ARCHIVED - Deductions (Net income and Taxable income)

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ARCHIVED - Deductions (Net income and Taxable income)


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Net income (lines 206 to 236)

Line 206 - Pension adjustment

Enter on line 206 the total of all amounts in box 52 of your T4 slips, or box 34 of your T4A slips. Generally, this total represents the value of the benefits you earned in 2007 under a registered pension plan (RPP) or a deferred profit-sharing plan (DPSP).

Do not include the pension adjustment (PA) amount in your income, and do not deduct it on your return. Simply enter this amount on line 206. We will use it to calculate your registered retirement savings plan (RRSP) deduction limit for 2008, which we will show on your Notice of Assessment or Notice of Reassessment for 2007, or on Form T1028, Your RRSP Information for 2007. See line 208 for details.

If you have any questions about how your PA was calculated, ask your employer.

Note
 If you live in Canada and you participated in a foreign pension plan in 2007, you may have to enter an amount on this line. For details, contact us.

Line 207 - Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts shown in box 20 of your T4 slips, in box 32 of your T4A slips, or on your union or RPP receipts. Contact us or see Guide T4040, RRSPs and Other Registered Plans for Retirement, to find out how much you can deduct if any of the following applies:

  • the total is more than $3,500 and your information slip shows a past-service amount for service before 1990;
  • you contributed in a previous year and could not deduct part of the contributions; or
  • you made contributions to a pension plan in a foreign country.

Receipts - If you are filing a paper return, do not include your receipts (other than your T4 and T4A slips), but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 208 - RRSP deduction

This section gives general information on registered retirement savings plans (RRSPs). If you need more information after reading this section, see Guide T4040, RRSPs and Other Registered Plans for Retirement. See "Schedule 7" below for details about completing Schedule 7. To view your RRSP information, visit My Account.

Receipts - If you are filing a paper return, include your official receipts for all amounts you contributed from March 2, 2007, to February 29, 2008, including those you are not deducting on your return for 2007 and those you are designating as Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP) repayments. See "Lines 6 and 7 - Repayments under the HBP and LLP" for details about HBP and LLP repayments. If you contributed to your spouse or common-law partner's plan, the receipt has to show your name as the contributor and your spouse or common-law partner's name as the annuitant. Also attach Schedule 7 if you have to complete it. If you are filing electronically, keep your documents in case we ask to see them.

Maximum contributions you can deduct

The maximum you can deduct on line 208 is whichever of the following amounts is less:

Notes

After the end of the year you turn 71, you or your spouse or common-law partner cannot contribute to an RRSP under which you are the annuitant. However, you still can contribute to your spouse or common‑law partner's RRSP until the end of the year he or she turns 71, and you can deduct those contributions as long as you still have an unused RRSP deduction limit.

If you contribute more to an RRSP than you can deduct, you may have to pay a tax of 1% per month. To pay this tax you must file a Form T1-OVP, Individual Tax Return for RRSP Excess Contributions, for each applicable tax year. For more details, see the section called "Tax on RRSP excess contributions" in Guide T4040, RRSPs and Other Registered Plans for Retirement.

Schedule 7

You may not have to complete Schedule 7. To find out, read the information at the top of the schedule. If you do have to complete it, you will find information below about lines 1, 2, 3, 6, 7, 10, 11, and 15 to 18.

Line 1 - Unused RRSP contributions

These are amounts you contributed to your own RRSP or to an RRSP for your spouse or common-law partner after 1990, but did not deduct on line 208 of any previous return or designate as an HBP or LLP repayment. The total of these amounts is shown on your Notice of Assessment or Notice of Reassessment for 2006 or on Form T1028, Your RRSP Information for 2007, if you showed them on a previous year's Schedule 7.

If you do not have your notice, you can find out if you have unused RRSP contributions by using RRSP deduction limit, one of our T.I.P.S. services.

Notes
 If you have unused RRSP contributions that you made from March 2, 2006, to March 1, 2007, you should have filed a completed Schedule 7 with your 2006 paper return. If you did not, you should submit your receipts and a completed copy of a 2006 Schedule 7 to your tax centre, but not with your return for 2007. See "How do you change a return?" for details.

If you have unused contributions that you made from January 1, 1991, to March 1, 2006, but did not show on a Schedule 7 for 2005 or earlier, contact us.



Lines 2 and 3 - Total RRSP contributions

This total includes amounts you:

  • contributed to your own RRSP or an RRSP for your spouse or common-law partner from March 2, 2007, to February 29, 2008;
  • transferred to your own RRSP (see "Line 11 - Transfers" later in this section); and
  • designated as Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP) repayments (see "Lines 6 and 7 - Repayments under the HBP and LLP" below).

Make sure you include on these lines all contributions you made from January 1, 2008, to February 29, 2008, even if you are not deducting or designating them on your return for 2007. Otherwise, we may reduce or disallow your claim for these contributions on your return for a future year.

Tax Tip

 If you have made deductible RRSP contributions for 2007 (other than transfers) from March 2, 2007, to February 29, 2008, you do not have to claim the full amount on line 208 of your 2007 return. Depending on your federal and provincial or territorial rates of tax for 2007, and your expected rates of tax for future years, it may be more beneficial for you to claim, if applicable, only part of your contributions on line 10 of Schedule 7 and on line 208 of your 2007 return. The contributions you do not claim for 2007 will then be available for you to carry forward and claim for future years when your federal and provincial or territorial rates of tax are higher.

Remember, in either case, you must record the total contributions you made from March 2, 2007, to February 29, 2008, on either line 2 or 3 and line 245 of your 2007 Schedule 7.

Do not include the following amounts:

  • Any unused RRSP contributions you made after March 1, 2007, that were refunded to you or your spouse or common-law partner in 2007. Report the refund on line 129 of your return for 2007. You may be able to claim a deduction on line 232.
  • Part or all of the contributions you made to your RRSP or an RRSP for your spouse or common-law partner less than 90 days before either of you withdrew funds from that RRSP under the HBP or LLP. For more details, see Guide RC4135, Home Buyers' Plan (HBP), or Guide RC4112, Lifelong Learning Plan (LLP).
  • Any payment directly transferred to your RRSP if you did not receive an information slip for it or if it is shown in box 35 of your T4RSP or T4RIF slip.
  • The part of an RRSP withdrawal that you recontributed to your RRSP and deducted on line 232. This would have happened if, in error, you withdrew more RRSP funds than necessary to obtain past-service benefits under a registered pension plan (RPP).
  • The excess part of a direct transfer of a lump-sum payment from your RPP to an RRSP or registered retirement income fund (RRIF) that you withdrew and are including on line 129 or 130 of your return for 2007, and deducting on line 232.
Lines 6 and 7 - Repayments under the HBP and LLP

If you withdrew funds from your RRSP under the Home Buyers' Plan (HBP) before 2006, you have to make a repayment for 2007. If you withdrew funds from your RRSP under the Lifelong Learning Plan (LLP) before 2006, you may have to make a repayment for 2007. In either case, your 2007 required repayment is indicated on your Notice of Assessment or Notice of Reassessment for 2006 or on Form T1028, Your RRSP Information for 2007.

To make a repayment for 2007, contribute to your own RRSP from January 1, 2007, to February 29, 2008, and designate your contribution as a repayment on line 6 or 7 of Schedule 7. Do not include an amount you deducted or designated as a repayment on your 2006 return, or that was refunded to you. Do not make your repayment to us. You cannot deduct any RRSP contribution you designate as an HBP or LLP repayment on Schedule 7.

Note
 If you repay less than the minimum amount for 2007, you have to include the difference on line 129 of your return.

Line 10 - RRSP contributions you are deducting for 2007

Your RRSP deduction limit for 2007 is shown on your Notice of Assessment or Notice of Reassessment for 2006, or, if we sent you one, on Form T1028, Your RRSP Information for 2007. You can carry forward indefinitely any part of your RRSP deduction limit accumulated after 1990 that you do not use.

If you do not have your notice or Form T1028, you can find out your limit for 2007 by using RRSP deduction limit, one of our T.I.P.S. services, or by contacting us.

If you would like to calculate your RRSP deduction limit for 2007, get Guide T4040, RRSPs and Other Registered Plans for Retirement.

Note
 In a previous year, you may have received income for which you could contribute to an RRSP, but you may not have filed a return for that year. If you want to keep your RRSP deduction limit up to date, you have to file a return for that year.

Line 11 - Transfers

You may have reported income on line 115, 129, or 130 of your return for 2007. If you contributed certain types of this income to your own RRSP on or before February 29, 2008, you can deduct this contribution, called a transfer, in addition to any RRSP contribution you make based on your "RRSP deduction limit for 2007."

For example, if you received a retiring allowance in 2007, you would report it on line 130 of your return. You can contribute to your RRSP up to the eligible part of that income (box 26 of your T4A slip or box 47 of your T3 slip) and deduct it as a transfer. Include the amounts you transfer on lines 2 or 3 and 11 of Schedule 7.

For more information about amounts you can transfer, see Guide T4040, RRSPs and Other Registered Plans for Retirement.

Lines 15 to 18 - 2007 withdrawals under the HBP and the LLP

On line 15, enter the total of your HBP withdrawals for 2007 from box 27 of your T4RSP slips. In addition, check the box at line 16 if the address of the home you acquired with these withdrawals is the same as the address on page 1 of your return.

On line 17, enter the total of your LLP withdrawals for 2007 from box 25 of your T4RSP slips. In addition, you can check the box at line 18 to designate that your spouse or common-law partner was the student for whom the funds were withdrawn. If you do not check the box, you will be considered to be the student for LLP purposes. You can change the person you designate as the student only on the return for the year you make your first withdrawal.

The Guide RC4135, Home Buyers' Plan (HBP), and Guide RC4112, Lifelong Learning Plan (LLP), include more information about:

  • when you have to make your repayments; and
  • the rules that apply when the person who made the withdrawal dies, turns 71, or becomes a non-resident.

Line 209 - Saskatchewan Pension Plan (SPP) deduction

You can deduct contributions to the SPP for 2007, up to whichever of the following three amounts is least:

  • $600;
  • your 2007 RRSP deduction limit minus your RRSP deduction from line 208 (not including transfers to your RRSP); or
  • the total amount you contributed to the SPP for yourself or your spouse or common-law partner from January 1, 2007, to February 29, 2008, not including any contributions that you deducted on your 2006 return.

Receipts - If you are filing a paper return, include your receipts. If you are filing electronically, keep them in case we ask to see them.

Line 210 - Deduction for elected split-pension amount

If you and your spouse or common‑law partner have jointly elected to split pension income by completing Form T1032, Joint Election to Split Pension Income, you (Pensioner) can deduct on this line the elected split-pension amount from line E of Form T1032.

Form T1032 is to be filed by your filing due date for the year (see "What date is your return for 2007 due?" ). This form must be attached to both your and your spouse or common-law partner's paper returns. If you are filing electronically, keep your election form in case we ask to see it.


Line 212 - Annual union, professional, or like dues

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

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

Annual membership dues do not include initiation fees, licences, special assessments, or charges for anything other than the organization's ordinary operating costs. You cannot claim charges for pension plans as membership dues, even if your receipts show them as dues. For more information, see Interpretation bulletin IT-103, Dues Paid to a Union or to a Parity or Advisory Committee, and Interpretation bulletin IT-158, Employees' Professional Membership Dues.

The amount shown in box 44 of your T4 slip, or on your receipts, includes any GST/HST you paid.

Tax Tip
You may be eligible for a rebate of any GST/HST you paid as part of your dues (see line 457).

Receipts - If you are filing a paper return, do not include your receipts (other than your T4 slips) but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 213 - Universal Child Care Benefit (UCCB) repayment

The person who reported the UCCB income in 2006 may deduct this amount on line 213. The amount of the UCCB repayment to deduct is shown in box 12 of the RC62 slip.

Line 214 - Child care expenses

You or your spouse or common-law partner may have paid for someone to look after your child so one of you could earn income, go to school, or conduct research in 2007. The expenses are deductible only if, at some time in 2007, the child was under 16 or had a mental or physical impairment. Generally, only the spouse or common-law partner with the lower net income (even if it is zero) can claim these expenses.

Note
You may have paid an amount that would qualify to be claimed as child care expenses and the children's fitness amount (line 365). If this is the case, you must first claim this amount as child care expenses. Any unused part can be claimed for the children's fitness amount as long as the requirements are met.

For more information, and to make your claim, get Form T778, Child Care Expenses Deduction for 2007. However, if you claimed child care expenses on your 2006 return, the tax package we mailed to you should include this form.

Tax Tips
 You may be able to claim payments you made to a boarding school, sports school, or camp. For details, see Form T778.

If your child needs special attendant care or care in an establishment, see Guide RC4064, Medical and Disability-Related Information, for details about different amounts you may be able to claim.

Receipts - If you are filing a paper return, include a completed Form T778, but not your receipts. Keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 215 - Disability supports deduction

You can claim expenses you paid for personal attendant care and other disability supports expenses that allowed you to go to school or to earn certain income. This includes income from employment or self-employment and a grant you received for conducting research.

For a complete list of allowable expenses, see Form T929, Disability Supports Deduction.

You cannot claim these expenses on this line if you or someone else will be claiming them as medical expenses on line 330 or 331.

To calculate your claim, complete Form T929. For more information, see Form T929 or use Info-Tax, one of our T.I.P.S. services.

Receipts - If you are filing a paper return, do not include your receipts or Form T929, but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 217 - Business investment loss

A business investment loss is a special type of capital loss. Such a loss can occur, for example, when you dispose of shares or certain debts of a small business corporation. For more information, and to find out how to complete lines 217 and 228 (to the left of line 217), see Guide T4037, Capital Gains.

If you have a tax shelter, see "Tax shelters".

Line 219 - Moving expenses

Generally, you can deduct moving expenses you paid in 2007 if both of the following apply:

  • You moved to work or run a business, or to study full-time at an educational institution that offers post-secondary courses.
  • You moved at least 40 kilometres closer to your new work or school.

Notes
 If you moved before 2007 but could not claim all your expenses on your return for that year or later, you may be able to claim the remaining expenses on your return for 2007.

In addition, if you pay expenses after the year of your move, you may be able to claim them on your return for the year you pay them. You may carry forward unused amounts until you have enough income to claim them.

Your deduction is limited to the amount of eligible income you earned at the new location. Also, you cannot deduct moving expenses against certain non-taxable scholarship, fellowship, and bursary income. See Scholarships, fellowships, bursaries, and artists' project grants for details. For more information, and to calculate how much you can deduct, see Form T1-M, Moving Expenses Deduction. Make sure you tell us your new address.

Receipts - If you are filing a paper return, do not include your receipts or Form T1-M, but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 220 - Support payments made

Enter on line 230 the total of all deductible and non-deductible support payments for a spouse or common-law partner, or for a child, that you made (or, if you are the payee, that you repaid under a court order) in 2007. Claim on line 220 only the deductible amount.

Note
Most child support payments paid according to a written agreement or court order dated after April 1997, are not deductible. For more details, see Guide P102, Support Payments.

To avoid your claim being delayed or disallowed, you should register your written agreement or court order (including any amendments) with us by completing Form T1158, Registration of Family Support Payments.

Receipts - If you are filing a paper return, do not include your receipts or cancelled cheques, or your court order or written agreement. Keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 221 - Carrying charges and interest expenses

You can claim the following carrying charges and interest you paid to earn income from investments:

  • fees to manage or take care of your investments (other than administration fees you paid for your registered retirement savings plan or registered retirement income fund), including safety deposit box charges;
  • fees for certain investment advice (see Interpretation Bulletin IT- 238, Fees Paid to Investment Counsel) or for recording investment income;
  • fees to have someone complete your return, but only if you have income from a business or property, accounting is a usual part of the operations of your business or property, and you did not use the amounts claimed to reduce the business or property income you reported (see Interpretation Bulletin IT-99, Legal and Accounting Fees); and
  • most interest you pay on money you borrow for investment purposes, but generally only as long as you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid. For details, contact us.

You cannot deduct on line 221 any of the following amounts:

  • the interest you paid on money you borrowed to contribute to a registered retirement savings plan or a registered education savings plan;
  • the interest part of your student loan repayments (although you may be able to claim a credit on line 319 on Schedule 1 for this amount);
  • subscription fees paid for financial newspapers, magazines, or newsletters; and
  • brokerage fees or commissions you paid when you bought or sold securities. Instead, you use these costs when you calculate your capital gain or capital loss. For more information, see Guide T4037, Capital Gains, and Interpretation Bulletin IT-238, Fees Paid to Investment Counsel.

Policy loan interest - To claim interest you paid during 2007 on a policy loan made to earn income, have your insurer complete Form T2210, Verification of Policy Loan Interest by the Insurer, on or before the date your return is due.

Refund interest - If we paid you interest on an income tax refund, you have to report the interest in the year you receive it, as we explain at line 121 in this guide. If we then reassessed your return and you repaid any of the refund interest in 2007, you can deduct the amount you repaid, up to the amount you had included in your income.

Carrying charges for foreign income - If you have carrying charges for Canadian and foreign investment income, identify them separately on Schedule 4, according to the percentage that applies to each investment.

Receipts - To make your claim, complete Part IV of Schedule 4 and attach it to your paper return. If you are filing a paper return, do not include your receipts or Form T2210, but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

If you have a tax shelter, see "Tax shelters".

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

You can claim, on this line, half of the total of your Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions, if any, from Schedule 8. You also can claim, on line 310 on Schedule 1, an amount for the other half. You can claim contributions you:

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

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

Making additional CPP contributions

You may be able to make CPP contributions on certain employment income for which no contribution was made (for example, tips that were not included on a T4 slip) or additional contributions on T4 income if you had more than one employer in the year and the total CPP contributions on all T4 slips is less than the required amount. For more information, see "Making additional CPP contributions" at line 308.

How to calculate your contributions

Complete Schedule 8 to calculate your CPP or QPP contributions, and attach it to your paper return. If you were a member of a partnership, make sure you include on line 1 of Schedule 8 only your share of the net profit or loss. You cannot use self-employment or partnership losses to reduce the CPP or QPP contributions that you paid on your employment earnings.

If you were not a resident of Quebec on December 31, 2007, enter on lines 222 and 310, in dollars and cents, the amount from line 11 of Schedule 8. Enter on line 421 the amount from line 10 of Schedule 8.

If you were a resident of Quebec on December 31, 2007, enter on lines 222 and 310, in dollars and cents, the amount from line 10 of Schedule 8. Line 421 does not apply to you.

Note
 We will prorate your CPP or QPP contribution and show the correct amount on your Notice of Assessment in certain situations, such as if, in 2007, you:

  • were a CPP participant and either turned 18 or 70, or received a CPP retirement or disability pension; or
  • were a QPP participant and either turned 18 or received a QPP disability pension.

Request for refund of CPP contributions

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

Line 223 - Deduction for provincial parental insurance plan (PPIP) premiums on self-employment income

Under proposed changes, if you were a resident of Quebec on December 31, 2007, you have to pay PPIP premiums if any of the following conditions apply:

  • your net self-employment income on lines 135 to 143 of your return is $2,000 or more; or
  • the total of your employment income (including employment income from outside Canada) and your net self-employment income is $2,000 or more.

Complete Schedule 10 to calculate your PPIP premiums and attach it to your paper return. You can claim, on this line, 43.555% of the total of your PPIP premiums. Enter on this line, in dollars and cents, the amount from line 7 of Schedule 10. Also, enter the same amount on your provincial income tax return for Quebec.


Line 224 - Exploration and development expenses

If you invested in a petroleum, natural gas, or mining venture in 2007, but did not participate actively, you can deduct your expenses on this line. If you participated actively, follow the instructions at line 135.

How to claim

Complete Form T1229, Statement of Exploration and Development Expenses and Depletion Allowance, using the information that the principals of the venture give you, such as T5, T101, T5013, or T5013A slips. Make sure you read the instructions on the back of these slips.

Claim your exploration and development expenses (including renounced resource expenses) on line 224. Claim your depletion allowances on line 232.

Effective January 2007, you can no longer deduct the resource allowance.

Attach Form T1229 and your T5, T101, T5013, and T5013A slips to your paper return. If you do not have these slips, attach a statement that identifies you as a participant in the venture. The statement has to show your allocation (the number of units you own, the percentage assigned to you, or the ratio of your units to those of the whole partnership) and give the name and address of the fund.

If you have any questions about these expenses, contact our Business Enquiries service. See "Contacting us".

If you have a tax shelter, see "Tax shelters".

Line 229 - Other employment expenses

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

  • your employment contract required you to pay them, and
  • you did not receive an allowance for the expenses, or the allowance you received is included in your income.

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

Under proposed legislation, the deductible part of certain meal and beverage expenses for long-haul truck drivers, incurred during an eligible travel period after March 18, 2007, has increased. See Guide T4044, Employment Expenses, for details.

Attach to your paper return a completed Form T777, Statement of Employment Expenses, to give us details of your expenses and to calculate how much you can deduct. Guide T4044, Employment Expenses, contains Form T777 and other forms you may need. The guide also explains the limits and conditions that apply when you claim these expenses.

Repayment of salary or wages - You can deduct salary or wages you included in income for 2007 or a previous year, if you repaid them in 2007. This includes amounts you repaid for a period when you were entitled to receive wage-loss replacement benefits or workers' compensation benefits. However, you cannot deduct more than the income you received when you did not perform the duties of your employment.

Legal fees - You can deduct legal fees you paid to collect or establish a right to salary or wages. It is not necessary for you to be successful; however, the amount sought must be for salary or wages owed. You must reduce your claim by any amount awarded to you in respect of those fees, or any reimbursement you received for your legal expenses.

Under proposed legislation, you can deduct legal fees you paid to collect or establish a right to collect other amounts that must be included in employment income even if they are not directly paid by your employer.

Receipts - If you are filing a paper return, include Form T777 but not your receipts or other forms. Keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Tax Tip
You may be eligible for a rebate of any GST/HST you paid as part of your expenses (see line 457).

Line 231 - Clergy residence deduction

If you are a member of the clergy, use this line to claim a deduction for your residence. Your employer has to certify that you qualify for this deduction. Complete Form T1223, Clergy Residence Deduction, to find out what you can deduct.

Receipts - If you are filing a paper return, do not include Form T1223, but keep it in case we ask to see it. If you are filing electronically, keep all of your documents.

Line 232 - Other deductions

Use this line to claim allowable amounts not deducted anywhere else on this return. For clarification of your request, specify the deduction you are claiming in the space to the left of line 232. If you have more than one amount, or you want to explain your deduction more fully, attach a note to your paper return.

Receipts - If you are filing electronically, keep all supporting documents for amounts you claim on this line in case we ask to see them.

Note
 A child who was born in 1990 or later can claim a deduction for certain income he or she reports. For more details, see "Split income of a child under 18".

If you have a tax shelter, see "Tax shelters".

Income amounts paid back

In 2007, you may have paid back amounts that you received and included in income (other than salary or wages) for 2007 or a previous year. If this applies to you, you can deduct most of these amounts on line 232 of your return for 2007. However, if you repaid, under a court order, support payments that you included on line 128, deduct the repayment on line 220.

Attach to your paper return receipts or other documents showing the amounts you paid back, such as a T4A (OAS) slip that shows in box 20 any Old Age Security benefits you repaid.

Notes
 If you had an OAS repayment for 2006, tax may have been withheld from your OAS benefits for 2007. The amount deducted is included in box 22 of your T4A(OAS) slip for 2007. Do not deduct it on line 232. Claim it on line 437. To make sure the correct amount has been withheld, see line 235 and complete the chart for line 235 on the Federal Worksheet you will find in the forms book.

If you paid back employment income, see "Repayment of salary or wages" under line 229. If you paid back income tax refund interest, see "Refund interest" under line 221.

EI and other benefits - You may have received more benefits than you should have and already paid them back to Service Canada (SC) or Ministère de l'Emploi et de la Solidarité sociale (ESS). For example:

  • SC or ESS may have reduced your EI benefits after discovering the mistake. In this case, your T4E slip will show only the net amount you received, so you cannot claim a deduction.
  • You may have repaid SC or ESS. If so, box 30 of your T4E slip will show the amount you paid back. Include this amount on line 232. This is not the same as repaying a social benefit as explained at line 235.

Legal fees

You can deduct your expenses in any of the following situations:

  • You paid fees (including any related accounting fees) for advice or assistance in responding to us when we reviewed your income, deductions, or credits for a year, or in objecting to or appealing an assessment or decision under the Income Tax Act, the Unemployment Insurance Act, the Employment Insurance Act, the Canada Pension Plan Act, or the Quebec Pension Plan.
  • You paid fees to collect (or establish a right to) a retiring allowance or pension benefit. However, you can only claim up to the amount of retiring allowance or pension income you received in the year, minus any part of these amounts transferred to a registered retirement savings plan or registered pension plan. You can carry forward, for up to seven years, legal fees that you cannot claim in the year.
  • You paid fees to collect (or establish a right to) salary or wages. It is not necessary for you to be successful; however, the amount sought must be for salary or wages owed. You must reduce your claim by any amount awarded to you in respect of those fees, or any reimbursement you received for your legal expenses. (These fees must be deducted on line 229.)

    Under proposed legislation you can deduct legal fees you paid to collect or establish a right to collect other amounts that must be included in employment income even if they are not directly paid by your employer. (These fees must be deducted on line 229.)
  • You incurred certain fees relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, will have to pay. You cannot claim legal fees you incurred to get a separation or divorce or to establish custody or visitation arrangements of a child. For more information, see Guide P102, Support Payments.

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

For details of other legal fees you may be able to deduct, see Interpretation Bulletin IT-99 , Legal and Accounting Fees.

Other deductible amounts

Here are some examples of other amounts that can be deducted at line 232:

  • depletion allowances (attach to your paper return a completed Form T1229, Statement of Exploration and Development Expenses and Depletion Allowance);
  • certain unused RRSP contributions you made after 1990 that were refunded to you or your spouse or common-law partner in 2007 (attach to your paper return an approved Form T3012A, Tax Deduction Waiver on the Refund of Your Unused RRSP Contributions, or Form T746, Calculating Your Deduction for Refund of Unused RRSP Contributions); and
  • the excess part of a direct transfer of a lump-sum payment from your RPP to an RRSP or registered retirement income fund (RRIF) that you withdrew and are including on line 129 or 130 of your return for 2007 (you can use Form T1043, Deduction for Excess Registered Pension Plan Transfers You Withdrew From an RRSP or RRIF, to calculate the deductible amount).

Line 235 - Social benefits repayment

Employment Insurance (EI) benefits

You have to repay part of the EI benefits (line 119) you received in 2007 if:

  • there is an amount in box 15 of your T4E slip;
  • the rate in box 7 is 30%; and
  • the amount on line 234 of your return, minus any Universal Child Care Benefit (line 117), plus any deduction on line 213, is more than $50,000.

Complete the chart on your T4E slip to calculate how much of your EI benefits you have to repay. If you also have to repay Old Age Security (OAS) benefits you received (see below), enter the EI benefits that you have to repay on lines 7 and 17 of the chart for line 235 on the Federal Worksheet in the forms book.

Old Age Security (OAS) benefits

You may have to repay all or a part of your OAS pension (line 113) or net federal supplements (line 146) if your net income before adjustments (line 234) is more than $63,511. Complete the chart for line 235 on the Federal Worksheet in the forms book to calculate how much you have to repay, even if tax was withheld by Service Canada.

Note
 If you had an OAS repayment for 2006, tax may have been withheld from your monthly OAS pension for 2007. The amount deducted is included in box 22 of your T4A(OAS) slip for 2007. Claim it on line 437. Similarly, if you have an OAS repayment for 2007, tax may be withheld starting with your July 2008 OAS payment. For more details, contact us.

Line 236 - Net income

We use this amount for certain calculations such as the Canada Child Tax Benefit, the GST/HST credit, the social benefits repayment, and certain tax credits.

Notes
 Make sure you enter, if it applies, your spouse or common-law partner's net income in the "Information about your spouse or common-law partner" area on page 1 of your return. Enter this amount even if it is zero.

If the amount you calculate for line 236 is negative, you may have a non-capital loss. To find out, use Form T1A, Request for Loss Carryback. If you have a loss for 2007, you may want to carry it back to your 2004, 2005, or 2006 return. To do this, attach a completed Form T1A to your paper return (or send one to us separately). Do not file an amended return for the year or years to which you want to apply the loss.

Taxable income (lines 244 to 260)

Line 244 - Canadian Forces personnel and police deduction

Enter the total of the amounts shown in box 43 of all your T4 slips.

Line 248 - Employee home relocation loan deduction

Enter the total of the amounts shown in box 37 of your T4 slips.

Line 249 - Security options deductions

Enter the total of the amounts shown in boxes 39 and 41 of your T4 slips. In addition, if you disposed of securities for which you had previously deferred the taxable benefit (see "Security option benefits"), claim 50% of the amount from line 4 of Form T1212, Statement of Deferred Security Options Benefits.

You may be able to claim a deduction for donating securities you acquired through your employer's security options plan.

Under proposed changes, gifts to private foundations that are made after March 18, 2007, will also be eligible for the additional deduction.

For details, see "Gifts of securities acquired under a security option plan" in Pamphlet P113, Gifts and Income Tax.

Line 250 - Other payments deduction

Generally, you can deduct the amount from line 147 of your return. This is the total of the workers' compensation payments, social assistance payments, and net federal supplements you entered on lines 144, 145, and 146.

Note
If your net income before adjustments (line 234) is more than $63,511 and you reported net federal supplements on line 146, you may not be entitled to claim the whole amount from line 147. Contact us to determine how much you can deduct.

Line 251 - Limited partnership losses of other years

If you had limited partnership losses in previous years that you have not already deducted, you may be able to claim part of these losses this year. For details, contact us.

You can carry forward limited partnership losses indefinitely. If you claim these losses, attach to your paper return a statement showing a breakdown of your total losses, the year of each loss, and the amounts deducted in previous years. You cannot use the amount in box 24 of your T5013 or T5013A slip for 2007 on your return for 2007.

Line 252 - Non-capital losses of other years

In 2007, enter the amount of the unapplied non-capital losses you reported on your 2000 to 2006 returns that you want to apply. For tax years ending after March 22, 2004, and before January 1, 2006, the loss carry forward period for non-capital losses is 10 years.

Also, enter any unapplied farming and fishing losses you reported on your 1997 to 2006 returns that you want to apply in 2007. Your available losses are shown on your Notice of Assessment or Notice of Reassessment for 2006.

For non-capital losses incurred in tax years after December 31, 2005, the loss carry forward period has been extended to 20 years.

There are restrictions on the amount of certain farm losses that you can deduct each year. If you have a farming or fishing business, see either Guide T4003, Farming Income, Guide RC4060, Farming Income and the AgriStability and AgriInvest Programs, Guide RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized, or Guide T4004, Fishing Income, for details.

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

Line 253 - Net capital losses of other years

Within certain limits, you can deduct your net capital losses of previous years that you have not already claimed. Your available losses are shown on your Notice of Assessment or Notice of Reassessment for 2006. You probably will have to adjust any losses you incurred after 1987 and before 2001. For details, see Guide T4037, Capital Gains.

Line 254 - Capital gains deduction

You may be able to claim a capital gains deduction for gains realized on the disposition of qualified small business corporation shares, qualified farm property, and disposition of qualified fishing property.

Under proposed legislation, the lifetime capital gains exemption limit has increased for capital gains arising on the disposition of qualified farm and fishing property and qualified small business corporation shares made after March 18, 2007.

For more details on this deduction, see Guide T4037, Capital Gains.

Line 255 - Northern residents deductions

To make your claim, use Form T2222, Northern Residents Deductions.

Note
All places in the Yukon, Nunavut, and the Northwest Territories are located in a prescribed northern zone.

Under proposed legislation, the District Municipality of Mackenzie in British Columbia has been added to the list of prescribed intermediate zones.

For a complete list of the areas that qualify, see Publication T4039, Northern Residents Deductions - Places in Prescribed Zones.

Receipts - If you are filing a paper return, include a completed Form T2222, but not your receipts. Keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 256 - Additional deductions

In the space to the left of line 256, specify the deduction you are claiming. If you have more than one amount, or you want to explain your deduction more fully, attach a note to your paper return.

Income exempt under a tax treaty

If you included foreign income on your return (such as support payments you received from a resident of another country and reported on line 128) that is tax-free in Canada because of a tax treaty, you can claim a deduction for it. If you do not know whether any part of the foreign income is tax-free, contact us.

Note
Under the Canada-U.S. tax treaty, you can claim a deduction equal to 15% of the U.S. social security benefits, including U.S. medicare premiums, that you included in your income on line 115.

Vow of perpetual poverty

If you have taken a vow of perpetual poverty as a member of a religious order, you can deduct the amount of earned income and pension benefits that you have given to the order. Attach to your paper return a letter from your order or your employer stating that you have taken a vow of perpetual poverty. For more information, see Interpretation Bulletin IT-86, Vow of Perpetual Poverty.

Adult basic education tuition assistance

You may have received (and included in your income) assistance to cover all or part of the tuition fees you paid for primary or secondary school courses. If so, you can claim a deduction for the amount of qualifying assistance shown in box 21 of your T4E slip.

Note
You may have received taxable tuition assistance shown in box 20 of the T4E slip for post-secondary level courses, or courses that provide or improve skills in an occupation. If so, these amounts are not deducted on line 256, but you may be eligible for the tuition, education, and textbook amounts (see line 323).

Employees of prescribed international organizations

If, in 2007, you were employed by a prescribed international organization, such as the United Nations, you can claim a deduction for net employment income you report from that organization. Net employment income is your employment income minus the related employment expenses that you are claiming.

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Date modified:
2008-02-06