The Canada Revenue Agency starts accepting 2016 tax returns on February 20. It marks the official start of the Canadian tax season. T4 slips are due to be sent from employers by the end of the month, and you should already be receiving RRSP slips (though some investment slips are not distributed until mid-March).
Every year there are changes to your tax return, and the 2016 tax period is no different. Several credits have either been removed or are being phased out as a result of last year's federal budget, and there are new credits available. The biggest changes have probably been to the tax brackets, but you won't necessarily see a difference on your return. Your payroll department would have made the appropriate adjustments at the beginning of the year.
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This is the last year parents will be able to claim the Children's Fitness Credit and Children's Arts Credit. While these credits seemed to have the best intentions behind them when they were introduced -- just try to get kids active and interested in the arts -- they tended to really only be beneficial if you had sufficient income to claim them. While the last government did make the fitness credit refundable in 2015, it didn't seem to help kids from lower-income families get involved.
Rather than eliminate the credits immediately, the government reduced the credits by half this year before they are removed entirely next year. It means you can claim up to $500 for the Children's Fitness Credit and $250 for the Children's Arts Credit. There are a number of provincial fitness and activity credits, and they remain unchanged.
The Family Tax Cut has been eliminated for 2016. Benefiting mainly higher-income families with only one parent working, the $2,000 credit had allowed couples with children under 18 to claim a credit based on the idea of income splitting. Pension income splitting for seniors remains unchanged.
You can claim up to $10,000 in home renovation expenses that meet the accessibility criteria per year.
The new Canada Child Benefit (CCB) was introduced last July so it means parents will need to report the Universal Child Care Benefit (UCCB) for the last time on their 2016 return. The New CCB is not a taxable benefit so it does not get reported on your return. You will receive a RC-62 Form from the government with the UCCB amount you need to claim. Remember, the UCCB is always reported by the lower-income spouse.
Your principal residence exemption remains intact, but you are now required to report basic information on the sale of your home in 2016. Questions include the date you bought the house, a description of the property and the proceeds of the sale. While there has been speculation that this could signal the government changing the tax-exempt status of your home, it has been explained as a way to try and track house flippers and foreign buyers taking advantage of the principal residence exemption.
The government did introduce a new credit to help people stay in their homes longer. The Home Accessibility Tax Credit (HATC) is non-refundable, which means you have to have taxable income in order to claim the credit. You can claim up to $10,000 in home renovation expenses that meet the accessibility criteria per year, per dwelling. The credit can be split among more than one qualifying or eligible individual but cannot exceed the $10,000 limit.
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Teachers and early childhood educators can take advantage of another new credit. The credit for school eligible supplies is a refundable credit for up to $1,000 of eligible expenses so you do not need taxable income in order to claim it.
Investors will also be impacted by the changes. Until this year, you were able to do a tax-deferred "switch" of non-registered mutual funds from one corporate class fund to another corporate class within the same mutual fund corporation. For example, you could switch one bank mutual fund for another from the same bank and defer any taxes. Not anymore. Now these kinds of moves will be treated at the time of the switch as a disposition at fair market value for tax purposes.
Remember, the CRA holds you responsible for the information you provide no matter how your return was prepared.
Life insurance will also be treated differently depending on the policy. New universal life insurance policy holders will see a decrease in their ability to build up investment gains above death benefit premiums on a tax-free basis.
If you are impacted by any of these changes, make sure you understand how they will impact your tax return. Remember, once you sign the document, the CRA holds you responsible for the information you provide no matter how your return was prepared.
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The Liberal government delivered its maiden budget Tuesday, March 22. A deficit of $29.4 billion in 2016-17, nearly three times the $10 billion promised during the fall election campaign, and a projected deficit of $17.7 billion in 2019-20 rather than the balanced budget that was promised in October. (Source: The Canadian Press)
One of the earmarks of the budget is a commitment to spending on aboriginal issues. This includes: - $2.6 billion over five years for primary and secondary education on First Nations reserves, including language and cultural programs, plus $969.4 million over five years for education infrastructure. - $1.2 billion over five years for social infrastructure for Aboriginal Peoples, including First Nations, Inuit and northern communities. - $10.4 million over three years for new women's shelters in First Nations communities, and $33.6 million over five years and $8.3 million ongoing for support services. - $40 million over two years for the inquiry into missing and murdered aboriginal women and girls. Read more here (Source: The Canadian Press)
The Liberals will be changing the structure of Canada's child benefits, ending income splitting and other tax credits for families and parents. This means: - $10 billion more over two years for a new Canada child benefit, absorbing and replacing both the Canada child tax benefit and the universal child care benefit. Targeted to low and middle-income families, the government says the new benefit provides an average increase of nearly $2,300 in 2016-17. - An end to income splitting for couples with children, the children's fitness tax credit and the children's arts tax credit. Read more here (Source: The Canadian Press)
The government will spend $2.5 billion over two years on a suite of changes, including reducing the required work experience for new entrants and re-entrants; halving the two-week waiting period; extending a pilot project to allow claimants to work while collecting benefits; simplifying job-search requirements; and extending the benefit eligibility window in specific regions with a higher unemployment rate. (Source: The Canadian Press)
- $5.6 billion more in benefits to veterans and their families over five years, including a disability award that increases to $360,000, retroactive to 2006, and an earnings loss benefit to injured vets of 90 per cent of pre-release salary. The government is also re-opening nine veterans' service offices across the country and adding a 10th. - Planned National Defence purchases worth $3.7 billion — ships, planes and vehicles — are being deferred indefinitely. Read more here (Source: The Canadian Press)
Planned National Defence purchases worth $3.7 billion — ships, planes and vehicles — are being deferred indefinitely. Read more here (Source: The Canadian Press)
The budget includes $3.4 billion over five years to increase the guaranteed income supplement top-up benefit by up to $947 annually for single seniors, and restore the old age security eligibility age to 65 from 67. Read more here (Source: The Canadian Press)
The Liberals broke a major campaign promise to cut the small business tax rate. Instead, the rate will remain at the current 10.5 per cent on the first $500,000 of active business income. Read more here (Source: The Canadian Press)
The Liberals will spend $1.53 billion over five years to increase Canada student grants to $3,000 from $2,000 for low-income students, to $1,200 from $800 for middle-income students and to $1,800 from $1,200 for part-time students. $2 billion over three years is also earmarked for a new strategic investment fund for infrastructure improvements at colleges and universities, in partnership with provinces and territories.
The Liberals' green infrastructure plan includes: - $2.2 billion over five years in water and wastewater treatment and waste management - $2 billion over two years for a low-carbon economy fund - Over $1 billion over four years to support future clean technology investments - $345.3 million over five years to Environment and Climate Change Canada, Health Canada and the National Research Council to take action to address air pollution. (Source: The Canadian Press)
The Liberals will spend $500,000 to help understand the role of foreign homebuyers in the country's housing market. The government says comprehensive and reliable data on the number of homes sold to foreign buyers does not exist right now. Read more here. (Source: The Canadian Press)
The marquee Liberal commitment to Syrian refugee resettlement could end up costing taxpayers close to $1 billion. The budget provided an additional $245 million over five years to bring in the remaining 10,000 people needed to meet the Liberal promise to resettle 25,000 Syrian refugees by the end of 2016. Read more here (Source: The Canadian Press)
$142.3 million over five years will be spent to add new national parks and improve access during the 150th anniversary of Confederation. (Source: The Canadian Press
The Grits will provide up to $178 million over two years for the provinces for urgent affordable housing needs. Read more here (Source: The Canadian Press)
The budget earmarks $38.5 million over two years to strengthen and modernize Canada's food safety system. (Source: The Canadian Press)
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