A Single Fathers Tax Situation

Ever since his wifes death, John Ambush has faced difficult personal and financial circumstances. His job provides him with fairly good income but requires him to hire a caregiver for his daughters, ages 8 and 10, nearly 20 days a month. This requires him to use in-home child care services that consume a large part of his income. Since the Ambushes live in a small apartment, this arrangement has been very inconvenient.

Although John has created an investment fund for his daughters education and for his retirement, he has not sought to select investments that offer tax benefits. Overall, he needs to look at several aspects of his tax-planning activities to find strategies that will best serve his current and future financial needs.

John has assembled the following information for the current tax year (2019):

Earnings from wages

$47,500

Interest earned on GIC

$ 125

RRSP deduction

$2,000

Savings account interest

$65

Federal income tax deducted at source

$ 7,043

Total non-refundable tax credit amounts

$13,200

Child care deduction

$6,300

Filing status: Head of household

Note: Total non-refundable tax credit amounts already include basic personal amount of 2019.

Federal Personal Income Tax Brackets and Tax Rates 2019

Taxable Income	Tax Rate
$0 - $47,630	15%
$47,630 - $92,529	20.5%
$92,529 - $147,667	26%
$147,667 - $310,271	29%
Over $310,271	33%

Calculate the following (10 marks)

1. What is Johns 2019 federal taxable income? (Refer to Exhibit 3-1, page 85)

2. What is his total 2019 federal tax liability? What is the average 2016 federal tax rate?

3. Will John receive a tax refund or owe additional taxes to the federal government for 2019?