Question
Tanya is 45 years of age and her 2020 income is made up of employment income of $93,500 and she contributed $9,800 to her Registered
Tanya is 45 years of age and her 2020 income is made up of employment income of $93,500 and she contributed $9,800 to her Registered Retirement Savings Plan. (Assuming she has the RRSP contribution room from working in 2019). She was awarded a year-end bonus of $10,000, all of which was payable in February 2021. [The bonus was received on February 10, 2021 consider if the bonus should be included in employment income in 2020 or 2021 (cash or accrual basis)].
For 2020, her employer withheld maximum CPP ($2,898) and EI ($856) contributions.
Tanya lived with her family in Lethbridge, Alberta. Other information pertaining to 2020 is as follows:
- Tanyas spouse is 47 years old and his employment income for the year totaled $45,500.
- Bob and Tanya have a daughter, Tammy, who is 3years old in 2020. Tammy was taken care of while Bob and Tanya worked during 2020 by Bobs mother who is currently unemployed and retired.
- The familys medical expenses for the year, all of which were paid by Bob, totaled $3,355. Of this amount, $300 was reimbursed by Tanyas employer.
- During the year, Tanya made cash donations to registered Canadian charities in the amount of $3,500 and Bob made $200. (Consider whether Bob will have higher donation credit if he transferred the $200 donation credit to Tanya or if he should use the credit on his return)
- During the year, Bob made contributions to federal political parties totaling $1,150.
- Both Tanya and Bob earned rent income from their house basement rented out during 2020. The details of the rent activities are as follows:
Rent income $7,500
Repairs (Bathroom and Kitchen) $1,080
Utilities (100% for the basement) $1,320
Advertising the basement $150
No Capital Cost Allowance is planned as they would like to maintain the entire house as a principal residence in the future. The net rental income will be shared jointly (50%) on their tax return in 2020.
Required: Use the above information to determine Tanya and Bobs
- Net income for tax purposes
- Federal tax payable before tax credit (Gross tax)
- Tax credits available
- Federal tax payable for 2020. (Do not consider provincial tax payable)
Federal Tax Bracket
| Tax Bracket 2020 | Tax Rate 2020 | Tax Bracket 2021 | Tax Rate 2021 |
| Up to $48,535 | 15% | Up to $49,020 | 15% |
| $48,536 to $97,069 | 20.50% | $49,021 to $98,040 | 20.50% |
| $97,070 to $150,473 | 26% | $98,041 to $151,978 | 26% |
| $150,474 to $214,368 | 29% | $151,979 to $216,511 | 29% |
| $214,369 and over | 33% | $216,512 and over | 33% |
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Cost Accounting A Managerial Emphasis
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
15th edition
978-0133428704
