Wednesday, April 26, 2017

Ideal vs. Reality

I'll keep this brief.  I have finally gotten through my Canadian taxes.  Each year, I delve a bit deeper and understand the overall approach better.  This year, I realized that I can claim a small foreign tax credit on certain investments.  I hadn't caught that in previous years.  It looks like I probably need to file an amended return for last year anyway, so I might as well claim this.  Of course, it is possible I am misunderstanding.  (While the U.S. tax code is far more convoluted than Canada's, they do have more explicit and detailed instructions for how to treat investment income.)  Last year I realized that investment fees are called carrying charges here and directly reduce investment income (whereas in the U.S., you can only claim them if you itemize your deductions and then they usually get clawed back through the AMT anyway!).  That is a more substantial error on my part, and I probably will file amended taxes back to 2014, but not beyond that.

Anyway, while in principle I agree with progressive taxation, it does pinch at times.  There are a few things that I do find unfair about Canada's system, such as you can no longer get a deduction for dependent children (at least provincially) unless you are quite low income.  On the other hand, children's art/cultural expenses and fitness fees are deductible.  I really don't like Ontario's tax surcharge, which is a tax upon one's income tax!  I think it would be more honest to just change the marginal rates.

There are certainly bigger issues that worry me, such as double taxation on investment income, and if one is a particularly high earner, then double taxation on earnings in the U.S.  That hasn't been as much of a problem for people lately, given the weakness of the Canadian dollar, which is likely to remain low for the near term.  Anyway, I am glad to have wrapped up both sets of taxes for another year.

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