What else is taxable?

Tax time is upon us yet again and as Canadians are preparing their returns there are a few things to keep in mind.  We all know about the regular taxable things like the income tax from your job or for the early redemption of RRSPs (Registered Retirement Savings Plan), but what else is taxable in Canada?

Lottery winnings are for the most part tax-free.  Cash winnings are safe in your wallet, and other prizes (like a car) are normally free of taxation.  The one catch is if you may have a taxable capital gain if you sell a prize from a lottery style win later for more than the value of the adjusted cost base at the time of the win.

The interest portion of an annuity (a prize awarded over time, like a $1000 a month for life) paid prize is also considered taxable.  Basically the contest holder purchases an amount before hand to pay out the prize,  part of the payments the winner receives are from that initial investment and the remainder comes from interest on that lump sum (the taxable portion).  It’s a bit complicated to figure out but regardless it is still part of Canadian tax law.

Giveaways, like a free donut from rolling some cardboard on your favourite cup of coffee are tax-free.  The only exceptions that makes a giveaway taxable is if the prize is received by virtue of your business or is received in respect of an achievement in a field of endeavour that you ordinarily carry on.  Okay that’s a little wordy,  so if your business wins something( like a volume bonus or rebate from a supplier) its taxable or if u say win an award from a professional institution for the best exam marks, that prize is taxable.

We all wish our employer would give us something more than a regular paycheck, and so does the taxman.  Any prize from your employer is subject to tax as it is considered a part of your income.  The form of the prize does not matter, cash prizes are just as taxable as additional pension benefits.

Enjoy your winnings and extra tax headaches, courtesy or the Canada Revenue Agency