10 Most Bizarre Canadian Tax Rules That Will Make You Giggle

Preparing your annual tax return is a grind for most people. You may appreciate some levity in this time of drudgery: here are some weird and bizarre tax rules that will make you laugh or at least giggle. And who knows, you may glean some tax savings tips at the same time!

Hair Transplant Costs

Hair transplant costs paid to a doctor will generally qualify as medical expenses and will give rise to a Canadian tax credit. However, only medical expenses in excess of 3% of income will be eligible for this tax credit. Medical expenses can be claimed by either spouse.

Lottery or Gambling Winnings Are Not Taxable

Lottery winnings in Canada are treated as windfalls and are not subject to Canadian income tax. This is also true for gambling winnings, as long as the taxpayer is not in the business of gambling, because the income is not considered to be income from a business.Professional gamblers, however, to have to report their winnings.

Salary Paid to 11-Year-Old Deductible

In a recent Tax Court case, the court allowed the taxpayer to deduct $7,000 in expenses paid to his 11- and 13-year-old sons. The taxpayer testified as to the exact duties performed by each son, including the number of hours worked. He also testified that he paid his sons in kind rather than by way of cheque.

Employers are Allowed to Give Two Non-Cash Gifts a Year to Employees

CRA’s policy is that employers are allowed to give two non-cash gifts a year to employees without the employee having to include the gifts in income for Canadian income tax purposes, provided that the gifts total less than $500.

Medical Marijuana is Deductible for Tax; Vitamins are Not Tax Deductible

In a ruling dated August 24, 2015, CRA confirmed that registered patients under Health Canada’s Marihuana for Medical Purposes Regulations (MMPR) who receive a prescription (authorization) for medical marijuana from a physician, and purchase cannabis from a licensed producer, may claim the cost of their cannabis as an allowable medical expense on their Canadian income tax return which can result in an income tax credit.

The general rules for claiming medical expenses under Canada’s Tax Act allows prescription medicines acquired for use by an individual taxpayer or spouse, when prescribed by a medical practitioner however non-prescription or over-the-counter drugs including vitamins cannot be claimed, even when prescribed by a physician.

Inactive Corporate Director is Liable For Corporation Taxes

A director, including an inactive director, or a corporation is jointly and severally liable with the corporation for failure to deduct, withhold or remit income tax, payroll or GST amounts required, along with any related interest or penalty. The same is applicable to the director of a non-profit or charitable corporation.

Change Of Use Of Principal Residence To Rental

If a taxpayer has completely converted his or her principal residence to a rental property, there is a deemed disposition of the property (both land and building) at fair market value. The resulting capital gain or loss must be reported in the year the change of use occurs. The taxpayer may elect to defer recognition of any gain to a later year,however, in order for the election to be valid, you may not claim tax depreciation (CCA)as a rental expense.

Most Legal Fees Incurred In Family Law Situations Are Not Deductible

Most legal fees incurred in family law situations are not deductible for Canadian income tax purposes. The main exception is for fees incurred to enforce a child maintenance order.Legal fees incurred in respect of a child support application are also deductible.

Parking Provided To Employees

Parking provided to employees may constitute a taxable benefit to the employee, requiring an inclusion on their Canadian income tax return. The taxable amount is the fair market value of the parking less any amount the employee pays for the space. If fair market value can’t be determined, such as parking in a mall, no taxable benefit results.

Cost Of Uniforms Or Other Specialized Clothing Not Deductible

Even though a job may require specialized clothing or uniforms, the cost of the clothes is not deductible for Canadian income tax purposes. Similarly, grooming costs such as facials, manicures, and haircuts for a professional such as on-air talent for television (news reporters and anchors) cannot be deducted.

About the Author

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David J. Rotfleisch

David J. Rotfleisch, a leading Canadian tax lawyer, is not only a certified specialist in taxation but also a chartered professional accountant. Most recently, David is a pioneer in Canadian crypto taxation.

As of April 2020, he was one of 12 Ontario Certified Specialists In Taxation™.

Learn more about David J. Rotfleisch