Changes you need to know about on your 2016 Income Tax ReturnApril 6, 2017
By Sheryl Smolkin
If your financial affairs are fairly straightforward and the only income you receive is from employment, you should have already received all of your tax slips and you may have already filed your income tax return, although it is not due until midnight on Monday, May 1st.
But tax slips for mutual funds, flow-through shares, limited partnerships and income trusts only had to be sent out by March 31st, so if you have multiple, more complex sources of income you are likely among the group of Canadians who are under the gun this month to finalize and file your returns.
Here are some of the things that have changed since last year that individuals and families should be aware of when they are assembling documentation and preparing their returns.
MyCRA: A mobile app from the Canada Revenue Agency now allows you to view your notice of assessment, tax return status, benefit and credit information, and RRSP and TFSA contribution room.
Auto-fill: If you use electronic software to do your taxes, the CRA will fill in many of the boxes for you. You sign into CRA MyAccount and agree to a download that will include information on your RRSP contributions, plus information from T4s, T4As and T5s. Users are advised to double-check the CRA’s data before they file.
INDIVIDUALS AND FAMILIES
Canada child benefit (CCB): As of July 2016, the CCB has replaced the Canada child tax benefit (CCTB), the national child benefit supplement (NCBS), and the universal child care benefit (UCCB). For more information see Canada child benefit.
Child-care expenses: The amount parents can claim for child-care expenses has increased by $1,000 annually, per child, to $8,000 for a child under six and $5,000 for a child aged between seven and 16 years old. For more information see line 214.
Canada Apprentice Loan: Students in a designated Red Seal trade program can now claim interest on their government student loans. For more information see line 319.
Northern resident’s deductions: The basic and additional residency amounts used to calculate the northern residency deduction have both increased to $11 per day. See Form T2222, Northern Residents Deductions. For more information see line 255.
Children’s arts amount: The maximum eligible fees per child (excluding the supplement for children with disabilities), has been reduced to $250. Both will be eliminated for 2017 and later years. For more information see line 370.
Home accessibility expenses: You can claim a maximum of $10,000 for eligible expenses you incurred for work done or goods acquired for an eligible dwelling. This deduction typically applies to home renovations to improve accessibility for individuals eligible for the disability tax credit for the year or for qualifying seniors over 65. For more information see line 398.
Family tax cut: The Family Tax Cut allowed eligible couples with children under the age of 18 to notionally split the income of the spouse with higher earnings, transferring up to $50,000 of taxable income to the lower income spouse in a taxation year. The family tax cut has been eliminated for 2016 and later years.
Children’s fitness tax credit: The maximum eligible fees per child (excluding the supplement for children with disabilities) has been reduced to $500. Both will be eliminated for 2017 and later tax years. For more information see lines 458 and 459.
Eligible educator school supply tax credit: If you were an eligible educator, you can claim up to $1,000 for eligible teaching supplies expenses. For more information see lines 468 and 469.
INTEREST AND INVESTMENTS
Tax-free savings account (TFSA): The amount that you can contribute to your TFSA every year has been reduced to $5,500.
Labour-sponsored funds tax credit: The tax credit for the purchase of shares of provincially or territorially registered labour-sponsored venture capital corporations has been restored to 15% for 2016 and later tax years. The tax credit for the purchase of shares of federally registered labour-sponsored venture capital corporations has decreased to 5% and will be eliminated for 2017 and later tax years. For more information see lines 413, 414, 411, and 419.
Top 10 year-end tax tipsDecember 8, 2016
By Sheryl Smolkin
If you earn income in Canada, you pay taxes. My father-in-law always said, “If you make money, pay what you owe, but not any more than you have to.” So to help you manage your 2016 tax bill, here are 10 top end-of-year tax tips he definitely would have approved of:
- Defer income: If you think you may earn less in 2017 than you have earned in 2016 and therefore be taxed at a lower rate, defer income where possible. This is less likely if you are employed and receive a regular wage or salary. However, your employer may agree to pay out a year-end bonus in January. Also, if you are a consultant or freelancer consider wait until the beginning of 2017 to invoice certain clients.
- Contribute to SPP: SPP plan members with RRSP contribution room can contribute a maximum of $2,500/year. Contributions made until the end of February 2017 can be reported on your 2016 tax return, but the sooner you make your contribution the better.
- Max RRSP contributions: Your 2016 RRSP contribution limit is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $25,370 minus any contributions to a company pension plan. However, unused RRSP contributions can be carried forward. Therefore if you have not maxed out your contributions every year, you may have thousands of dollars of contribution room. By using up this room you will trigger significant tax deductions when you file your 2016 tax return.
- Spousal RRSP: Where only one spouse is employed, opening a spousal RRSP will allow income splitting at retirement. Your permissible contributions to a spousal RRSP will depend on your available RRSP contribution room and you will get the tax deduction. Also, if your spouse withdraws funds within three calendar years of your contribution, it will be attributed to you.
- Max TFSA Contributions: As of this year, cumulative total TFSA contribution room is $46,500. Contributions are not tax-deductible, but investments accumulate tax-free and there are no tax consequences when money is withdrawn. Contribution room is also restored in the year following withdrawal. If you are holding cash or investments in an unregistered account and you have TFSA contribution room, consider moving as much as you can into your TFSA. However, keep in mind this will trigger a deemed disposition as of the date of transfer and you may have to pay any capital gains tax in the year of disposition
- Disability tax credit: Taxpayers who meet the criteria can apply for a non-refundable disability tax credit (DTC) of $8,001 in 2016. Where the disability has been in existence for some time, you can file retroactively for up to 10 years. However, the DTC requires Canada Revenue Agency (CRA) approval. Your doctor needs to complete a T2201 Disability Tax Credit Certificate for the CRA to review and approve, and you can only proceed once you have this approval.
- Get rid of losers: If you have an unregistered investment account, sell off investments with accrued losses at year end to offset capital gains realized in your portfolio.
- Charitable donations: You have until December 31st to make charitable donations that will generate a non-refundable tax credit on your 2016 tax return. You can typically claim eligible amounts of gifts to a limit of 75% of your net income. You can also claim any unclaimed donations made in the previous five years by you or your spouse or common law partner. You can find charitable donation tax credit rates for 2016 here. First-time donors who qualify can get an extra federal tax credit of 25%. For more information, see First-time donor’s super credit.
- Donate stock: There are plenty of ways to give to charity, but the donation of shares, whether publicly-traded or private company shares, can give rise to significant tax relief. Not only will you get a charitable donation tax credit but you will not have to pay capital gains tax on any appreciation in value since you purchased the shares.
- Medical/dental receipts: Make sure you have receipts for eligible medical expenses for you, your spouse or common-law partner, and dependent children under 18 that have not been otherwise reimbursed. They can be claimed on line 330 of the federal tax return. Only expenses in excess of the lesser of $2,237 for 2016 or 3% of net income can be claimed for the federal tax credit. Generally, you can claim all amounts paid, even if they were not paid in Canada.
Tax tips for seniorsMarch 6, 2014
By Sheryl Smolkin
Retirement income has to last a long time and stretch to cover the increasing need for care required by disabled or older seniors. That’s why it is important for seniors, their children and their advisors to fully understand and take advantage of available tax exemptions and deductions.
Here are two tax breaks you may not know about.*
1. Disability tax credit (DTC)
The disability amount is a non-refundable tax credit that a person with a severe and prolonged impairment in physical or mental functions can claim to reduce the amount of income tax he/she has to pay in a year. In 2013 the maximum tax credit for people over 18 is $7,697.
To be eligible for the DTC, The Canada Revenue Agency must approve Form T2201, Disability Tax Credit Certificate. You can apply for the DTC at any time during the year. Retroactive payments may be made if the individual was disabled for several years before applying for the tax credit. Last year we got over $9,000 back for my mother.
If you qualified for the disability amount for 2012 and you still meet the eligibility requirements in 2013, you can claim this amount without sending in a new Form T2201. However, you must send one if the previous period of approval ended before 2013, or if requested to do so by CRA.
You may be able to transfer all or part of your disability amount to your spouse or common-law partner or to another supporting person.
If you received attendant care and you are eligible for the DTC, there are special rules that apply for claiming those expenses. For more information, see Attendant care or care in an establishment.
CRA has an interactive online quiz you can take to find out if you or your family member may qualify for the DTC. Also see Who is eligible for the disability tax credit? for all of the requirements that must be met to qualify for the DTC
2. GST/HST for homecare expenses
The goods and services tax (GST) in Saskatchewan (or the harmonized sales tax (HST) in Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador) is not payable on publicly subsidized or funded homecare services.**
However, if an individual is not approved for municipal or provincial homecare services, a private agency must charge GST/HST.
Nevertheless, if a government agency approves even a small amount of subsidized homecare services (i.e. 2 hours/week), then ALL public and private homecare services become GST/HST exempt.
That’s why Lorne Lebow, a partner in the accounting firm Stern Cohen LLP recommends that in any situation where an individual requires home care services, an application should be made to the relevant government agency for subsidized or free services before or at the same time a private home care worker is retained.
“Even if a government agency authorizes services for only one or two hours a week, it’s enough to trigger the GST/HST exemption for additional privately-retained home care services. With GST/HST rates ranging from 5% (Saskatchewan) to 15% (Nova Scotia), that can quickly add up,” Lebow says.
He also advises individuals receiving both public and private home care services to inform the agency they are working with and request that invoices do not include GST/HST.
In the event that someone you know has inadvertently paid GST/HST you can apply to the CRA for a rebate going back two years. Saskatchewan residents must send the completed General Application for rebate of GST/HST CRA (Form 189) three-page form with a letter from the government agency confirming the client is receiving subsidized care plus copies of the original invoices to Summerside Tax Centre 275 Pope Road Summerside PE C1N 6A2.
*Also see Guide RC4064, Medical and Disability-Related Information and discuss your family’s situation with your accountant or other financial advisor.
** Effective March 21, 2013 the definition of “homemaker service” in the GST/HST legislation has been expanded to include cleaning, laundering, meal preparation and child care provided to an individual who, due to age, infirmity or disability, requires assistance in his/her home plus personal care services such as bathing, feeding, and assistance with dressing and taking medication.