Sophie Legault
Senior Manager | Lawyer, CPA, CGA, M. Fisc. | Tax

Heard about the pink tax? This extensively-studied phenomenon demonstrates that in 42% of cases*, women are charged more for their products than men.

But what about tax measures? Do women have an advantage? Does tax have a gender?

To begin, let’s be honest, the answer is no. Canadian and Quebec tax laws are neutral. The Canadian taxpayer, just like the Quebec taxpayer, can be a man or a woman. In Canada, the various tax laws were written using male pronouns to make the texts less cumbersome. This is also the case for Quebec civil law, and the large majority of other Canadian and Quebec laws, except for those that set out specific measures for women. For the most part, Canadian laws are gender-neutral.

That said, while tax is neutral in theory, that doesn’t mean that it has the same impact on women as it does on men. Despite society’s honourable quest for equality between the sexes, the reality is that the economic and financial situations for women and men are not on a par. There are many reasons behind this, some noble and valid, while others should no longer exist. For example, women earn less than men on average in all categories. They often have less job security than men. Women are often their family’s “first responders” when it comes to the children or an elderly parent. They have less money and more things to think about than money management. However, this isn’t a reason to let personal finances fall by the wayside.

First let’s look at saving and retirement planning. Nobody is exempt from unpleasant financial surprises and even the lucky ones have to contend with financial challenges in time. Sooner or later, everyone has to stop working. Rather than simply praising the benefits of saving, we’d like to present two tangible tax methods available to help you save. The registered retirement savings plan (RRSP) allows you to grow your savings tax-free and benefit from a tax deduction when the amounts are invested. It’s when the amounts are withdrawn that the capital and generated income are taxed. For those who don’t have sufficient income for an RRSP, the tax-free savings accounts (TSFA) is a good alternative. While the amounts invested are not eligible for a tax deduction in calculating income—as with RRSPs—the income generated in a TSFA is tax-free. Furthermore, when you withdraw from the account, the capital withdrawn and income generated are also tax-free.

Taxes for Women – Tax Measures and Dependents

We demonstrated that the neutrality of the tax system doesn’t mean that finances are gender-neutral, and we looked at savings and retirement planning solutions. Now let’s look at tax aspects related to children.

The baby adventure starts with maternity leave which, in Quebec, gives access to the Quebec Parental Insurance Plan (QPIP) if you’ve contributed through your job or as a self-employed worker and if you have insurable income of at least $2,000 during the reference period. One part of the leave is exclusive to the mother, the other to the father. The parental leave can be shared between both parents. Paid leave is also provided when a child is adopted. The number of weeks of leave, meaning the period for which you can receive benefits, varies according to the benefit level chosen. Therefore, you can take a longer leave if you’re satisfied receiving 55% of your salary, or for less time if you prefer receiving the maximum amount possible—75% of your insurable salary.

Once the baby has arrived, you’ll be eligible for the Canada Child Benefit from the federal government and the Quebec Child Assistance Payment, and both can be supplemented if your child has a recognized handicap. Daycare and adoption fees and fees for children’s activities may also give rise to tax credits or deductions. You may also be interested in a registered education savings plan or a registered disability savings plan. In both cases, while contributions to the plan do not provide any tax deduction—as is the case for RRSPs—they may be eligible for government subsidies, and the return generated by these investments is only taxable upon withdrawal. An interesting fact: you can set up this kind of plan not only for your child, but also for yourself, which can be appealing if you’re thinking about going back to school.

You can have child dependents but you can also have a parent who is a dependent. There are both federal and Quebec tax credits for people housing one or several eligible dependents. A major dependent must be eligible due to a mental or physical deficiency, unless the individual has attained 65 years of age, in which case the individual is eligible regardless. The rules for the provincial credit are more inclusive than those for the federal credit and interpretation is specified each year.

Taxes for Women — Tax Impact Related to Spouses and End-of-life Planning

Previously, we explained that the neutrality of the tax system doesn’t necessarily mean that finances are gender-neutral and we presented tax measures for dependents. Now let’s focus on the tax aspects related to a spouse and end-of-life planning.

If you have a spouse, it could be beneficial to submit joint tax returns. For example, several credits are transferable between spouses, helping you to reduce your overall tax bills. Remember that our tax system is based on progressive tax brackets for each individual, whether in a couple or not. So, the higher the revenue earned, the higher the tax rate will be. A couple in which each individual earns $50,000 will be taxed less overall than a couple in which one spouse earns $100,000 and the other one, nothing. This is why income splitting measures are used to spread income among family members rather than leaving it in the hands of only one person. The 2014, 2015 and 2016 federal tax cuts provided similar measures, pension income splitting does as well. In other cases, certain well-structured and well-documented techniques can be implemented, conditions permitting.

Lastly, you need to take care of your end-of-life planning—an updated will is an essential tool in this regard. Remember that if you have a spouse, but aren’t married, you’re considered to be “spouse-less” for the purposes of the civil law governing the law of wills. Moreover, if you or your spouse don’t have a will, the ab intestat succession rules will apply and everything will go to your children, parents or brothers and sisters, depending on the situation. Does your will reflect your most recent wishes? Perfect! But you also need to ensure that your estate will have the necessary funds to settle the taxes payable on death. Unless left to your spouse, all of your property will be deemed to have been disposed of at its fair market value and tax will be calculated on any appreciation in value. Unless you have major “liquid” assets, it’s wise to get life insurance to avoid your estate having to sell property to settle these taxes.

To conclude, it’s your responsibility to keep your finances in check. If it seems too difficult or complex a task, don’t hesitate to consult with our experts. They will be pleased to support and guide you in making decisions that are in line with your needs and expectations.

* Taken from a study conducted by the New York Department of Consumer Affairs in December 2015

26 Oct 2016  |  Written by :

Ms. Legault is a senior manager at RCGT. She is your expert in taxation for the Rimouski office....

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