withheld from their earnings, preventing under or overpayment of taxes.

Eligibility Criteria

To be eligible for the Alberta Personal Tax Credits Return, you must meet the following criteria:

  1. Residency: You must be a resident of Alberta.
  2. Employment Status: You must be employed or receiving income that is subject to withholding tax.
  3. Income Level: Your total income and deductions must not exceed certain thresholds outlined by the Canada Revenue Agency (CRA).

Key Tax Credits

  1. Basic Personal Amount: This is a non-refundable tax credit that all taxpayers can claim. It allows you to earn a certain amount of income each year without paying federal or provincial income tax on it.
  2. Spousal Amount: If you support your spouse or common-law partner, you may be eligible to claim this credit.
  3. Equivalent to Spouse: If you support a dependent relative other than your spouse or common-law partner, you might qualify for this credit.
  4. Child Amount: Parents can claim this credit for each eligible child under the age of 18.
  5. Medical Expenses: Certain medical expenses can be claimed, such as prescription medications and medical supplies not covered by insurance.

Advantages of Claiming Alberta Personal Tax Credits

  1. Increased Take-Home Pay: By accurately claiming your tax credits, you can reduce the amount of tax withheld from your paycheck, leading to higher take-home pay throughout the year.
  2. Preventing Overpayment: Filling out the Alberta Personal Tax Credits Return accurately can prevent you from overpaying taxes and waiting for a refund during tax season.
  3. Financial Planning: Claiming the right tax credits can positively impact your financial planning and help you manage your monthly budget more effectively.

Filling Out the Form

  1. Download the Form: Obtain the Alberta Personal Tax Credits Return form from the CRA website or your employer’s payroll department.
  2. Provide Accurate Information: Fill out the form accurately, providing details such as your name, social insurance number, and the number of eligible dependents.
  3. Calculate Credits: Follow the instructions on the form to calculate the appropriate tax credits based on your situation.

Conclusion

The Alberta Personal Tax Credits Return offers taxpayers the opportunity to optimize their finances by ensuring the correct amount of tax is withheld from their income. By understanding the eligibility criteria and the various tax credits available, you can make informed decisions to enhance your take-home pay and manage your tax obligations efficiently. Remember that while this article provides general information, it’s always advisable to consult a tax professional for personalized guidance related to your specific financial situation.

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5009-C AB428 – Alberta Tax and Credits

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For people with visual impairments, the following alternate formats are also available:

Last update: 2020-03-05

Previous-year versions are also available.

While all Canada Revenue Agency web content is accessible, we also provide our forms and publications in alternate formats (digital audio, electronic text, Braille, and large print) to allow persons with disabilities to access the information they need.

Original Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/alberta/5009-c.html

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Employers' Guide – Filing the T4 Slip and Summary

Table of contents

Is this guide for you?

Use this guide if you are an employer (resident or non-resident) and you have paid your employees any of the following types of income:

  • employment income
  • commissions
  • taxable allowances and benefits
  • retiring allowances
  • payments from a wage loss replacement plan either paid directly by you or paid by a third party on your behalf (see Box 14 – Employment income, for more information)
  • income for special situations such as barbers and hairdressers, taxi drivers and drivers of other passenger-carrying vehicles, fishing income, Indians, placement or employment agency workers, and other situations explained in Chapter 6 – Special situations
  • any other remuneration (see Box 14 – Employment income, for a detailed list)

Do not use this guide if:

Throughout this guide, we refer to other guides, forms, interpretation bulletins, and information circulars. If you need any of these, go to Forms and publications. You may want to bookmark this address for easier access to our website in the future.

What’s new?

Elimination of code 68 – Indian (exempt income) – Eligible retiring allowances

For 2019 and subsequent years, the use of code 68 will no longer be needed.

Elimination of code 70 – Municipal officer’s expense allowance

For 2019 and subsequent taxation years, non-accountable allowances paid to members of legislative assemblies and certain municipal officers will be fully included in their income. The use of code 70 will therefore no longer be needed.

Salary overpayments made in error

On January 15, 2019, the Government of Canada released proposed legislative changes to the Income Tax Act, Canada Pension Plan, and Employment Insurance Act. The legislation allows employers who make an overpayment of salary in error in 2016 and subsequent tax years to recover the income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums withheld and remitted on the overpayment from the Canada Revenue Agency (CRA) if certain conditions are met. This will let employees repay only the net amount. The changes to the Income Tax Act, Canada Pension Plan, and Employment Insurance Act are now law and in force.

For more information, see Clerical, administrative, or system error.

Chapter 1 – General information

What are your responsibilities?

As an employer, you must do the following:

  • Deduct Canada Pension Plan/Quebec Pension Plan (CPP/QPP) contributions, employment insurance (EI) premiums, provincial parental insurance plan (PPIP) premiums (also known as the Quebec Parental Insurance Plan or QPIP), and income tax from remuneration or other amounts you pay.
  • Hold the amounts in trust for the government and keep them separate from the operating funds of your business. Make sure the amounts are not part of an estate in liquidation, assignment, receivership, or bankruptcy.
  • Send the CPP contributions, EI premiums, federal and provincial income tax (except Quebec income tax) to the Canada Revenue Agency (CRA).
  • Send QPP contributions, PPIP premiums and Quebec provincial income tax directly to Revenu Québec.
  • Report the income and deductions on the T4 slips that you will send to the CRA. To do this, fill out the T4 slips, Statement of Remuneration Paid. If you file on paper, also include the related T4 Summary, Summary of Remuneration Paid. Detailed instructions on how to fill out the T4 slips under Filling out T4 slips and Filling out the T4 Summary.
  • File the T4 Summary, together with the related T4 slips, on or before the last day of February following the calendar year to which the slips apply. See Chapter 4 – T4 information return for information about the filing methods you can use.
  • Give employees their T4 slips on or before the last day of February following the calendar year to which the slips apply.
  • Keep your paper and electronic records for six years after the year to which they relate. If you want to destroy them before the six-year period is over, fill out Form T137, Request for Destruction of Records. For more information, go to Keeping records.

For more information about employer responsibilities, go to:

Penalties, interest, and other consequences

Late filing and failing to file the T4 information return

You have to give your employee their T4 slip and file your T4 information return with the CRA on or before the last day of February following the calendar year to which the information return applies. If the last day of February falls on a Saturday, or a Sunday, your information return is due the next business day.

We consider your return to be filed on time if we receive it or if it is postmarked on or before the due date.

We may assess a penalty if you file your information return late. For T4 information returns, we have an administrative policy that reduces the penalty that we assess so it is fair and reasonable for small businesses. Each slip is an information return, and the penalty we assess is based on the number of information returns you filed late. The penalty is $100 or the amount calculated according to the chart below, whichever is more:

Number of information
returns (slips) filed late		Penalty per day
(up to 100 days)		Maximum
penalty
1 to 5penalty not based on number of days$100 flat penalty
6 to 10$5$500
11 to 50$10$1,000
51 to 500$15$1,500
501 to 2,500$25$2,500
2,501 to 10,000$50$5,000
10,001 or more$75$7,500

Mandatory electronic filing

Failure to file information returns over the Internet

If you file more than 50 information returns for a calendar year and you do not file the returns by Internet file transfer or Web Forms, you may have to pay a penalty as determined in the table below. 

Each slip is an information return, and the penalty we assess is based on the number of information returns filed in an incorrect format. The penalty is calculated per type of information return. For example, if you file 51 NR4 slips and 51 T4 slips on paper, we would assess two penalties of $250, one per type of information return.

Number of information
returns (slips) by type		Penalty
 
51 to 250$250
251 to 500$500
501 to 2,500$1,500
2,501 or more$2,500

For more information about filing electronically, see Electronic filing methods.

Failure to deduct

If you fail to deduct the required CPP contributions or EI premiums from the amounts you pay your employee, you are liable for these amounts even if you cannot recover the amounts from the employee. We will assess you for both the employer’s share and the employee’s share of any contributions and premiums owing. We will also assess a penalty and interest as described in the section Penalty for failure to deduct.

If you failed to deduct the required amount of income tax from the amounts you pay your employee, you may be assessed a penalty as described below. As soon as you realize you did not deduct the proper amount of income tax, you should let your employee know. Your employee can either pay the amount when they file their income tax and benefit return or they can ask you to deduct more income tax at source.

Penalty for failure to deduct

We can assess a penalty of 10% of the amount of CPP, EI, and income tax you did not deduct.

If you are assessed this penalty more than once in a calendar year, we will apply a 20% penalty to the second or later failures if they were made knowingly or under circumstances of gross negligence.

Failure to remit amounts deducted

When you deduct CPP contributions, EI premiums or income tax from the amounts you pay to your employee or other individual, you have to remit them to the Receiver General for Canada. Also, you have to include your share of CPP contributions and EI premiums when you remit.

We will assess you for both the employer’s share and the employee’s share of any CPP contributions and EI premiums that you deducted but did not remit. We will also assess a penalty and interest as described in the section Penalty for failure to remit and remitting late.

Penalty for failure to remit and remitting late

We can assess a penalty when:

  • you deduct the amounts, but do not remit them to us
  • you deduct the amounts, but send them to us late

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, we consider your payment to be on time if we receive it on the next business day.

The penalty is:

  • 3% if the amount is one to three days late
  • 5% if it is four or five days late
  • 7% if it is six or seven days late
  • 10% if it is more than seven days late or if no amount is remitted

Generally, we only apply this penalty to the part of the amount you failed to remit that is more than $500. However, we will apply the penalty to the total amount if the failure was made knowingly or under circumstances of gross negligence.

In addition, if you are assessed this penalty more than once in a calendar year, we will assess a 20% penalty on the second or later failures if they were made knowingly or under circumstances of gross negligence. If you send a payment to cover the balance due with your return, it is considered late. Penalty and interest charges may apply.

Whether you file electronically or file a paper return, you can make your payment in several different ways. For more information, go to Make a Payment to the Canada Revenue Agency or see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Notes

Regardless of your filing method, if you are a threshold 2 accelerated remitter, you must remit any balance due electronically or in person at your Canadian financial institution. For more information, see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

We will charge you a fee for any payment that your financial institution refuses to process. If your payment is late, we can also charge you a penalty and interest on any amount you owe.

Interest

If you fail to pay an amount, we may apply interest from the day your payment was due. The interest rate we use is determined every three months, based on prescribed interest rates. Interest is compounded daily. We also apply interest to unpaid penalties. For the prescribed interest rates, go to Prescribed interest rates.

Cancel or waive penalties or interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties or interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2019 must relate to a penalty for a tax year or fiscal period ending in 2009 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2019 must relate to interest that accrued in 2009 or later.

To make a request, fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.

When an employee leaves

When an employee stops working for you, we suggest you calculate the employee’s earnings for the year to date and give the employee a T4 slip. Include the information from that T4 slip in your T4 return when you file it on or before the last day of February of the following year.

You must also issue a Record of Employment (ROE) to each former employee. Generally, if you are issuing a ROE electronically, you have five calendar days after the end of the pay period in which an employee’s interruption of earnings occurs to issue it. If you are issuing a paper ROE, you have to issue it within five calendar days of the employee’s interruption of earnings or the date you become aware of the interruption of earnings. However, special rules may apply.

For more information, or to get the publication called How to Complete the Record of Employment Form, go to Service Canada at Access Record of Employment on the Web (ROE Web). You can also call their Employer Contact Centre at 1-800-367-5693 (TTY: 1-855-881-9874).

Changes to your business entity

If your business stops operating, or a partner or the sole proprietor dies

If your business stops operating, or a partner or the sole proprietor dies, you should do the following:

  • Remit all CPP contributions, EI premiums, and income tax deductions you deducted for the former employees to your National Verification and Collection Centre within seven days of the day your business ends. For more information, see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances. For information on the filing of information slips and the remitting requirements for QPP contributions and PPIP premiums to Revenu Québec, visit Revenu Québec.
  • Calculate the pension adjustment (PA) that applies to your former employees who accrued benefits for the year under your registered pension plan (RPP) or deferred profit sharing plan (DPSP). For information on how to calculate pension adjustments, see Guide T4084, Pension Adjustment Guide.
  • Fill out and file all T4 slips and the T4 Summary using electronic filing methods, or on paper and send them to the Jonquière Tax Centre, within 30 days from the date your business ends (or 90 days from the date a partner or the sole proprietor dies). If you have to prepare more than 50 slips for a calendar year, you must file your return electronically, as explained in Electronic Filing methods.
  • Give copies of the T4 slips to your former employees.
  • Issue a Record of Employment (ROE) for each former employee. You generally have five calendar days after the end of the pay period in which an employee’s interruption of earnings occurs to do so. For more information, go to Service Canada at The Record of Employment on the Web (ROE Web), or get the publication called How to complete the Record of Employment Form. You can also call their Employer Contact Centre at 1-800-367-5693 (TTY: 1-855-881-9874).
  • When the owner of a sole proprietorship dies, a final personal income tax and benefit return has to be filed. This return is due by June 15 of the year following death, unless the date of death is between December 16 and December 31, in which case the final return is due six months after the date of death. For more information, see Guide T4011, Preparing Returns for Deceased Persons.
  • Close the business number (BN) and all CRA business accounts after all the final returns and all the amounts owing have been processed.

To close your payroll program account, you can use the “Request to close payroll account” service in My Business Account. An authorized representative can use this service through Represent a Client.

If you change your legal status, restructure, or reorganize

If you change your legal status, restructure, or reorganize, we consider you to be a new employer. You may need a new business number (BN) and a new payroll program account. Let us know if your business status has changed, or if it will change in the near future.

Note

Amalgamations have different rules. For more information, see If your business amalgamates.

The following are examples of changes to a business status:

  • You are the sole proprietor of a business and you decide to incorporate.
  • You and a partner own a business. Your partner leaves the business and sells his half interest to you, making you a sole proprietor.
  • A corporation sells its property division to another corporation.
  • One corporation transfers all of its employees to another corporation.

When a change happens, a new (successor) employer is created. A successor employer is one who has acquired all or part of a business, and who has immediately succeeded the former (predecessor) employer as the new employer of an employee. The successor employer may, under certain circumstances, take into consideration the CPP/QPP, EI, and PPIP deductions already withheld by the previous employer and continue withholding and remitting those deductions as if there were no change in employer. If employees have already paid the maximum deductions, take no further deductions for the year. For more information, see Employer restructuring/Succession of employers.

If the above situation does not apply, you must continue to deduct CPP/QPP, EI, and PPIP.

As stated in the previous section called If your business stops operating, or a partner or the sole proprietor dies, the predecessor company has to do the following:

  • send us their final remittances
  • calculate any pension adjustment
  • fill out and file all slips and summaries
  • give employees their copies of T4 or T4A slips
  • issue a record of employment (ROE) to their employees
  • deregister their business number
  • close all program accounts

For more information, go to Changing your business status.

If your business amalgamates

If your business amalgamates with another, special rules apply. In this case, you as the successor employer can keep the business number (BN) of one of the companies, or you can apply for a new one. If one of the corporations is non-resident, however, you have to apply for a new BN.

Since no new employer exists for CPP and EI purposes, continue deducting in the normal manner, taking into account the deductions and remittances that occurred before the amalgamation. These remittances will be reported under the payroll program account number of the successor BN.

If you had previously been granted a reduced employer’s EI premium rate, you will need to contact Employment and Social Development Canada to make sure you are still eligible for the reduced rate.

With an amalgamation, the predecessor companies do not have to file T4 returns for the period leading up to the amalgamation. The successor company files the T4 returns for the entire year.

How to appeal a payroll deductions assessment or a CPP/EI ruling

If you receive a payroll assessment for CPP contributions, EI premiums, or income tax that you do not agree with, or you have received a ruling letter and you disagree with the decision, you have 90 days after the date of the notice of assessment or notification of the ruling to appeal.

However, if you receive a payroll assessment because your payment was not applied to your account correctly, before you file an appeal, we recommend that you call Business Enquiries at 1?800?959?5525 or write to your National Verification and Collection Centre to discuss it. Many disputes are resolved this way and can save you the time and trouble of appealing.

To appeal a CPP/EI ruling decision or payroll deductions assessment, you can:

CPP/EI Appeals Division
Canada Revenue Agency
451 Talbot Street
London ON  N6A 5E5

Explain why you do not agree with the ruling or payroll deductions assessment and provide all relevant facts. Include a copy of the CPP/EI ruling letter or payroll notice of assessment.

For more information on how to appeal a payroll deductions assessment of income tax, see Booklet P148, Resolving Your Dispute: Objection and Appeal Rights Under the Income Tax Act.

For more information on how to appeal a CPP/EI ruling decision or a payroll deductions assessment of CPP or EI, see Booklet P133, Your Appeal Rights – Canada Pension Plan and Employment Insurance Coverage.

Chapter 2 – T4 slips

When to fill out a T4 slip

Most amounts paid to an individual by an employer are referred to as remuneration. You have to fill out a T4 slip to report the following:

  • salary, wages (including pay in lieu of termination notice), tips or gratuities, bonuses, vacation pay, employment commissions, gross and insurable earnings of self-employed fishers, and all other remuneration (see Box 14 – Employment income, for a detailed list) you paid to employees during the year
  • taxable benefits or allowances
  • retiring allowances
  • deductions you withheld during the year
  • pension adjustment (PA) amounts for employees who accrued a benefit for the year under your registered pension plan (RPP) or deferred profit sharing plan (DPSP)

You have to fill out T4 slips for all individuals who received remuneration from you during the year if:

  • you had to deduct CPP/QPP contributions, EI premiums, PPIP premiums, or income tax from the remuneration
  • the remuneration was more than $500

You have to report income on a T4 slip for the year during which it was paid, regardless of when the services are performed, or if the employee is deceased. For example, you pay your employee in January 2020 for income they earned in December 2019. You will have to report that income on their T4 slip for 2020 since that is the year it was paid.

If you provide employees with taxable group term life insurance benefits, you always have to prepare T4 slips, even if the total of all remuneration paid in the calendar year is $500 or less. If you provide former employees or retirees with such benefits, you have to prepare a T4A slip. For more information, see Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.

If you provide either an employee, a former employee, or a non-resident employee with security options benefits, you have to prepare a T4 slip. For more information, go to Security options.

Types of T4 slips

Customized T4 slips

For those who fill out a large number of slips, we accept certain slips other than our own. Follow the guidelines for the production of Customized forms or see the current version of Information Circular IC97-2R, Customized Forms.

Slips for filing over the Internet

For information about filling out and filing T4 slips over the Internet, go to Filing Information Returns Electronically (T4/T5 and other types of returns). You can also read the information on Electronic filing methods.

Slips for filing on paper

Whether you print, type, or fill out your slips and summaries by hand, you can order up to 9 copies at Forms and publications.

Filling out T4 slips

Make sure the social insurance number (SIN) and name you enter on the T4 slip for each employee are correct.

An incorrect SIN can affect an employee’s Canada Pension Plan or Quebec Pension Plan benefits if the record of earnings file is not accurate. Also, if the T4 slip has a pension adjustment amount, the employee may receive an inaccurate annual RRSP deduction limit statement and the related information on the employee’s notice of assessment will be inaccurate.

If the individual does not give you their SIN (within three days of starting to work), you must be able to show that you made a reasonable effort to get it. If you do not, you may have to pay a penalty of $100 for each number you did not try to get. If you cannot obtain a SIN from the employee, file your information return, without the SIN, on or before the last day of February.

For more information, see the current version of Information Circular IC82-2R, Social Insurance Number Legislation that Relates to the Preparation of Information Slips, or visit Service Canada.

If you had an employee who had more than one province or territory of employment during the year, prepare a separate T4 slip for the earnings and deductions that apply to each province or territory.

Follow these guidelines to fill out your T4 slips:

  • Clearly fill out the slips.
  • Report, in dollars and cents, all amounts you paid during the year, except pension adjustment amounts, which are reported in dollars only.
  • Report all amounts in Canadian dollars, even if they were paid in another currency. To get the average exchange rates, go to What are the average exchange rates?
  • Do not enter hyphens or dashes between numbers.
  • Do not enter the dollar sign ($).
  • Do not show negative dollar amounts on slips; to make changes to previous years, send us amended slips for the years in question. See Amending or cancelling slips over the Internet.
  • If you do not have to enter an amount in a box, do not enter “nil;” leave the box blank.
  • Do not change the headings of any of the boxes.

Detailed instructions

These instructions are for all employers who fill out T4 slips. Refer to additional guidelines in Chapter 6 – Special situations for:

Employer’s name

Enter your operating or trade name in the space provided on each slip. This should be the same information that appears on your statement of account. If you would like to, you may also add your business address in this space.

Employee’s name and address

Enter the employee’s last name, followed by the first name and initial (all in capital letters). If the employee has more than one initial, enter the employee’s first name followed by the initials in the “First name” space. If you enter only the employee’s initials, enter them at the beginning of the “First name” space. Do not enter the title of office or courtesy title of the employee, such as Director, Mr., or Mrs. Enter the employee’s address, including the province, territory, or U.S. state, Canadian postal code or U.S. ZIP code, and country.

Year

Enter the four digits of the calendar year in which you paid the remuneration to the employee.

Box 10 – Province of employment

Before you decide which provincial or territorial abbreviation to use, you need to determine your employee’s province or territory of employment. This depends on whether you required your employee to report for work at your place of business.

For more information, see “Which tax tables should you use?” in Chapter 1 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Enter one of the following abbreviations:

AbbreviationProvince or territory/Country
ABAlberta
BCBritish Columbia
MBManitoba
NBNew Brunswick
NLNewfoundland and Labrador
NTNorthwest Territories
NSNova Scotia
NUNunavut
ONOntario
PEPrince Edward Island
QCQuebec
SKSaskatchewan
YTYukon
USUnited States
ZZOther
Enter ZZ if an employee worked in a country other than Canada or the United States, or if the employee worked in Canada beyond the limits of a province or territory (for example, on an offshore oil rig).

For any employee who had more than one province or territory of employment in the year, fill out separate T4 slips. For each location, indicate the total remuneration paid to the employee and the related deductions, such as CPP/QPP contributions, EI premiums, PPIP premiums, and income tax.

Box 12 – Social insurance number

Enter the employee’s SIN, as provided by the employee.

Notes

If your employee had a SIN beginning with a nine (9) and later in the year received a permanent SIN, use the permanent SIN in box 12. Do not prepare two T4 slips.

If you do not have the employee’s SIN, enter nine zeros.

See Filling out T4 slips for information on your obligation to provide a valid SIN.

Box 14 – Employment income

Report the total income before deductions. Include all salary, wages (including pay in lieu of termination notice), bonuses, vacation pay, tips and gratuities, honorariums, director’s fees, management fees, and executor’s and administrator’s fees received to administer an estate (as long as the administrator or executor does not act in this capacity in the regular course of business).

Notes

A retiring allowance can be reported on the same T4 slip as employment income, but do not include it in box 14. See the explanations under Code 66 – Eligible retiring allowances and Code 67 – Non?eligible retiring allowances. For more information about the difference between retiring allowances and employment income received as a result of a loss of employment, see Income Tax Folio S2?F1?C2, Retiring Allowances.

If you are paying amounts to placement or employment agency workers, taxi drivers or drivers of other passenger?carrying vehicles, barbers or hairdressers, or fishers (self?employed), see Chapter 6 – Special situations and under Box 29.

Certain Canadian Forces personnel and police officers can claim a deduction from net income for the amount of employment income earned in certain circumstances (including taxable allowance). See the explanation under Code 43.

Director’s fees paid to non-resident directors for services rendered in Canada must also be reported in box 14. However, a non-resident director is not considered to be employed in Canada when they do not attend any meetings or perform any other functions in Canada. For more information, see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Include commissions, taxable allowances, the value of taxable benefits (including any GST/HST or other applicable taxes), and any other payments you paid to employees during the year. These amounts may also have to be reported in the “Other information” area at the bottom of the T4 slip.

Include payments made from a wage-loss replacement plan (WLRP) if you had to deduct CPP contributions or EI premiums. For more information, see Guide T4001.

Include amounts paid under a supplementary unemployment benefit plan (SUBP) such as employer-paid maternity, parental, and compassionate care top-up amounts, whether they are registered with Service Canada or not.

Include payments out of an employee benefit plan (EBP) and amounts that a trustee allocated under an employee trust. If the trustee allocates the income, but you do not pay it immediately, include it in the income of the employee. Do not report it when you make the payment. For more information, see archived Interpretation Bulletin IT-502, Employee Benefit Plans and Employee Trusts, and its special release.

If you are a government, a municipality, or a public authority and you hired emergency volunteers (such as firefighters, ambulance technicians, or search and rescue volunteers), do not include in box 14 the first $1,000. However, if you paid the individual other than as a volunteer for the same or similar duties, the whole amount is taxable and should be included in box 14. More information can be found in Chapter 6 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances. Report the exempt amount (up to $1,000) in the “Other information” area of the T4 slip, using code 87.

Include amounts you paid to a member of a religious order who has taken a vow of perpetual poverty. Even if you did not have to deduct CPP, EI, or income tax from the payments, you still have to include these amounts in box 14.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

Enter the amount of Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions you deducted from the employee’s pensionable earnings in box 16 or box 17, depending on the province or territory of employment. For example, if you reported Quebec in box 10, then report the QPP contributions you deducted in box 17. Leave both boxes blank if the employee did not contribute to either plan.

Do not report the employer’s share of CPP or QPP contributions on the T4 slip.

To verify an employee’s CPP contributions at year-end before you fill out and file the T4 slip, see Appendix 3 in Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Note

If you report an amount in box 16 or box 17, you have to report pensionable earnings in Box 26 – CPP/QPP pensionable earnings.

There are situations when you do not have to deduct CPP contributions from the payments and benefits you give your employee. For example, the employee is age exempt or works in a type of employment or receives a benefit that does not require CPP deductions. For more information, go to Chapter 2 of Guide T4001.

Employment in Quebec

Different contribution rates apply for employees working in Quebec. For information about CPP rates and maximums, go to Chapter 2 of Guide T4001. For information about QPP rates and maximums, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions, or visit Revenu Québec.

More than one T4 slip for the same employee

If an employee contributed to CPP and QPP during the year, you have to prepare two T4 slips as follows:

  • one showing the province of employment as Quebec, the employee’s QPP pensionable earnings in Quebec and the QPP contributions you deducted
  • one showing the applicable province or territory of employment (other than Quebec), the employee’s CPP pensionable earnings and the CPP contributions you deducted
CPP overpayment

If, during the year, you deducted more CPP contributions from the employee’s earnings than you should have and you could not reimburse the overpayment:

Make this request no later than four years after the end of the year in which the CPP overpayment occurred.

For more information about CPP overpayments, see Chapter 2 in Guide T4001.

Box 18 – Employee’s EI premiums

Enter the amount of EI premiums you deducted from the employee’s earnings. If you did not deduct premiums, leave this box blank.

Do not report the employer’s share of EI premiums on the T4 slip.

To verify an employee’s EI premiums at year-end before you fill out and file the T4 slip, see Appendix 5 in Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Note

If you report an amount in box 18, you have to report insurable earnings in box 24. For more information, see Box 24 – EI insurable earnings.

There are situations when you do not have to deduct EI premiums from the payments and benefits you give your employee. For example, the employee works in a type of employment or receives a benefit that is exempt under the Employment Insurance Act. For more information, go to Chapter 3 of Guide T4001.

Employment in Quebec

The requirements for deducting EI and Provincial Parental Insurance Plan (PPIP) premiums for employees in Quebec are different. For more information about deducting EI premiums, see Guide T4001. For information about deducting PPIP premiums, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions, or visit Revenu Québec.

EI overpayment

If, during the year, you deducted more EI premiums from the employee than you should have and you could not reimburse the overpayment:

  • Do not adjust the amounts you report on the employee’s T4 slip. We will credit the excess EI premiums to the employee when they file their income tax and benefit return.
  • Fill out Form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums, to apply for a refund of your EI overpayment. Send it to us with your paper-filed T4 information return or mail it separately if you have filed your return electronically.

Make this request no later than three years after the end of the year in which the EI overpayment occurred.

For more information about EI overpayments, see Chapter 3 in Guide T4001.

Box 20 – RPP contributions

Enter the total amount the employee contributed to a registered pension plan (RPP). If the employee did not contribute to a plan, leave this box blank. Do not include amounts transferred directly to an RPP from an employee’s registered retirement savings plan (RRSP).

Enter any deductible retirement compensation arrangement (RCA) contributions you withheld from the employee’s income. Do not include amounts that are not deductible. If the amount in box 20 includes RPP contributions and deductible RCA contributions, attach a letter informing the employee of the amounts.

If the amount you report includes current contributions and past service contributions for 1989 or earlier years, enter, in the “Other information” area, the following codes along with the corresponding amount:

  • code 74 for past service contributions while the employee was a contributor
  • code 75 for past service contributions while the employee was not a contributor

To determine if the employee made past-service contributions while a contributor or while not a contributor, see archived Interpretation Bulletin IT-167, Registered Pension Plans – Employee’s Contributions.

Include instalment interest in box 20. This includes interest charged to buy back pensionable service.

Notes

Do not use box 20 to show what you contributed to your employee’s RRSP. Your RRSP contribution is a taxable benefit to the employee. Enter code 40 in the “Other information” area and the corresponding amount in the box. Also include this amount in box 14.

If you have a group RRSP for your employees, the trustee will send the official receipts for tax purposes to you or to your employees. If the trustee sends the receipts directly to you, give these copies to the employees. The receipts will show the employee and employer contribution amounts.

Box 22 – Income tax deducted

Enter the total income tax you deducted from the employee’s remuneration and retiring allowances. This includes the federal, provincial (except Quebec), and territorial taxes that apply. If you did not deduct tax, leave the box blank.

Do not include any amount you withheld under the authority of a garnishee or a requirement to pay that applies to the employee’s previously assessed tax arrears.

Box 24 – EI insurable earnings

Box 24 must always be completed even if there are no insurable earnings.

Enter the total amount of insurable earnings you used to calculate the employee’s EI premiums that you reported in box 18, up to the maximum insurable earnings for the year ($53,100 for 2019). If there are no insurable earnings for the entire reporting year and box 18 is blank, enter “0” in box 24. In many cases, boxes 14 and 24 will be the same amount.

Reporting the correct EI insurable earnings in box 24 will reduce unnecessary pensionable and insurable earnings review (PIER) reports for EI deficiency calculations, especially if the employee worked both inside and outside of Quebec.

If you paid amounts to the employee for employment, benefits, or other payments that should not have EI premiums deducted (as described in Chapter 3 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances), do not report those earnings in box 24.

Do not include the unpaid portion of any earnings from insurable employment that you did not pay because of your bankruptcy, receivership, or non-payment of remuneration for which the employee has filed a complaint with the federal, provincial, or territorial labour authorities.

Special rules may apply when filling in box 24 in certain situations. For more information, refer to Chapter 6 – Special situations, which deals with special situations.

More than one T4 slip for the same employee

When you give the same employee more than one T4 slip for the year, you should report the insurable earnings amount for each period of employment in box 24 of each T4 slip.

Example

An employee earned $28,000 working in Ontario from January 2019 to June 2019 and earned $28,000 working in Quebec for the remainder of the year with the same employer. In addition to any other boxes that need to be completed, fill in boxes 14 and 24 as follows:

  • Ontario T4 slip – box 14 = $28,000 and box 24 = $28,000
  • Quebec T4 slip – box 14 = $28,000 and box 24 = $25,100 (calculated as the maximum insurable earnings for 2019 of $53,100 – $28,000 already reported on T4 slip with Ontario as province of employment = $25,100)
Box 26 – CPP/QPP pensionable earnings

Box 26 must always be completed even if there are no pensionable earnings.

Enter the total amount of pensionable earnings paid to your employee, up to the maximum pensionable earnings for the year ($57,400 for 2019), even if you did not withhold CPP/QPP contributions on all or any of those earnings. This may happen if you give a non-cash taxable benefit to an employee but do not pay cash earnings during the year. If there are no pensionable earnings for the entire reporting year and boxes 16 and 17 are blank, enter “0” in box 26. In many cases, boxes 14 and 26 will be the same amount.

Reporting the correct CPP pensionable earnings in box 26 will reduce unnecessary pensionable and insurable earnings review (PIER) reports for CPP deficiency calculations, especially if the employee worked both inside and outside of Quebec.

For more information, refer to Chapter 6 – Special situations, which deals with special situations.

CPP – Include the following types of remuneration in box 14, “Employment income”. However, do not include in box 26, “CPP/QPP pensionable earnings”:

  1. Remuneration paid to the employee:
  2. Amounts paid to the employee for employment, benefits, or other payments described in Chapter 2 of Guide T4001 and no CPP contributions had to be deducted.
  3. Amounts for a clergy member’s residence from which you did not deduct CPP contributions (if the clergy member gets a tax deduction for the residence, CPP contributions are not required).

Subtract any of the amounts noted above from the amount in box 14, and enter the difference in box 26. Do not change the amount in box 14.

Note

Non?cash taxable benefits (including security option benefits) – If you provide pensionable non?cash taxable benefits in a tax year, include the value of the benefit in box 26 at all times. This applies even if the employee received no other remuneration (for example, an employee is on an unpaid leave of absence and you continue to provide benefits during the leave period).

QPP – Fill in box 26 when you deduct QPP from the employees’ earnings, regardless of their province or territory of residence.

More than one T4 slip for the same employee

When you give the same employee more than one T4 slip for the year, you should report the pensionable earnings amount for each period of employment in box 26 of each T4 slip.

Example

An employee earned $35,000 working in Ontario from January 2019 to June 2019 and earned $35,000 working in Quebec for the remainder of the year with the same employer. In addition to any other boxes that need to be completed, fill in boxes 14 and 26 as follows:

  • Ontario T4 slip – box 14 = $35,000, and box 26 = $35,000
  • Quebec T4 slip – box 14 = $35,000, and box 26 = $22,400 (calculated as the maximum pensionable earnings for 2019 of $57,400 – $35,000 already reported on T4 slip with Ontario as province of employment = $22,400) on the Quebec T4 slip
Benefits and earnings taxable only in Quebec

Revenu Québec considers certain benefits and earnings to be pensionable earnings for employees working in Quebec. These include:

  • employer-paid private health benefit plan premiums
  • assumed earnings – persons 55 years of age or older whose hours of work are reduced by reason of phased retirement may choose, with their employers, to make contributions to the QPP on all or part of the amount of the reduction in remuneration

For more information, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions, or brochure IN-253-V, Taxable Benefits, which you can get from Revenu Québec.

The following examples show how to fill in boxes 14 and 26 of the employee’s T4 slip when you provide a benefit or earnings to an employee that is only taxable in Quebec. For information on how to fill out the RL-1 slip, consult Guide RL-1.G-V, Guide to Filing the RL-1 Slip: Employment and Other Income.

Examples

Example 1– Quebec taxable benefit, unpaid leave
Marion works for her employer in Quebec and is on an unpaid leave of absence. Her employer pays $750 in premiums to an employer-paid private health benefit plan on her behalf. Since the benefit is not taxable outside of Quebec, it is not income. When preparing Marion’s Quebec T4 slip, her employer will leave box 14 blank. Since the premiums are QPP pensionable, her employer will report $750 in box 26, the QPP contributions withheld on the benefit in box 17, and fill in any other boxes on her T4 slip as applicable.

Example 2 – Quebec taxable benefit, other earnings
During 2019, Julien received wages of $25,000 plus an $875 benefit that is only taxable in Quebec. When preparing Julien’s Quebec T4 slip, his employer will report $25,000 in box 14, $25,875 in box 26, and fill in any other boxes on his T4 slip as applicable.

Note

The T4 slip will still be processed even though box 26 is more than box 14.

Example 3 – Benefit is taxable both federally and in Quebec
Stephane works for his employer in Quebec and did not receive any cash earnings. However, his employer gave him a non cash housing benefit valued at $1,100. When preparing Stephane’s Quebec T4 slip, his employer will report $1,100 in boxes 14 and 26, and fill in any other boxes on his T4 slip as applicable.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

CPP/QPP (Canada Pension Plan/Quebec Pension Plan) – Leave this box blank if you:

Otherwise, enter an “X” or a check mark if you did not have to withhold CPP contributions from the earnings for the entire reporting period. For more information, go to “Employment, benefits, and payments from which you do not deduct CPP contributions” in Chapter 2 of guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

EI (employment insurance) – Leave this box blank if you reported an amount greater than “0” in box 18 or 24. Enter an “X” or a check mark in the “EI” box only if you did not have to withhold EI premiums from the earnings for the entire reporting period. For more information, go to “Employment, benefits, and payments from which you do not deduct EI premiums” in Chapter 3 of Guide T4001.

PPIP (provincial parental insurance plan) – Leave this box blank if you reported an amount in box 55 or 56. Enter an “X” or a check mark in the “PPIP” box only if you did not have to withhold PPIP premiums from the earnings for the entire period of employment in the province of Quebec. For more information, go to Revenu Quebec.

Box 29 – Employment code

Enter the appropriate code in this box if one of the following situations applies. Otherwise, leave it blank.

Do not fill in box 14, “Employment income,” if you are using employment code 11, 12, 13, or 17.

11 – Placement or employment agency workers
12 – Taxi drivers or drivers of other passenger-carrying vehicles
13 – Barbers or hairdressers
14 – Withdrawal from a prescribed salary deferral arrangement plan
15 – Seasonal Agricultural Workers Program
16 – Detached employee – Social security agreement
17 – Fishers – Self-employed

Box 44 – Union dues

Use this box only if you and the union agree that the union will not issue receipts for union dues to employees. Keep the certificate of agreement on file in case we ask to see it.

Enter in box 44 the amount you deducted from employees for union dues. Include amounts you paid to a parity or advisory committee that qualify for a deduction. Do not include initiation fees. Also, do not include strike pay that the union paid to union members in this box.

For more information, see archived Interpretation Bulletin IT-103R, Dues Paid to a Union or to a Parity or Advisory Committee.

Box 46 – Charitable donations

Enter the amount you deducted from the employee’s earnings for donations to qualified donees in Canada.

Box 50 – RPP or DPSP registration number

Enter the seven-digit registration number we issue for a registered pension plan (RPP) or a deferred profit sharing plan (DPSP) under which you report a pension adjustment (PA). Do this even if your plan requires only employer contributions.

However, if you make contributions to union pension funds, you have to indicate the union’s plan number, which the union has to give you.

If an employee is a member of more than one plan, insert only the number of the plan under which the employee has the largest PA.

Box 52 – Pension adjustment

If you have a registered pension plan (RPP) or a deferred profit sharing plan (DPSP), enter, in dollars only, the amount of the employee’s pension adjustment (PA) for the year. If you have to prepare more than one T4 slip for the employee because the employee worked for you in more than one province or territory of employment, report the PA proportionately on each T4 slip. If you cannot apportion the PA, report it on one slip.

If an employee participates in one or more RPPs or DPSPs, you have to calculate their PA using the total amount of all pension credits accumulated by the employee under all these plans for the year.

If an employee is on a leave of absence and is still accruing pensionable service or credits under the plan, you must report the PA on a T4 slip. This is true even if the employee has no employment income in the tax year. Administrators of multi-employee plans (MEPs) should report the PA for the employee on leave on a T4A slip.

Leave box 52 blank if the employee participated in your RPP or DPSP and one of the following applies:

  • the calculated PA is a negative amount or zero
  • the employee died during the year
  • the employee, even if they are still a member of the plan, no longer accrues new pension credits in the year (for example, the employee has accrued the maximum number of years of service in respect of the plan)
Special rules concerning the PA

Special calculation rules apply, in some circumstances, to employees who:

  • left your employment during the year
  • are on, or return from, a leave of absence
  • participate in a salary deferral arrangement
  • work for you part-time

For more information on how to calculate the PA, see Guide T4084, Pension Adjustment Guide. If you need more help calculating a PA, see your pension plan administrator or call our Registered Plans Directorate at 1-800-267-3100 or 613-954-0419 (in Ottawa).

Unregistered retirement plans or arrangements

An individual’s RRSP deduction limit is affected if they are entitled to benefits under any of the following three types of unregistered retirement plans or arrangements:

  • a specified retirement arrangement (SRA)
  • a government-sponsored retirement arrangement (GSRA)
  • a foreign pension plan

For more information about the PA for these types of plans or arrangements, see Guide T4084, Pension Adjustment Guide, or call our Registered Plans Directorate at 1-800-267-3100 or 613-954-0419 (in Ottawa).

Box 54 – Employer’s account number

Enter the 15-character account number that you use to send us your employees’ deductions. This number is your payroll program account number that appears at the top of your PD7A statement of account. Your payroll program account number should not appear on the two copies of the T4 slip that you give to your employees.

Box 55 – Employee’s PPIP premiums

Enter the provincial parental insurance plan (PPIP) premiums that you deducted for employees working in Quebec.

Box 56 – PPIP insurable earnings

For employees working in Quebec, enter the total amount used to calculate the employee’s PPIP premiums, up to a maximum of $76,500 for 2019.

Leave the box blank if:

  • there are no insurable earnings
  • the insurable earnings are the same as the employment income in box 14
  • the insurable earnings are over the maximum for the year

Other information

The “Other information” area at the bottom of the T4 slip has boxes for you to enter codes and amounts that relate to employment commissions, taxable allowances and benefits, deductible amounts, fishers’ income, and other entries if they apply.

The boxes are not pre-numbered. Enter the codes and amounts that apply to the employee.

Example

Box – CaseAmount – Montant 

40

2400

98

Note

If more than six codes apply to the same employee, use an additional T4 slip. Do not repeat all the data on the additional slip. Enter only the employer’s name and address, and the employee’s SIN and name, and fill in the required boxes in the “Other information” area. Report each code, and amount only once.

Codes 30 to 88 – Taxable allowances and benefits, deductible amounts, employment commissions, and other entries
Code numberDescriptionReport in Box 14
30Board and lodgingYes 
31Special work siteNo 
32Travel in a prescribed zoneYes 
33Medical travel assistanceN/ANote de bas de page1
34Personal use of employer’s automobile or motor vehicleYes 
36Interest-free and low-interest loansYes 
38Security options benefitsYes 
39Security options deduction – 110(1)(d)No 
40Other taxable allowances and benefitsYes 
41Security options deduction – 110(1)(d.1)No 
42Employment commissionsYes 
43Canadian Armed Forces personnel and police deductionYes 
66Eligible retiring allowancesNo 
67Non-eligible retiring allowancesNo 
69Indian (exempt income) – Non-eligible retiring allowancesNo 
71Indian (exempt income) – EmploymentNo 
74Past service contributions for 1989 or earlier years while a contributorN/ANote de bas de page2
75Past service contributions for 1989 or earlier years while not a contributorN/ANote de bas de page2
77Workers’ compensation benefits repaid to the employerNo 
78Fishers – Gross incomeNo 
79Fishers – Net partnership amountNo 
80Fishers – Shareperson amountNo 
81Placement or employment agency workers – Gross incomeNo 
82Taxi drivers and drivers of other passenger-carrying vehicles – Gross incomeNo 
83Barbers or hairdressers – Gross incomeNo 
85Employee-paid premiums for private health services plansNo 
86Security options electionNo 
87Emergency services volunteer exempt amountNo 
88Indian (exempt income) – Self-employmentNo 

Footnotes

Footnote 1

Return to footnote1Referrer

Do not include this amount in box 14. It is included under code 32. Footnote 2

Return to footnote2Referrer

For more information, see Box 20 – RPP contributions.

Detailed instructions for taxable allowances and benefits, deductible amounts, employment commissions and other entries

The following instructions explain how to report each of the benefits in the above list. Some of these benefits must include the goods and services tax (GST) and the provincial sales tax (PST, or QST in Quebec) if they apply, or the harmonized sales tax (HST).

Note

See Guide T4130, Employers’ Guide – Taxable Benefits and Allowances, for details on how to calculate the value of these benefits and which taxable benefits must include GST/HST.

Code 30 – Board and lodging

If you provided an employee with free or subsidized housing, or board and lodging, enter code 30 and the corresponding taxable amount. Also include this amount in box 14.

Note

If you pay for utilities (or provide them) for a member of the clergy, add the eligible part of your cost for those utilities to the housing allowance. Report it under code 30. Eligible utilities are electricity, heat, water and sewer. Report all other utilities under code 40.

Code 31 – Special work site

If the employee received a benefit for board and lodging at a special work site in a prescribed zone and you filled out Form TD4, Declaration of Exemption – Employment at a Special Work Site, enter code 31 and the corresponding amount. Do not include this amount in box 14 or under code 30.

Code 32 – Travel in a prescribed zone

If you provided an employee living in a prescribed zone with an amount for travel assistance, enter code 32 and the corresponding amount. Include this amount in box 14. If any part was for medical travel assistance, see code 33.

Code 33 – Medical travel assistance

If you provided an employee living in a prescribed zone with an amount for medical travel assistance, identify only the medical part under code 33. Make sure the total of the travel assistance is reported under code 32.

Note

Employees who are eligible to claim the northern residents deduction for travel benefits will use the information included in boxes 32 and 33 of their T4 slip to correctly calculate their deduction on form T2222, Northern Residency Deductions for 2019. For more information, go to Northern residents or see Travel assistance benefits in Chapter 4 of Guide T4130, Employers’ Guide – Taxable Benefits and Allowances.

Code 34 – Personal use of employer’s automobile or motor vehicle

If you provided an employee with the use of an automobile or motor vehicle, enter code 34 and the amount representing the benefit. Include this amount in box 14.

Code 36 – Interest-free and low-interest loans

If you provided an employee with an interest-free or low-interest loan, including a home-purchase and home-relocation loan, because of an office or employment (or intended employment), enter code 36 and the corresponding taxable benefit. Include this amount in box 14. For more information, see archived Interpretation Bulletin IT-421R, Benefits to individuals, corporations and shareholders from loans or debt.

Code 38 – Security options benefits

If an employee received a taxable benefit under a corporation’s agreement to issue its eligible shares or units of mutual fund trusts to the employee, enter code 38 and the corresponding amount. Include this amount in box 14. For more information, go to Security options.

Code 39 – Security options deduction – 110(1)(d)

If the employee is entitled to a deduction under paragraph 110(1)(d) of the Income Tax Act, enter code 39 and one-half of the amount you reported under code 38 for those shares. Do not include this amount in box 14. For more information, go to Security options.

Code 40 – Other taxable allowances and benefits

If you provided an employee with taxable allowances or benefits that you did not include elsewhere on the T4 slip, enter code 40 and the corresponding amount. Include this amount in box 14. See Guide T4130, Employers’ Guide – Taxable Benefits and Allowances, for details on calculating taxable benefits.

Code 41 – Security options deduction – 110(1)(d.1)

If the employee is entitled to a deduction under paragraph 110(1)(d.1) of the Income Tax Act, enter code 41 and one-half of the amount you reported under code 38 for those shares. Do not include this amount in box 14. For more information, go to Security options.

Code 42 – Employment commissions

If an employee sold property or negotiated contracts for you, enter code 42 and the amount of the employee’s commissions. Include this amount in box 14.

Code 43 – Canadian Armed Forces personnel and police deduction

For 2017 and subsequent taxation years, Canadian Armed Forces personnel and police officers deployed outside Canada can claim a deduction from net income for the amount of employment earnings they receive while serving on international operational missions as determined by the Minister of National Defence or by a person designated by that Minister. This is the case regardless of the risk associated with the mission. Enter code 43 and the amount of those earnings, up to the maximum rate of pay earned by a lieutenant-colonel of the Canadian Armed Forces. Include this amount with the total employment earnings in box 14.

Code 66 – Eligible retiring allowances

Enter the amount of retiring allowances (also called severance pay) that was paid in the year and is eligible for transfer to an RPP or RRSP, even if not transferred. Do not include this amount in box 14. For more information, see Retiring allowances.

Code 67 – Non-eligible retiring allowances

Enter the amount of retiring allowances (also called severance pay) not eligible for transfer to an RPP or RRSP. Do not include this amount in box 14. For more information, see Retiring allowances.

Code 69 – Indian (exempt income) – Non-eligible retiring allowances

Enter the amount of retiring allowances (also called severance pay) that was paid to an Indian in the year and is not eligible for transfer to an RPP or RRSP. Do not include this amount in box 14. For more information on retiring allowances, go to Retiring allowances. For more information on how to report income paid to an Indian, go to Indians – employment.

Code 71 – Indian (exempt income) – Employment

If you are an employer paying tax-exempt salary or wages to an Indian, go to Indians – employment.

Code 74 – Past service contributions for 1989 or earlier years while a contributor

If an employee made past service contributions to a registered pension plan (RPP) for employment in 1989 or earlier years while a contributor to an RPP, see Box 20 – RPP contributions.

Code 75 – Past service contributions for 1989 or earlier years while not a contributor

If an employee made past service contributions to a registered pension plan (RPP) for employment in 1989 or earlier years while not a contributor to an RPP, see Box 20 – RPP contributions.

Code 77 – Workers’ compensation benefits repaid to the employer

Enter the amount of workers’ compensation benefits repaid to the employer that was previously included in the employee’s employment income (box 14 of the T4 slip). This allows employees to claim a corresponding deduction as other employment expenses on their income tax and benefit returns. For more information, see “Workers’ compensation claims” in Chapter 6 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Code 78 – Fishers – Gross income

See Code 78 – Fishers – Gross income.

Code 79 – Fishers – Net partnership amount

See Code 79 – Fishers – Net partnership amount.

Code 80 – Fishers – Shareperson amount

See Code 80 – Fishers – Shareperson amount.

Code 81 – Placement or employment agency workers – Gross income

See Placement or employment agency workers.

Code 82 – Taxi drivers and drivers of other passenger-carrying vehicles – Gross income

See Barbers and hairdressers, and taxi drivers and drivers of other passenger-carrying vehicles.

Code 83 – Barbers or hairdressers – Gross income

See Barbers and hairdressers, and taxi-drivers and drivers of other passenger-carrying vehicles.

Code 85 – Employee-paid premiums for private health services plans

An employee can claim premiums they paid to a private health services plan (PHSP) as a qualifying medical expense (including the applicable GST/HST or PST). The use of code 85 is optional; however, if you do not use this code, we may ask the employee to provide supporting documents. For more information, see archived Interpretation Bulletin IT-339, Meaning of private health services plan (1988 and subsequent taxation years) and go to Private Health Services Plan for the CRA’s position on what qualifies as a PHSP.

Code 86 – Security options election

Enter the total amount of the security option cash-outs that you have elected not to claim as an expense. This amount is already included in box 14.

Code 87 – Emergency services volunteer exempt amount

Enter the exempt amount (up to $1,000) paid by a government, a municipality, or a public authority to an individual who performed firefighter or search and rescue duties as a volunteer. If you employed the individual other than as a volunteer for the same or similar duties, the whole amount is taxable. Include the whole amount in box 14 and do not use code 87.

Code 88 – Indian (exempt income) – self-employment

Enter the amount of tax-exempt self-employment income paid to an Indian who is a fisher, barber or hairdresser, or taxi driver or driver of other passenger-carrying vehicles. For more information, see Tax-exempt self-employment income.

Filing T4 slips

For a description of the filing methods available, see Chapter 4 – T4 information return.

Chapter 3 – T4 Summary

If you are filing your return electronically, do not send us a paper copy of the slips or summary but keep a copy for your records. For information about filing electronically, see Electronic filing methods or go to Filing Information Returns Electronically (T4/T5 and other types of returns).

If you are filing on paper, use the T4 Summary, Summary of Remuneration Paid, to report the totals of the amounts reported on the related T4 slips. Send the original summary and the related slips to the Jonquière Tax Centre.

Filling out the T4 Summary

Report amounts in Canadian dollars and cents, even if they were paid in another currency. To get the average exchange rates, go to What are the average exchange rates?.

Fill out a separate T4 Summary for each of your payroll program accounts. The totals you report on your T4 Summary have to agree with the totals you report on your T4 slips. Errors or omissions can cause unnecessary processing delays.

If you have not reported any amounts on the T4 slip or Summary, there is no need to send us a form.

Detailed instructions

In the area at the top of the T4 Summary, enter the 15-character payroll program account number in the “Employer’s account number” box. It is the number that you use to send us your employees’ deductions. Enter your operating or trade name as well as your address below the payroll program account number.

You cannot change your address using the T4 Summary. To do this, contact your tax centre at the address listed at the end of this guide.

Note

You can also change the address of your business online in My Business Account. An authorized representative can use this service through Represent a Client.

Year

Enter the last two digits of the calendar year for which you are filing the return.

Line 14 – Employment income

Enter the total of box 14 from all T4 slips.

Line 16 – Employees’ CPP contributions

Enter the total of box 16 from all T4 slips.

Line 18 – Employees’ EI premiums

Enter the total of box 18 from all T4 slips.

Line 19 – Employer’s EI premiums

Enter your share of EI premiums (multiply the employees’ total premiums by the employer’s premium rate).

Line 20 – Registered pension plan (RPP) contributions

Enter the total of box 20 from all T4 slips.

Line 22 – Income tax deducted

Enter the total of box 22 from all T4 slips.

Line 27 – Employer’s CPP contributions

Enter your share of CPP contributions.

Line 52 – Pension adjustment

Enter the total of box 52 from all T4 slips.

Lines 74 and 75 – Canadian-controlled private corporations or unincorporated employers

Enter the social insurance numbers of any proprietors or principal owners.

Lines 76 and 78 – Person to contact about this return

Enter the name and telephone number of a person that we can call to get or clarify information on the T4 Summary.

Line 80 – Total deductions reported

Add the amounts reported on lines 16, 27, 18, 19, and 22 of the T4 Summary. Enter the total on line 80.

Line 82 – Minus: remittances

Enter the amount you remitted for the year under your payroll program account number.

Note

A remittance that was due in January of the current year (for deductions made in December of the previous year) is considered late when paid with the previous year’s information return (T4, T4A) and this return is filed after the remittance due date.

Difference

Subtract line 82 from line 80. Enter the difference in the space provided. If there is no difference between the total deductions you reported and the amount you remitted for the year, leave lines 84 and 86 blank. Generally, we do not charge or refund a difference of $2 or less.

Line 84 – Overpayment

If the amount on line 82 is more than the amount on line 80 (and you do not have to file another type of return for this account number), enter the difference on line 84. Attach a note indicating the reason for the overpayment and whether you want us to transfer this amount to another account or another year, or refund the overpayment to you.

Line 86 – Balance due

If the amount on line 80 is more than the amount on line 82, enter the difference on line 86.

Line 88 – Total number of T4 slips filed

Enter the total number of T4 slips that you are including with the T4 Summary.

Chapter 4 – T4 information return

In all instances, you have to file your T4 information return on or before the last day of February following the calendar year that the information return applies to. If the due date falls on a Saturday, or a Sunday, your return is due the next business day.

We consider your return to be filed on time if we receive it or it is postmarked on or before the due date. If you fail to file it on time, we may assess a penalty. See Penalties, interest and other consequences.

If you have more than one payroll program account, you will have to file a separate information return for each account.

If you have overpaid, include a letter explaining the reason for the overpayment and how you want us to apply it. If you owe an amount, send the account information and tax year with your payment.

If your business or activity ceases during the year, you have to file a T4 information return within 30 days of ending your business or stopping your activity.

Service bureaus filing returns

If a service bureau is filing an information return for you, you are still responsible for the accuracy of the information, for any balance owing, and for filing on time.

Branch offices filing returns

If the branch office of a company has sent in CPP contributions, EI premiums, and income tax deductions under a separate account that only that branch uses, file the T4 information return of that branch as a separate return.

Electronic filing methods

Internet filing will be available starting January 6, 2020. You must file information returns by Internet if you file more than 50 information returns (slips) for a calendar year.

For more information, go to Filing Information Returns Electronically (T4/T5 and other types of returns).

Filing by Web Forms

Our Web Forms application is free and secure. To use it, all you need is access to the Internet. With Web Forms you can file an information return easily, following the step-by-step instructions.

Web Forms lets you:

  • file up to 100 slips (original, additional, amended, or cancelled) from our website
  • calculate all of the totals for the summary
  • create an electronic information return containing slips and a summary, which can be saved and imported at a later date
  • print all your slips and your summary
  • validate data in real time

After you submit your information return, you will receive a confirmation number that will be your proof that we received it.

To use the Web Forms application, you must have a business number and its associated web access code. If you do not have a web access code, you can easily get one online or by calling us. For more information, see Web access code.

To start using this application or to get more information, see Filing Information Returns Electronically (T4/T5 and other types of returns).

Filing by Internet file transfer (XML)

Internet file transfer allows you to transmit an original or amended return with a maximum file size of 150 MB. All you need is a web browser to connect to the Internet, and your software will create, print, and save your electronic information return in XML format.

If you use commercial or in-house developed payroll software to manage your business, you can file up to 150 MB by Internet file transfer. Multiple returns can be filed in one submission, as long as the total submission does not exceed the 150 MB restriction.

Note

If your return is more than 150 MB, you can either compress your return or you can divide it so that each submission is no more than 150 MB.

For more information about this filing method, contact your software provider or go to Filing Information Returns Electronically (T4/T5 and other types of returns).

Web access code

To file your return over the Internet using the Internet file transfer or Web Forms services, you will need a business number and its associated web access code (WAC), unless you are filing through My Business Account or Represent a Client. For more information about these services, see the next section Filing without a web access code below. The CRA is no longer mailing WAC letters. As a result, you can use the WAC that was issued for the tax year to file your information returns. If you have misplaced or do not have a WAC, see Filing Information Returns Electronically (T4/T5 and other types of returns) to access our Web access code online service. If you cannot get your WAC online or would like to change it, call the e-Services Helpdesk at 1-800-959-5525.

Filing without a web access code

You can file your T4 information return without a web access code through My Business Account or Represent a Client.

Select the “File a return” option through:

If you are already registered for our online services, you can log in using your CRA user ID and password or the Sign-In Partner option.

To register as a business owner, go to My Business Account and do the following:

  • Select “CRA Register” and create a CRA use ID and password. You can also select “Sign-In Partner Login/Register” and use the same sign-in information you use for other online services such as online banking.
  • To register, you will need to provide all of the following information:
    • your social insurance number (SIN)
    • your date of birth
    • your postal code or ZIP code
    • an amount you entered on your income tax and benefit return (the line we ask for will vary; it could be from the current or the previous tax year)
    • your business number (BN)
  • You must enter a CRA security code to finalize the registration process. You can ask for the CRA security code by paper mail or email.
  • Return to My Business Account to enter your CRA security code.

To register as a representative, including employees of a business, go to Represent a Client and do the following:

  • Select “CRA Register” and create a CRA user ID and password. Or you can select “Sign-In Partner Login/Register” and use the same sign-in information you use for other online services, such as online banking.
  • To register, you will need to provide:
    • your access code from your notice of assessment
    • your postal code or ZIP code
  • Register as the business owner (using your BN) or as yourself and receive a representative identifier (RepID), or create a group of representatives and receive a group identifier (GroupID).
  • Get authorization to have online access to the tax free savings account (TFSA) by doing one of the following:
    • using the “Authorization request” service with Represent a Client
    • giving your BN, RepID, or GroupID to businesses or your employer so they can authorize you using the “Authorize or manage representatives” service in My Business Account

Note
If the business authorizes you online in My Business Account, you will have immediate online access to the business accounts.

Once you are registered as a business owner, or registered and authorized as a representative, an employee, or a group of employees, you will be able to file or amend T4 slips without a Web access code.

Filing on paper

You can file up to 50 slips on paper. However, we strongly encourage you to file online using Internet file transfer or Web Forms. We explain these options under Electronic filing methods. 

If you need more paper copies, you can order a maximum of 9 single-page slips at Forms and publications or by calling 1-800-959-5525. There are two slips per page intended for printers, for typing, or to be filled out by hand.

If you choose to file your return on paper, mail it to:

Jonquière TC
T4 Program
Post Office Box 1300 LCD Jonquière
Jonquière QC  G7S 0L5

Fill out one copy of the T4 slip for each employee and include it with your T4 Summary when you file. Enter the information for two different employees on one sheet. You must keep the information from the T4 slips and the T4 Summary or a copy of these forms for your files.

How to distribute your T4 slips

You must give employees their T4 slips on or before the last day of February following the calendar year to which the slips apply. If you do not, you may be assessed a penalty. The penalty for failing to distribute T4 slips to recipients is $25 per day for each such failure with a minimum penalty of $100 and a maximum of $2,500.

Employers may distribute T4 slips electronically by making them accessible to their employees on a secured portal and with a secured printer. With written consent from the employee, the employer can distribute T4 slips using email.

In all other cases, where the employee does not have access to a secured portal and printer or when the employee requests it, the employer will provide two copies of the T4 slip, in paper format, to the employee in person or by mail.

Notes

If T4 slips are returned as not deliverable, you may want to keep the copies with the employee’s file.

If you know that the address you have on file for an employee is not correct, do not send the employee’s T4 slip copies to that address. Document why the copies were not sent and your efforts to get the correct address. Keep this information with the T4 slip copies in the employee’s file. You still have to include that T4 slip information in your T4 information return when you file it.

We suggest that you print the two T4 slips that you have to give to each employee on one sheet. For security purposes, do not print your payroll program account number (box 54) on these copies.

For more information on how to fill out the T4 slip and the T4 Summary, see Filling out T4 slips and Filling out the T4 Summary.

Chapter 5 – After you file

When we receive your information return, we check it to see if you have prepared it correctly. After an initial review, we enter your return into our processing system, which captures the information and performs various validity and balancing checks. If there are any problems, we may contact you.

We also verify the calculations you made on the T4 slips to make sure that the pensionable and insurable earnings you reported agree with the CPP and EI deductions you remitted. For more information, see Chapter 4 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

If you receive a pensionable and insurable earnings review (PIER) report, do not send us amended slips. Instead, respond to the PIER advising of the changes required for the employees on the listing. For more information, see Chapter 4 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

After filing your information return, you may notice that you made an error on a T4 slip. If so, you will have to prepare an amended slip to correct the information.

If you made an overpayment of salary, wages, or other remuneration to an employee, see Salary overpayments for more information on how to correct an error.

Note

You do not have to file an amended T4 slip if the only change is to the employee’s address.

CPP contributions and EI premiums are sometimes deducted in error from exempt income. The employer may report the deduction and the exemption on the original T4 slip. Amendments may be necessary to allow the individual to be credited through an income tax and benefit return.

A T4 slip should be cancelled if it is issued to a proprietor or partner in an unincorporated business. They should report their income as business income on an income tax and benefit return, along with a statement of revenue and expenses.

For information, go to Salary overpayments.

Amending or cancelling slips over the Internet

To amend a slip over the Internet, change only the information that is incorrect and retain all of the remaining information that was originally submitted. Use summary report type code “A” and slip report type code “A.”

To cancel a slip, do not change any information that was contained on the original slip. Use summary report type code “A” and slip report type code “C.”

For more information about amending or cancelling information returns using the Internet, go to Filing Information Returns Electronically (T4/T5 and other types of returns).

If you amend or cancel slips using the Internet, we may contact you to find out why.

Amending or cancelling slips on paper

If you choose to file your amended return on paper, clearly identify the slips as amended or cancelled slips by writing “AMENDED” or “CANCELLED” at the top of each slip. Make sure you fill out all the necessary boxes, including the information that was correct on the original slip. Send two copies of the amended slips to the employee. Send one copy of the amended slips to any national verification and collection centre with a letter explaining the reason for the amendment. The addresses of our national verification and collection centres are listed at the end of this guide.

Do not file an amended T4 Summary.

Adding slips

After you file your information return, you may discover that you need to send us additional slips. If you have original slips that were not filed with your return, file them separately either electronically or on paper.

To file additional slips electronically, see Electronic filing methods.

When submitting additional slips on paper, clearly identify the new slips by writing “ADDITIONAL” at the top of each slip. Send one copy of the additional slips to any national verification and collection centre with a letter explaining the reason for the addition. The addresses of our national verification and collection centres are listed at the end of this guide.

Do not file an amended T4 Summary.

Note

Any additional T4 slips which are filed after the due date may result in a penalty. For more information, go to Late filing and failing to file the T4 information return.

Replacing slips

If you issue paper T4 slips to replace copies that are lost or destroyed, do not send us a copy. Clearly identify them as “DUPLICATE” copies, and keep them with your records.

Pension adjustment (PA)

You have to recalculate a pension adjustment (PA) in a registered pension plan when all of the following conditions are met:

  • an employee returns from a leave of absence or a period of reduced service
  • the service was not previously pensionable service
  • by April 30 of the following year:
    • benefits are retroactively provided under a defined benefit provision for the period concerned and the employee makes the commitment to purchase the benefits
    • retroactive contributions are made by the employee or the employer to a money purchase provision

Note

If the commitment to purchase benefits is made after April 30, a past service pension adjustment (PSPA) will be calculated.

If a recalculated PA applies, you have to report an amended PA for each year after 1989 that is affected by the leave.

You do not have to report an amended PA when the difference between the previously reported PA and the amended PA is less than $250. However, you do have to report one if an employee asks you to accurately report the PA, or if we ask you to report the amended PA.

For the years in which you did not previously report a PA for the employee, you have to file an amended T4 slip showing the correct PA. If you previously reported a PA for the employee in a particular year, you have to show the total PA that applies for that year on an amended T4 slip.

For information on recalculating a PA, see Guide T4084, Pension Adjustment Guide. For information on calculating and reporting PSPA, see Guide T4104, Past Service Pension Adjustment Guide.

Data used by other programs

Other federal government departments use T4 information. For example, Employment and Social Development Canada (ESDC) uses the information on the T4 slip to update a person’s record of earnings file.

The information on CPP contributions that we send to ESDC determines the CPP benefits that a person will receive.

Chapter 6 – Special situations

Barbers and hairdressers, and taxi drivers and drivers of other passenger-carrying vehicles

Workers who are your employees

If you employ these types of workers, you have to deduct CPP/QPP contributions, EI premiums, PPIP premiums, and income tax from their pay and prepare a T4 slip for them, as you would for regular employees. For information about the payroll deductions, see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances. For information about preparing a T4 slip, see Chapter 2 – T4 slips.

Tax?exempt salary or wages you paid to your Indian employee are treated differently. For information about the payroll deductions, see “Chapter 7 – Special situations” in Guide T4001. For information about preparing a T4 slip, see Indians – Employment.

Workers who are self-employed

Even if these types of workers are self-employed, special rules apply to the payroll deductions you have to withhold. For more information, see “Chapter 7 – Special situations” in Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

You still have to prepare a T4 slip for these workers for EI and PPIP purposes as explained below. For information on how to report the tax-exempt earnings of an Indian who is self-employed, see Indians – Self-employment.

For all other self-employed workers, fill in the following fields on their T4 slip:

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the worker’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the worker.

Box 14 – Employment income

Leave this box blank. See Other information.

Box 18 – Employee’s EI premiums

Enter the EI premiums remitted on behalf of the worker (worker’s share only).

Box 24 – EI insurable earnings

Enter the amount of the worker’s insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Enter an “X” or a check mark under CPP/QPP.

Box 29 – Employment code

Enter the appropriate code for the occupation of the worker. Enter code 13 for barbers or hairdressers, code 12 for taxi drivers or drivers of other passenger-carrying vehicles.

Box 55 – Employee’s PPIP premiums

Enter the PPIP premiums remitted on behalf of the worker (worker’s share only) while they worked in Quebec.

Box 56 – PPIP insurable earnings

For workers working in Quebec, enter the total amount used to calculate the worker’s PPIP premiums, up to a maximum of $76,500 for 2019.

Other information

Enter the amount of gross earnings of the worker, using code 83 for barbers or hairdressers and code 82 for taxi drivers and drivers of other passenger-carrying vehicles.

If you do not know the actual gross earnings, you still have to report gross income and an amount of insurable earnings, which you can calculate using the method explained in Chapter 7 of Guide T4001.

Certified non-resident employers

A qualifying non-resident employer is not required to file a T4 slip for salary, wages or other remuneration paid to a qualifying non-resident employee, if the employer, after reasonable enquiry, determines that the employee’s total taxable income earned in Canada during the calendar year, including the payment of such salary, wages, or other remuneration is $10,000 or less. For more information, go to Rendering services in Canada.

Employees with power saws or tree trimmers

If you are an employer in the forestry business, you may have employees who, according to their contracts, have to use their own power saws or tree trimmers at their own expense.

In box 14, “Employment income,” include rental payments you made to employees for the use of their own power saws or tree trimmers. You should not reduce the amount in box 14 by the cost or value of saws, trimmers, parts, gasoline, or any other materials the employee supplies.

Employees outside Canada

In situations where you pay CPP on behalf of your employee who is working outside Canada, for all or part of the year, you have to prepare a T4 slip. See Box 29 – Employment code and Box 10 – Province of employment for specific T4 reporting instructions.

Note

When CPP is paid by the employer on behalf of detached employees under employment code 16, leave box 14 blank if no other type of income is reported. Fill in boxes 16 and 26 with the appropriate amounts and leave boxes 18 and 24 blank.

Fishing income

Fishing income is reported on the T4 slip.

Fishing income (for example, proceeds of the catch paid to a self-employed fisher) and employment income (for example, plant income) can be reported on the same T4 slip or on separate T4 slips.

The instructions that follow are for fishing income paid to a self-employed fisher. For instructions on reporting employment income that you paid to an employee, see the Detailed instructions. For instructions on reporting tax-exempt fishing income that you paid to a self-employed Indian, see Tax-exempt self-employment income.

Notes

Do not use code 78, 79, or 80 to report employment income. Use box 14. See Box 14 – Employment income.

Reporting paid or payable self?employed fisher income depends on whether you are using the cash method or accrual method of accounting. For an explanation of these methods, see Chapter 1 of Guide T4002, Self?employed Business, Professional, Commission, Farming, and Fishing Income.

For more information on how to calculate the insurable earnings of a fisher if you are a designated employer, see Guide T4005, Fishers and Employment Insurance. For more information about calculating the fishing income for a sole proprietor, see Chapter 2 of Guide T4002.

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the fisher’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the fisher.

Box 14 – Employment income

Leave blank. Fishing income is reported using codes 78, 79, and 80. See the Other information section.

Box 18 – Employee’s EI premiums

Enter the EI premiums you remitted on behalf of the self-employed fisher on their gross income.

Box 24 – EI insurable earnings

Enter the amount of the fisher’s insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Enter an “X” or a check mark under CPP/QPP (fisher earnings are not pensionable).

Box 29 – Employment code

Enter code 17.

Box 55 – Employee’s PPIP premiums

Enter the PPIP premiums you deducted from gross income of fishers working in Quebec.

Box 56 – PPIP insurable earnings

For fishers working in Quebec, enter the total amount used to calculate the fisher’s PPIP premiums, up to a maximum of $76,500 for 2019.

Other information

Code 78 – Fishers – Gross income

Enter the amount paid or payable to the fisher from the proceeds of a catch. Do not include this amount in box 14.

In addition, report either the net partnership or owner amount using code 79 or the shareperson amount using code 80.

Note

This income does not include amounts paid for a catch or part of a catch made by other persons who were not members of the crew. For more information, see “Calculating the insurable earnings of a fisher” in Guide T4005, Fishers and Employment Insurance.

Code 79 – Fishers – Net partnership amount

Enter the amount that is the product of the gross income (or gross value of the catch) reported under code 78, minus the 25% prescribed amount and the total amount paid to the shareperson reported under code 80, multiplied by your partnership agreement allocation. See Example 5 in Guide T4005. Include this amount in box 24 (and in box 56 for fishers in Quebec). Do not include this amount in box 14.

Code 80 – Fishers – Shareperson amount

Enter the amount paid or payable to the fisher from the proceeds of a catch based on the sharing arrangement agreed to before embarking on the fishing trip. Include this amount in box 24 (in box 56 for fishers in Quebec) and with code 78. Do not include this amount in box 14.

Indians – Employment

We recognize that many First Nations people in Canada prefer not to describe themselves as Indians. However, we use the term Indian because it has a legal meaning in the Indian Act.

The salary or wages, benefits or allowances you paid to an Indian may be taxable, tax-exempt, or partly tax-exempt. Use Form TD1-IN, Determination of Exemption of an Indian’s Employment Income, to determine the type of exemption that applies to an Indian’s employment income. For more information, you can also refer to Chapter 7 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

Taxable employment income

If you are an employer paying taxable salary or wages, benefits or allowances to an Indian employee, you have to deduct CPP/QPP contributions, EI premiums, and income tax, as well as PPIP premiums (for employees working in Quebec). Fill in all boxes of the T4 slips in the usual way.

Note

If you paid a retiring allowance to an Indian, see Retiring allowances and Code 69 – Indian (exempt income) – Non?eligible retiring allowances for more information.

Tax-exempt employment income

If you are an employer paying tax-exempt salary or wages, benefits, or allowances to an Indian employee, you do not have to deduct CPP/QPP contributions; however, you have to deduct EI premiums and PPIP premiums (for employees working in Quebec). For more information, see Guide T4001, Employers’ Guide – Payroll Deductions and Remittances.

How to fill out the T4 slip

Prepare the T4 slip in the following way when you pay a tax-exempt salary or wages to your Indian employee.

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the employee’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the employee.

Box 14 – Employment income

Leave this box blank. Instead, in the “Other information” area, enter code 71 and the amount of the exempt salary or wages paid to your Indian employee in the year.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

The employment of an Indian whose income is exempt from tax is excluded from pensionable earnings; however, you can elect to provide your Indian employees with optional CPP coverage by filling out and filing Form CPT124, Application for Coverage of Employment of an Indian in Canada Under the Canada Pension Plan Whose Income is Exempt Under the Income Tax Act.

If you did not elect to provide CPP/QPP coverage to all your Indian employees on their tax-exempt employment income, leave this box blank.

If you did elect to provide CPP/QPP coverage, enter the CPP/QPP contributions you deducted from the employee’s earnings.

For more information, see Guide T4001. For optional QPP coverage, fill out and file Form RR-2-V, Election to Participate in the Québec Pension Plan: Indian Employees Whose Employment Is Excepted by Reason of a Tax Exemption. For more information, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions, which you can get from Revenu Québec.

Box 18 – Employee’s EI premiums

Tax-exempt salary or wages paid to your Indian employee are insurable earnings and you must deduct EI premiums. Enter the EI premiums you deducted.

Box 20 – RPP contributions

Leave this box blank. Registered pension plan (RPP) contributions made with respect to tax-exempt employment income are not deductible by your employee.

Box 24 – EI insurable earnings

Enter the amount of insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 26 – CPP/QPP pensionable earnings

If you did not elect to provide CPP or QPP coverage to all your Indian employees on their tax-exempt employment income, enter “0.”

If you did elect to provide CPP/QPP coverage, enter the amount of pensionable earnings on which you calculated the CPP/QPP contributions, up to a maximum of $57,400 for 2019.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Leave this box blank if you entered an amount greater than 0 in box 16, 17, or 26. Enter an “X” or a check mark under CPP/QPP only if the earnings were exempt for the entire period of employment.

Box 44 – Union dues

Leave this box blank. Union dues paid in respect of tax-exempt employment income are not deductible by your Indian employee.

Box 52 – Pension adjustment

Tax-exempt salary is included when determining the pension adjustment amount. See Box 52 – Pension adjustment for details.

Box 55 – Employee’s PPIP premiums

Tax-exempt salary or wages paid to an Indian in Quebec are insurable earnings and you must deduct PPIP premiums. Enter the PPIP premiums you deducted from employees working in Quebec.

Box 56 – PPIP insurable earnings

For employees working in Quebec, enter the total amount used to calculate the employee’s PPIP premiums, up to a maximum of $76,500 for 2019.

Partly tax-exempt employment income

How to fill out the T4 slip

Prepare the T4 slip in the following way when you pay a partly tax-exempt salary or wages to your Indian employee.

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the employee’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the employee.

Box 14 – Employment income

Enter the taxable salary or wages paid to the Indian employee in box 14. In the “Other information” area, enter code 71 and the amount of the tax-exempt salary or wages paid in the year.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

If you did not elect to provide CPP/QPP coverage to all your Indian employees on their tax-exempt employment income, enter the CPP/QPP contributions you deducted from your employee’s taxable earnings.

If you did elect to provide CPP/QPP coverage, enter the CPP/QPP contributions you deducted from your employee’s earnings.

Box 18 – Employee’s EI premiums

Taxable and tax-exempt salary or wages paid to your Indian employee are insurable earnings and you must deduct EI premiums. Enter the EI premiums you deducted.

Box 20 – RPP contributions

Registered pension plan (RPP) contributions that have been made for tax-exempt income are not deductible. Do not enter those contributions in box 20. If the employment income that relates to an RPP contribution consists of both taxable and tax-exempt income, you have to prorate the RPP contribution.

You do not have to prorate the amount of pension adjustment (PA). Report the total amount in box 52, “Pension adjustment,” of the T4 slip.

Box 24 – EI insurable earnings

Enter the amount of insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 26 – CPP/QPP pensionable earnings

Enter the amount of pensionable earnings on which you calculated the CPP/QPP contributions, up to a maximum of $57,400 for 2019. Enter “0” if there are no pensionable earnings.

Box 44 – Union dues

Annual union, professional, or like dues related to tax-exempt income are not deductible. Do not enter these dues in box 44. If the employment income that relates to union dues consists of both taxable and tax-exempt income, you have to prorate the union dues.

Box 52 – Pension adjustment

Taxable and tax-exempt salary is included when determining the pension adjustment amount. See Box 52 – Pension adjustment for details.

Box 55 – Employee’s PPIP premiums

Taxable and tax-exempt salary or wages paid to an Indian in Quebec are insurable earnings and you must deduct PPIP premiums. Enter the PPIP premiums you deducted from employees working in Quebec.

Box 56 – PPIP insurable earnings

For employees working in Quebec, enter the total amount used to calculate the employee’s PPIP premiums, up to a maximum of $76,500 for 2019.

Indians – Self-employment

We recognize that many First Nations people in Canada prefer not to describe themselves as Indians. However, we use the term Indian because it has a legal meaning in the Indian Act.

If you pay taxable income to a self-employed Indian who works as a fisher, barber or hairdresser, taxi driver or driver of other passenger-carrying vehicles, you may have to deduct EI premiums (and PPIP premiums for workers in Quebec) and report the amounts on a T4 slip following the instructions below. Payments you made to an Indian who is not your employee may be taxable, tax-exempt, or partly tax-exempt.

Taxable self-employment income

If you pay taxable income to a self-employed Indian who works as a fisher, barber or hairdresser, taxi driver or driver of other passenger-carrying vehicles, you have to pay EI premiums (and PPIP premiums for workers in Quebec). For more information on fishers, see Guide T4005, Fishers and Employment Insurance.

How to fill out the T4 slip

If the Indian’s income was earned while working as a barber and hairdresser, taxi driver or driver of other passenger carrying vehicles, follow the instructions under Barbers and hairdressers, and taxi drivers and drivers of other passenger-carrying vehicles. If the Indian received self-employed fishing income, follow the instructions under Fishing income.

Tax-exempt self-employment income

If you pay tax-exempt income to a self-employed Indian worker who is a fisher, barber or hairdresser, a taxi driver or driver of other passenger-carrying vehicles, you do not have to deduct CPP/QPP contributions; however, you have to pay EI premiums (and PPIP premiums for fishers/workers in Quebec). For more information on fishers, see Guide T4005.

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the fisher or worker’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the fisher or worker.

Box 14 – Employment income

Leave blank. In the “Other information” area, enter code 88 and the amount of the tax-exempt earnings paid to the self-employed fisher or worker in the year. See Other information – code 88.

Box 18 – Employee’s EI premiums

Enter the EI premiums you remitted on behalf of the self-employed fisher or worker’s gross earnings.

Box 24 – EI insurable earnings

Enter the amount of the fisher or worker’s insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 29 – Employment code

Enter the appropriate code for the occupation of the worker. Enter code 13 for barbers or hairdressers, code 12 for taxi drivers or drivers of another passenger-carrying vehicles or code 17 for a fishers – self-employed.

Box 55 – Employee’s PPIP premiums

Enter the PPIP premiums you deducted from the self-employed fisher or worker’s gross income earned in Quebec.

Box 56 – PPIP insurable earnings

For self-employed income earned in Quebec, enter the total amount used to calculate the fisher or worker’s PPIP premiums, up to a maximum of $76,500 for 2019.

Other information – code 88

Enter the amount of the fisher or worker’s tax-exempt gross earnings using code 88, Indian (exempt income) – Self-employment. Do not include this amount in box 14.

Partly tax-exempt self-employment income

If part of the income that you pay to a self-employed Indian fisher or worker is tax-exempt you will have to fill out the T4 slip using the instructions under Taxable self-employment income and Tax-exempt self-employment income.

Placement or employment agency workers

These guidelines apply to employees/workers engaged by placement or employment agencies, in the following four situations:

a) Agency that hires a worker as an employee

An agency that hires an employee (even if they are located at a client’s premises) has to deduct CPP/QPP contributions, EI premiums, income tax, and PPIP premiums (for employees working in Quebec) from amounts paid to these employees. The agency also has to report these amounts on a T4 slip for the employee.

b) Agency that pays the worker

Where an agency places a worker (who is not an employee of the agency) in employment under the direction and control of a client of the agency and the agency pays the worker, the agency is not required to deduct income tax, but is required to deduct CPP/QPP contributions, EI premiums, and PPIP premiums (for workers in Quebec), from amounts paid to these workers. The agency also has to report these amounts on a T4 slip for the worker.

c) Agency whose client pays the worker

Where an agency places a worker (who is not an employee of the agency) in employment under the direction and control of a client of the agency and the client of the agency pays the worker, the client is required to deduct CPP/QPP contributions and income tax but is not required to deduct EI premiums (or PPIP premiums for employees in Quebec). The client of the agency has to report these amounts on a T4 slip.

d) Agency that hires a worker under a contract for services

Where an agency places a worker under a contract for services (that is, an independent worker and not an employee of the agency), the agency is not required to deduct CPP/QPP contributions, EI premiums, PPIP premiums, or income tax since the worker is self?employed. Because the worker is self?employed, neither the agency nor the client is required to file a T4 slip. However, you may be required to file a T4A slip. See Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.

How to fill out the T4-slip

In all cases, except where an agency hires a worker under a contract for services, you (the agency or the client, as the case may be) will fill out the T4 slip as follows:

Employer’s name

Enter your operating or trade name.

Employee’s name and address

Enter the employee’s/worker’s name and address, including the province or territory and postal code.

Box 10 – Province of employment

Enter the provincial or territorial abbreviation (see the list at Box 10 – Province of employment).

Box 12 – Social insurance number

Enter the SIN, as provided by the employee or worker.

Box 14 – Employment income

Report the gross earnings before deductions only if the agency hired the employee. If the agency paid the worker or the agency’s client paid the worker, leave this box blank. See Code 81 below.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

Enter the CPP/QPP contributions you deducted from the employee or worker’s gross earnings.

Box 18 – Employee’s EI premiums

Enter the EI premiums you deducted from the employee or worker’s gross earnings. If the agency’s client paid the worker, leave this box blank.

Box 22 – Income tax deducted

Enter the total income tax you deducted from the employee or worker’s remuneration. This includes the federal, provincial (except Quebec), and territorial taxes that apply. If the agency paid the worker, leave this box blank.

Box 24 – EI insurable earnings

Enter the amount of the employee or worker’s insurable earnings on which you calculated the EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings. If the agency’s client paid the worker, enter “0.”

Box 26 – CPP/QPP pensionable earnings

Enter the amount of the employee or worker’s pensionable earnings on which you calculated the CPP/QPP contributions, up to a maximum of $57,400 for 2019. Enter “0” if there are no pensionable earnings.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Leave this box blank. If the agency’s client paid the worker, enter an “X” or a check mark under EI, otherwise, leave this box blank.

Box 29 – Employment code

Enter employment code 11 for scenarios “b” and “c” and leave this box blank for scenario “a”.

Box 55 – Employee’s PPIP premiums

Enter the PPIP premiums you deducted from the employee or worker’s gross earnings while they worked in Quebec. If the agency’s client paid the worker, leave this box blank.

Box 56 – PPIP insurable earnings

For employees or workers working in Quebec, enter the total amount used to calculate the employee or worker’s PPIP premiums, up to a maximum of $76,500 for 2019. If the agency’s client paid the worker, leave this box blank.

Code 81

In the “Other information” area at the bottom of the T4 slip, use code 81 for scenarios “b” and “c” and enter the gross earnings of placement and employment agency workers. If the agency hired the employee, as in scenario “a”, leave this box blank.

For more information, go to Filling out the T4 slip.

Retiring allowances

A retiring allowance (also called severance pay) is an amount paid to officers or employees when or after they retire from an office or employment, in recognition of long service or for the loss of office or employment.

Detailed information about what is and is not a retiring allowance, how to calculate deductions for retiring allowances, and how to determine the amount of retiring allowance that is eligible for transfer, are found in Chapter 6 of Guide T4001, Employers’ Guide – Payroll Deductions and Remittances and in Income Tax Folio S2-F1-C2, Retiring Allowances.

If you paid a retiring allowance to a non-resident of Canada, do not report it on a T4 slip. Instead, fill out an NR4 slip, Statement of Amounts Paid or Credited to Non-Residents of Canada. For more information, see Guide T4061, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting.

Transfer of a retiring allowance – T4 codes

Employees with years of service before 1996 may be able to directly transfer all or part of a retiring allowance to a registered pension plan (RPP) or a registered retirement savings plan (RRSP). This part is commonly referred to as the eligible portion or the amount eligible for transfer. A retiring allowance may include an eligible portion and a non-eligible portion.

The part of the retiring allowance paid in each year that is eligible for transfer should be reported on a T4 slip in the “Other information” area using code 66. Amounts not eligible for transfer are reported in the “Other information” area using code 67 (or code 69 for an Indian). For example, if an employee receives $60,000 payable in instalments of $10,000 over six years and has an eligible amount of $40,000, the employee can choose how they want the eligible and non-eligible parts applied to the instalment payments in each year.

Note

The amounts reported as retiring allowances should not be reported in box 14. For more information, see Code 66 – Eligible retiring allowances.

Salary deferral arrangements

A salary deferral arrangement is a plan or arrangement made between an employee and an employer. Under such an arrangement, an employee postpones receiving salary and wages to a later year. Treat the deferred salary and wages as employment income in the year the employee earns the amount. Report it on the employee’s T4 slip for that year.

Prescribed plans or arrangements

Prescribed plans or arrangements are not covered by the above salary deferral rules. Treat the deferred amounts in these cases as income in the year the employee receives them. Report the income on the employee’s T4 slip for that year.

To find out how to report pension adjustments under these circumstances, see Guide T4084, Pension Adjustment Guide.

Salary paid while the participant is working

How to fill out the T4 slip

Prepare the T4 slip in the following way when you pay a salary to the participant while they are working.

Box 14 – Employment income

Enter the participant’s net salary (the salary minus the deferred amounts) while the person was working.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

Enter the CPP/QPP contributions you deducted from the participant’s net salary (the salary minus the deferred amounts) while the person was working.

Box 18 – Employee’s EI premiums

Enter the EI premiums you deducted from the participant’s gross salary (including deferred amounts) while the person was working.

Box 22 – Income tax deducted

Enter the total income tax you deducted from the participant’s remuneration. This includes the federal, provincial (except Quebec), and territorial taxes that apply.

Box 24 – EI insurable earnings

Enter the amount of insurable earnings on which you calculated the participant’s EI premiums, up to a maximum of $53,100 for 2019. Enter “0” if there are no insurable earnings.

Box 26 – CPP/QPP pensionable earnings

Enter the amount of the participant’s pensionable earnings on which you calculated the CPP/QPP contributions, up to a maximum of $57,400 for 2019. Enter “0” if there are no pensionable earnings.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Do not fill in the CPP/QPP, EI, or PPIP boxes, unless the earnings were exempt for the entire period of employment.

Box 55 – Employee’s PPIP premiums

Enter the PPIP premiums you deducted from the participant’s gross earnings (including deferred amounts) while the person was working in Quebec.

Box 56 – PPIP insurable earnings

For participants working in Quebec, enter the total amount used to calculate the participant’s PPIP premiums, up to a maximum of $76,500 for 2019.

Deferred amounts paid to the participant during the leave period

How to fill out the T4 slip

Prepare the T4 slip in the following way when you pay the deferred amounts to the participant during the leave period

Box 14 – Employment income

Enter the total deferred amounts paid to the participant during the leave period.

Boxes 16 and 17 – Employee’s CPP/QPP contributions

Enter the CPP/QPP contributions you deducted from the participant’s deferred amounts you paid during the leave period.

Box 18 – Employee’s EI premiums

Leave this box blank.

Box 22 – Income tax deducted

Enter the total income tax you deducted from the participant’s remuneration. This includes the federal, provincial (except Quebec), and territorial taxes that apply.

Box 24 – EI insurable earnings

Enter “0.”

Box 26 – CPP/QPP pensionable earnings

Enter the amount of the participant’s pensionable earnings on which you calculated the CPP/QPP contributions, up to a maximum of $57,400 for 2019. Enter “0” if there are no pensionable earnings.

Box 28 – Exempt (CPP/QPP, EI, and PPIP)

Enter an “X” or a check mark under EI. Do not fill in the CPP/QPP or PPIP boxes, unless the earnings were exempt for the entire period of employment.

Box 55 – Employee’s PPIP premiums

Leave this box blank.

Box 56 – PPIP insurable earnings

Leave this box blank.

Salary overpayments

If you make an overpayment of salary, wages or other remuneration to an employee, how you correct this will often depend on the reason the employee was overpaid and the year in which the employee repaid the amount.

You may need to correct overpayments in the following situations:

  • an employee did not perform their duties
  • there was a clerical, administrative, or system error

Note

If you let your employee repay an overpayment in instalments, you may have to calculate a taxable interest benefit. For more information, see “Loans – interest-free and low-interest” in Guide T4130, Employers’ Guide – Taxable Benefits and Allowances.

Employee did not perform their duties

Your employee should repay you the gross amount of the salary overpayment when all of the following conditions are met:

  • the employee is on a leave of absence (that is, the employee did not work)
  • you paid salary or wages the employee would normally be entitled to receive under the terms of their employment contract or collective agreement during the leave period
  • the employee’s circumstances have changed, and the employee is no longer entitled to the salary or wages you paid

Note

If the salary overpayment is the result of a clerical, administrative, or system error, follow the instructions under Clerical, administrative, or system error.

Examples
  • you paid your employee a maternity leave top-up amount, but she did not return to work as required under the terms of her collective agreement
  • you advanced vacation leave credits, but the employee quits working for you before earning the credits
  • you paid a signing bonus to your employee, but he did not work for the time agreed to in his employment contract

If your employee does not repay you, include the salary overpayment and the deductions withheld on the overpayment on the employee’s T4 slip. No other action is required.

Even if your employee repays you in the same year or a different year, you still have to include the salary overpayment and the deductions withheld on the employee’s T4 slip. You cannot adjust the slip or the payroll records to reduce the total employment income or source deductions by the amount of the repayment.

After your employee has repaid the salary or wages, you can give them a letter confirming the tax year when the overpayment was included in their income, as well as the date, the reason, and the amount of repayment you received. With that letter, the employee will be able to claim a deduction on line 22900 of their income tax and benefit return in the year the amount was repaid.

Note

Your employer’s share of Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums is not refundable.

Example

In September 2019, Peter became ill and could not work. You continue to pay his regular salary. In February 2020, he begins to receive payments from a wage loss replacement plan and repays you the amount of salary he received from September 2019 to February 2020. Do not make any adjustments to his 2019 T4 slip or to his current year pay records to reflect the amount of repayment. Instead, Peter can claim a deduction for the repayment on his 2020 income tax and benefit return by providing a copy of the letter you gave him confirming the date and the amount he repaid you and the year the amount was included in income.

Clerical, administrative, or system error

If you overpaid salary, wages, or remuneration to your employee because of a clerical, an administrative, or a system error, you may elect to have the employee repay the net amount of the salary overpayment to you. The net amount is the gross amount, less the following amounts you withheld on the salary overpayment and sent to the Canada Revenue Agency (CRA):

  • income tax
  • Canada Pension Plan (CPP) contributions
  • employment insurance (EI) premiums
Note

If you did not overpay the salary because of a clerical, an administrative, or a system error and the employee did not work, follow the instructions under Employee did not perform their duties.

If you withheld Quebec Pension Plan (QPP) contributions or Quebec Parental Insurance Plan (QPIP) premiums on the salary overpayment, please see Guide TP-1015.G-V, Guide to Filing the RL-1 Slip: Employment and Other Income.

Having your employee repay the net amount of the salary overpayment

You may elect to have your employee repay the net amount of the salary overpayment, if all of the following apply:

  • the overpayment was a result of a clerical, administrative, or system error
  • no later than three years after the end of the year in which you overpaid the salary:
    • you made the election in the prescribed manner
    • the employee repaid or arranged to repay the net amount of the salary overpayment
  • you did not issue a T4 slip with the employee’s correct earnings (that is, with the salary overpayment removed)
  • your business is actively operating

The CRA may ask you to provide supporting documents to verify that you meet the conditions above.

Note

The election is made by either excluding the salary overpayment from an original T4 slip or amending a T4 slip to remove the overpayment and reducing the corresponding income tax you deducted, as well as the CPP contributions and EI premiums you withheld and remitted (when applicable).

Before the original T4 is issued

If the employee repays you or arranges to repay the salary overpayment before you issue the original T4 slip, do not include the salary overpayment or the income tax, CPP contributions, or EI premiums withheld on the overpayment on the employee’s T4 slip.

Note

If the amount of an employee’s corrected earnings are at or above the maximum annual pensionable earnings, you have to include on their T4 slip the CPP contributions withheld on the salary overpayment. Also, if an employee’s corrected earnings are at or above the maximum annual insurable earnings, you have to include on their T4 slip the EI premiums withheld on the salary overpayment.

After the original T4 is issued

If you issued an original T4 slip for the year you made the salary overpayment:

  • prepare an amended T4 slip for that year
  • reduce the total employment income in box 14 by the amount of the salary overpayment
  • reduce box 22 by any income tax deducted on the salary overpayment
  • if the employee’s annual earnings were below the maximum annual pensionable earnings, reduce box 16 by the amount of CPP contributions deducted on the salary overpayment (see example 1)
  • if the employee’s earnings were above the maximum annual pensionable earnings, but are below the maximum pensionable earnings after you correct the salary overpayment, reduce box 16 by the amount of CPP contributions that corresponds withe the part of the salary overpayment that is below the maximum annual pensionable earnings (see example 2)
  • if the employee’s annual earnings were below the maximum annual insurable earnings, reduce box 18 by the amount of EI premiums deducted on the salary overpayment (see example 1)
  • if the employee’s earnings were above the maximum annual insurable earnings but are below the maximum insurable earnings after you correct the salary overpayment, reduce box 18 by the amount of EI premiums that corresponds with the part of the salary overpayment that is below the maximum annual insurable earnings (see example 2)

You may also have to amend the EI insurable earnings in box 24 and CPP pensionable earnings in box 26 to agree with the reduced employment income that you will report in box 14.

After the CRA receives and processes the amended T4, it will credit the income tax, CPP contributions, and EI premiums remitted on the salary overpayment made in error (including your share of CPP contributions and EI premiums) to your payroll program account. You can then reduce, by the credited amount, the next payroll remittance you send to the CRA. The credited amount will be shown on your PD7A statement of account.

Note

If the employee’s corrected earnings are above the maximum annual pensionable earnings, you have to include on the T4 slip the CPP contributions withheld on the salary overpayment.

If the employee’s corrected earnings are above the maximum annual insurable earnings, you have to include on the T4 slip the EI premiums withheld on the salary overpayment.

Examples
Example 1 – Annual pensionable and insurable earnings are below the maximum

In 2019, your employee earned $36,000. One year later, after you issued the original 2019 T4 slip, you discover you overpaid them by $1,000, because of a system error. From the overpayment, you had deducted income tax of $100, CPP contributions of $51, and EI premiums of $16.20.

In 2020, your employee agrees to repay the net amount of the salary overpayment. You should amend their 2019 T4 slip to reduce each of the following amounts by $1,000:

  • total employment income in box 14
  • CPP pensionable earnings in box 26
  • EI insurable earnings in box 24

You should also reduce:

  • the amount of income taxes deducted in box 22 by $100
  • the CPP contributions in box 16 by $51
  • the EI premiums in box 18 by $16.20 

You can reduce your next payroll remittance to the CRA by the following amounts:

  • $100 of income tax deducted on the salary overpayment
  • $51 of CPP contributions deducted on the salry overpayment
  • $16.20 of EI premiums deducted on the salary overpayment
  • your $51 share of CPP contributions
  • your $22.68 share of EI premiums
Example 2 – Annual pensionable and insurable earnings are above the maximum

In 2019, your employee earned $60,000. One year later, after you issued the original 2019 T4 slip, you discover you overpaid them by $10,000, because of a system error. In 2020, your employee agrees to repay the net amount of the salary overpayment.

You should amend their 2019 T4 slip to reduce:

  • total employment income in box 14 by $10,000
  • CPP pensionable earnings in box 26 by $7,400 (maximum pensionable earnings of $57,400 minus corrected earnings of $50,000)
  • EI insurable earnings in box 24 by $3,100 (maximum insurable earnings of $53,100 minus corrected earnings of $50,000)

You should also reduce:

  • income taxes deducted in box 22 by $2,200 (the amount deducted on the salary overpayment of $10,000)
  • CPP contributions in box 16 by $377.40 (the $7,400 difference between the maximum pensionable earnings and the corrected earnings multiplied by the 5.10% employee CPP contribution rate)
  • EI premiums in box 18 by $50.22 (the $3,100 difference between the maximum insurable earnings and the corrected earnings multiplied by the 1.62% employee EI premium rate)

You can reduce your next payroll remittance to the CRA by the following amounts:

  • $2,200 of income tax deducted on the salary overpayment
  • $377.40 of CPP contributions deducted on the salary overpayment
  • $50.22 of EI premiums deducted on the salary overpayment
  • your $377.40 share of CPP contributions
  • your $70.31 share of EI premiums
Having your employee repay the gross amount of the salary overpayment

If you do not elect to have your employee repay the net amount of the salary overpayment or you do not meet the conditions noted above, the employee must repay you the gross amount of the salary overpayment.

In this situation, prepare an amended T4 slip for your employee. Use the CPP contributions, EI premiums, and income tax deductions from the employee’s original T4 slip but reduce the employment income in box 14 by the amount of the salary overpayment. You may also have to amend the EI insurable earnings in box 24 and CPP pensionable earnings in box 26 to agree with the reduced employment income you will report in box 14.

If you had to report the CPP contributions and EI premiums withheld on the salary overpayment on the employee’s T4 slip, you can ask for a refund of your share. Do this by filling out Form PD24, Application for a Refund of Overdeducted CPP Contributions or EI Premiums, and sending it to the CRA.

You can ask for a refund of CPP contributions up to four years after the end of the year in which you deducted them. For EI premiums, you can ask for a refund up to three years after the end of the year you deducted them in.

Example

In 2019, your employee earned $36,000. One year after you issued the original T4 slip, you discover you overpaid them by $500 because of a calculation error. You do not elect to have them repay the net amount, and they agree to repay you the gross amount in 2020.You should amend their 2019 T4 slip to reduce the total employment income in box 14, as well as the CPP pensionable and EI insurable earnings in boxes 26 and 24 by $500. Do not adjust the amount of CPP contributions, EI premiums, or income tax deducted in boxes 16, 18, and 22.

You can then ask for a refund of your share of CPP contributions and EI premiums by filling out Form PD24 and sending it to the CRA. The employee will not be able to claim a deduction from income in the 2020 tax year for the repayment, but they can ask the CRA to adjust their 2019 income tax and benefit return.

Seasonal Agricultural Workers Program

If you employ foreign workers under the Seasonal Agricultural Workers Program, enter code 15 in box 29, “Employment code,” of the T4 slips for your employees. For more information, see Guide RC4004, Seasonal Agricultural Workers Program.

Online services

Handling business taxes online

Use the CRA’s online services for businesses throughout the year to:

  • make payments to the CRA by setting up pre-authorized debit agreements in My Business Account or by using the My Payment service
  • initiate a payment search
  • file or amend information returns without a web access code
  • send documents to the CRA
  • authorize a representative for online access to your business accounts
  • register to receive email notifications and to view mail from the CRA in My Business Account
  • change addresses
  • manage direct deposit information
  • view account balance and transactions
  • provide a nil remittance
  • transfer a misallocated credit
  • download reports

To log in to or register for the CRA’s online services, go to:

For more information, go to E-services for Businesses.

CRA BizApp

CRA BizApp is a mobile web app for small business owners and sole proprietors. The app offers secure access to view accounting transactions, pay outstanding balances, and more.

You can access CRA BizApp on any mobile device with an Internet browser—no app stores needed! To access the app, go to Mobile apps – Canada Revenue Agency.

Receiving your CRA mail online

Sign up for email notifications to get most of your CRA mail, like your PD7A – Statement of account for current source deductions, online.

For more information, go toEmail notifications from the CRA – Businesses.

Authorizing the withdrawal of a pre-determined amount from your Canadian chequing account

Pre-authorized debit (PAD) is a secure online, self-service, payment option for individuals and businesses. This option lets you set the payment amount you authorize the CRA to withdraw from your Canadian chequing account to pay your tax on a specific date or dates you choose. You can set up a PAD agreement using the CRA’s secure My Business Account service, or the CRA BizApp at Mobile apps – Canada Revenue Agency. PADs are flexible and managed by you. You can use My Business Account to view historical records, modify, cancel, or skip a payment. For more information, go to Pay by pre-authorized debit.

Electronic payments

Make your payment using:

  • your financial institution’s online or telephone banking services
  • the CRA’s My Payment service at My Payment
  • your credit card through one of the CRA’s third party service providers
  • PayPal through one of the CRA’s third-party service providers
  • pre-authorized debit at My Business Account for Individuals

For more information on all payment options, go to Payments to the Canada Revenue Agency.

For more information

What if you need help?

If you need more information after reading this guide, visit Taxes or call 1-800-959-5525.

Direct deposit

Direct deposit is a fast, convenient, reliable, and secure way to get your CRA payments directly into your account at a financial institution in Canada. To enrol for direct deposit or to update your banking information, go to Direct deposit – Canada Revenue Agency.

Due dates

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, we consider your payment to be on time if we receive it on the next business day. Your return is considered on time if we receive it or if it is postmarked on or before the next business day.

For more information, go to Important dates for payroll.

Forms and publications

To get our forms and publications, go to Forms and publications or call 1-800-959-5525.

Addresses

Tax Centres (TC)

Jonquière TC
Post Office Box 1300 LCD Jonquière
Jonquière QC  G7S 0L5

Prince Edward Island TC
275 Pope Road
Summerside PE  C1N 6A2

Sudbury TC
Post Office Box 20000, Station A
Sudbury ON  P3A 5C1

National Verification and Collection Centres (NVCC)

Newfoundland and Labrador NVCC
Post Office Box 12071 Station A
St?John’s NL  A1B 3Z1

Shawinigan NVCC
4695 Shawinigan-Sud Boulevard
Shawinigan-Sud QC  G9P 5H9

Surrey NVCC
9755 King George Boulevard
Surrey BC  V3T 5E1

Winnipeg NVCC
66 Stapon Road
Winnipeg MB  R3C 3M2

Electronic mailing lists

The CRA can notify you by email when new information on a subject of interest to you is available on the website. To subscribe to the electronic mailing lists, go to Electronic mailing lists.

Teletypewriter (TTY) users

If you have a hearing or speech impairment and use a TTY, call 1-800-665-0354.

If you use an operator-assisted relay service, call our regular telephone numbers instead of the TTY number.

Publications for employers

Service-related complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the Canada Revenue Agency (CRA); see the Taxpayer Bill of Rights.

If you are not satisfied with the service you received, try to resolve the matter with the CRA employee you have been dealing with or call the telephone number provided in the CRA’s correspondence. If you do not have contact information, go to Contact information.

If you still disagree with the way your concerns were addressed, you can ask to discuss the matter with the employee’s supervisor.

If you are still not satisfied, you can file a service complaint by filling out Form RC193, Service-Related Complaint. For more information and how to file a complaint, go to Make a service complaint.

If the CRA has still not resolved your service-related complaint, you can submit a complaint with the Office of the Taxpayers’ Ombudsman.

Formal disputes (objections and appeals)

If you disagree with an assessment, determination, or decision, you have the right to register a formal dispute.

Reprisal complaints

If you have previously submitted a service-related complaint or requested a formal review of a CRA decision and feel that, as a result, you were not treated impartially by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information about complaints and disputes, go toComplaints, objections, appeals, disputes, and relief measures.

Foreign exchange rate

Report foreign income and other foreign Amounts

The Income Tax Act requires generally that foreign currency amounts that are relevant to the computation of a taxpayer’s income must be converted to Canadian dollars using the exchange rate on the day on which the amounts arise. For this purpose, the CRA will accept the exchange rate published by the Bank of Canada on the day. 

The CRA will also generally accept the rate quoted on the day by a source other than the Bank of Canada if it is:

  • widely available
  • verifiable
  • published by an independent provider on an ongoing basis
  • recognized by the market
  • used in accordance with well-accepted business principles
  • used for the preparation of the taxpayer’s financial statements
  • used consistently from year to year by the taxpayer

Each of the above conditions must be met in order for such a rate to be accepted.

Examples of other sources of foreign exchange rates that would be generally acceptable to the CRA include Bloomberg L.P., Thomson Reuters Corporation and OANDA Corporation.

For more information, or to determine when it may be acceptable to use an average exchange rate to convert income items, see Income Tax Folio S5-F4-C1, Income Tax Reporting Currency.

Original Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4120/employers-guide-filing-t4-slip-summary.html

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Preparing your financial statements using GIFI

The GIFI codes identify items that are usually found on a corporation’s financial statement (balance sheets, income statements, and statements of retained earnings). Each item is assigned its own unique code. This allows us to collect financial statement information in a standardized format. For example, the item “Cash” is assigned code 1001 and “Office expenses” is assigned code 8810.

Your method of preparing and filing your T2 return determines how your financial statement information is prepared using the GIFI codes.

Include the same level of detail using the GIFI codes as you would with a traditional financial statement. For example, if your corporation’s financial statement includes 40 items, we expect to see the same number of GIFI codes.

With your financial statement, remember to complete the following:

Preparing your return using CRA-certified T2 software

Whether you are filing your return electronically using Corporation Internet Filing or by mailing the T2 Bar Code Return, your software provides the appropriate space to complete your financial statement information using GIFI codes.

Choose a GIFI code for each item you report on your financial statement. Enter only the item code and dollar amount.

Sending notes to your financial statement

If you have notes to your financial statement:

  • If you are filing by Corporation Internet Filing, enter the details in the notes to the financial statements in the GIFI section of your software program.
  • If you are printing and mailing a T2 Bar Code Return, send your notes on a separate piece of paper with your T2 Bar Code Return.

Preparing your return using CRA-issued paper forms

If you use paper forms to file your T2 return, you can prepare your financial statement as follows:

Corporations that are inactive throughout the tax year and that do not have balance sheet or income statement information to report are no longer required to attach schedules 100, 125, and 141 to their T2 return. However, they will be accepted if filed.

Sending notes to your financial statement

Send any notes regarding your financial statement on a separate piece of paper with your return.

Completing Schedule 141, Notes Checklist

You have to complete Schedule 141, Notes Checklist, even if you do not have any notes to your financial statement.

Whether you are filing your return electronically using Corporation Internet Filing or by mailing the T2 Bar Code Return, Schedule 141 is completed within the software.

See What is Schedule 141, Notes Checklist for more information.

Forms and publications

Original source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/completing-your-corporation-income-tax-t2-return/general-index-financial-information-gifi/preparing-your-financial-statements-using-gifi.html