Personal Income Tax rules change every year in Canada. Deductions and credits are added, amended and removed. You can be sure that the Canada Revenue Agency will inform you of anything you have failed to report, but do not expect them to point out if you have missed a deduction or tax credit. Brooks Financial has outlined some of the more significant changes for Individuals and Families in 2016.
Tax Reporting Change on Sale of Principal Residence
Starting in 2016, all principal residence dispositions must be reported on your tax return. This is true even if the entire gain is fully protected by the principal residence exemption. The penalties for not reporting are steep, $100 per month to a maximum of $8,000.
Marginal Tax Rates
Government has decreased the second marginal tax rate from 22% to 20.5% and introduced a new top marginal tax rate of 33% for income above $202,800 (applicable in 2016 and subsequent tax years).
Canada Child Benefit (CCB)
The CCB has been introduced to replace the current Canada child tax benefit and universal child care benefit. CCB payments will begin in July 2016. The CCB will provide an annual benefit of up to $6,400 per child under six years of age and up to $5,400 per child aged six through 17 years old. The benefit will be phased out as adjusted family net income increases. An additional amount of $2,730 per child eligible for the disability tax credit will continue to be provided. These amounts will be paid monthly to eligible families, will not be taxable and will not reduce the amount eligible for the goods and services tax (GST) credit, the guaranteed income supplement, the Canada Education Savings Grant, the Canada Learning Bond and the Canada Disability Savings Grant. If your household income is more than $200,000 you will not receive a CCB amount.
Income Splitting Credit
Previously, a non-refundable income splitting tax credit was available for couples with at least one child under the age of 18. This credit has been eliminated.
Increase to Northern Residents Deduction
The maximum residency deduction that each member of a household may claim has increased from $8.25 to $11 per day and, where no other member of the household claims the residency deduction, the maximum residency deduction has increased from $16.50 to $22 per day. Residents of the Intermediate Zone will be entitled to deduct half of these increased amounts.
Teacher and Early Childhood Educator School Supply Tax Credit
A new refundable tax credit for teachers and early childhood educators to help cover out-of-pocket supplies acquired on or after January 1, 2016. This measure will allow an employee who is an eligible educator to claim a 15% refundable tax credit based on an amount of up to $1,000 in expenditures made by the employee in a taxation year for eligible supplies. For the cost of supplies to qualify for the credit, employers will be required to certify that the supplies were purchased for the purpose of teaching or otherwise enhancing learning in a classroom or learning environment. Individuals making claims will be required to retain their receipts for verification purposes.
Education and Textbook Tax Credits
These credits are being eliminated as of January 1, 2017. The education credit is worth 15% of $400 for each month a student is enrolled in school full-time, while the textbook credit is set at 15% of $65 per month. This measure does not eliminate the tuition tax credit. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in 2017 and subsequent years.
Children’s Fitness and Arts Tax Credit
As of January 1, 2017, these credits will begin to be phased out. Eligible expenses will be cut in half for 2016 and eliminated for 2017. The fitness credit is now worth up to $150 on expenses of as much as $1,000, while the arts credit is worth up to $75 on expenses of up to $500.
Old Age Security and Guaranteed Income supplement
The age of eligibility has been restored to 65 from 67.
Canada Student Grant
Beginning August 1, 2016 Canada Student Grant amounts will increase by 50%. The grants will increase from $2,000 to $3,000 a year for students from low-income families; from $800 to $1,800 for students from middle-income families; and from $1,200 from $1,800 per year for part-time students from low-income families.
Canada Student Loan Repayment
Students will not have to repay money borrowed under the Canada Student Loan program until he or she is earning at least $25,000 per year. Previously, single graduates had to start repaying their loans when they were earing at least $20,210 while families of 5 or more would have earn more than $67,825 before starting to repay.
To learn more about the 2016 tax return, visit the Government of Canada website:
DID YOU KNOW?
With the news that the Provincial Government is looking into allowing ride-sharing companies, like Uber, to operate in Manitoba, it’s important to remember that the Canada Revenue Agency considers income derived from Sharing Economy activities to be taxable income. In addition to ride-sharing, the term “Sharing Economy” encompasses: accommodation sharing (Airbnb), music and video streaming (Spotify), online staffing (Freelancer.com), crowdfunding (GoFundMe), etc.
Just like any other business, you are required to report all income earned through sharing-economy activities. As well, you must meet all the GST reporting and remittance obligations. Not reporting this income would be viewed by CRA as tax evasion leaving you subject to fines, penalties or even jail time. If you have missed reporting this income in the past it would be prudent to correct your tax affairs by having your previous tax returns adjusted.
Did you know… that if you have received money under a crowdfunding arrangement, Canada Revenue Agency could consider it as taxable income? Funds raised through crowdfunding could represent a loan, capital contribution, gift, income, or a combination thereof. The terms and conditions of each situation may vary greatly, consider hiring a tax professional to help you understand what your tax obligation will be.
Contact Brooks Financial today for help with your Personal Income Tax Return. Only 24 days left until it is due (May 1, 2017).