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Tax Changes That Will Impact Your Return This Year

03/03/2016 04:14 EST | Updated 03/04/2017 05:12 EST
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From the Canadian Federal election to the collapse of oil prices to a jump in food prices, 2015 was a year of changes. And your tax return is no exception. But unlike previous years, there are only a few changes. However, even small changes can help you save a few tax dollars.

The new government did make changes to the tax brackets however, this will not affect your 2015 tax return. The second tax bracket dropped from 22 per cent to 20.5 per cent. So if you are an employee earning between $45,282 and $216,987 this year, you should see a few more dollars when you look at your pay stub but it should not result in a tax refund when you file next year.

There is good news and bad news for parents. First, they benefited from the enhanced Universal Child Care Benefit (UCCB), which increased the amount for children under six to $160 and added $60 a month for children from six to 18. This included a lump sum payment in July, which was a little bonus for the summer. However, this is considered income and it must be claimed by the lower income spouse with a few exceptions.

So this will reduce the spousal amount claim for families where one parent earns most of the income. And single parents will find the amount for eligible dependent will also be reduced by the UCCB income for the one child they claim. The new government has indicated they will eliminate the UCCB since it is not geared to income and focus on enhancing the Canada Child Tax Benefit (CCTB) which is tax free.

But parents will get some extra tax savings thanks to some changes introduced in the last federal budget. They may be able to claim $1,000 more in child care expenses in 2015 and the $1,000 Children's Fitness Tax Credit is now a refundable tax credit. This means the fitness credit can create a refund. Previously, it was non-refundable so it meant you had to have paid tax during the year in order to benefit from claiming it. This change should allow more low income families to get some benefit from the credit.

Tax-Free Savings Accounts (TFSAs) are popular with Canadians since you can earn income in the account without paying tax on it. Canadians don't have that many tax shelters so TFSAs can be a good choice. The TFSA contribution limit for 2015 was raised to $10,000 and was supposed to remain at that level. But the new government reduced the contribution limit for 2016 to $5,500 and the limit will be indexed going forward. If you deposited the $10,000 limit in your TFSA in 2015, you will not be penalized. However, the contribution amount has changed for 2016.

Last year also brought the Foreign Account Tax Compliance Act (FATCA) into full effect. FATCA is an information sharing agreement being used to look for assets and accounts outside of the country. Unlike other countries, the U.S. tax system is based on citizenship and residency. It means U.S. citizens and green card holders usually have tax filing obligations no matter where they live.

FATCA compelled Canadian financial institutions to share customer data to help the IRS identify U.S. citizens. The first information exchanged happened last September via the Canada Revenue Agency (CRA). If you are a U.S. citizen living abroad and not filing, the IRS may be searching for you.

Some of the biggest changes are actually with the CRA. Many certified tax software programs are taking advantage of the new Auto-fill my return which automatically inputs information from the most common tax slips such as T3s, T4s , T5s , RRSP contributions and student provincial and federal carry over amounts. Even though the penalty for forgetting an income slip may have been reduced, the auto-fill feature include the slips they have related to your Social Insurance Number (SIN). But you need to sign up for the CRA's MyAccount in order to use this feature.

Your Notice of Assessment for 2015 has also been redesigned to make it easier to understand. And if you have signed up for the CRA's MyAccount service, you can access the online mail option to receive your tax-related documents in the account.

The next federal budget is due on March 22. It will not impact your 2015 tax return but could help contribute to your tax planning for 2016. If you are affected by this year's changes, make sure you claim your tax credits. No one wants to pay the government more money than they should.

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