10 years to claim a missed deduction
What happens when tax deductions are missed or when a large property gets sold? These were among the questions in the latest batch of reader letters. Here’s what they wanted to know.
Q When a mistake is made on a tax return that is not in our favour (for instance, failing to claim a valid deduction), are the governments not obligated to correct the mistake?
A The tax departments will correct mathematical errors (which often are in the taxpayer’s favour), but they won’t make deductions they don’t know you’re entitled to claim. The door isn’t closed, however, if you discover later that you missed some deductions. You can file for an adjustment going back as many as 10 calendar years. You’ll need to fill out form T1-ADJ, T1 Adjustment Request (federal) and/or TP-1. R-V (provincial), available on the Canada Revenue Agency and Revenue Quebec websites, and supply copies of the supporting documents.
Q I have a property in Nova Scotia (17 acres, plus a cottage and barn) where I spend five months of the year. I also have an apartment in Montreal where I spend the winters. If I sell the property in Nova Scotia, what is my capital gains situation?
A It depends on a couple of things. If you rent in Montreal, you can designate the cottage property in Nova Scotia as your principal residence. The principal-residence exemption will spare you from capital-gains taxes on at least part of the property. The size of the lot is the complication. The tax department considers anything above one-half hectare ( just over an acre) to be outside the scope of the principal-residence exemption unless you can make a case for why it’s essential for the use and enjoyment of the property. So you may have to pay capitalgains taxes on the excess. If you own the apartment in Montreal, you’ll have to designate one of your two real-estate holdings as your principal residence and pay capital-gains taxes when you sell the other.
Q You mentioned the (provincial) tax credit for home support services for seniors 70 and older. How does it apply to me? I live in an apartment.
A If you live in an apartment (as opposed to a private seniors’ residence), your eligible expenses amount to 5 per cent of the first $600 in rent that you pay every month (a maximum of $30). The credit is 32 per cent of that number. No breakdown in costs is required from the landlord. Different rules apply for houses, condos, seniors’ residences and health establishments.