There are many changes for the 2016 tax year. Changes to some of the more common tax credits are detailed below:
Canada Child Benefit
In December 2015, the federal government announced that it would introduce, in its next budget, proposals with regards to the new Canada Child Benefit. Payments under this new benefit should begin in July 2016. This program has replaced the Canada Child Tax Benefit (CTTB) as well as the Universal Child Care Benefit (UCCB). This benefit will not be indexed until July, 2020.
Charitable Donations – New Tier for High Income Taxpayers
Beginning in 2016, there are new tiers being applied to charitable donations for taxpayers who are subject to the new 33% tax bracket. For taxpayers whose federal tax rate is 33%, charitable donations will be calculated as:
· 15% on 1st $200
· 33% on the amount of donations (after the 1st $200) that is equal to the amount of income being taxed at 33%
· Remainder at 29%
· First time donors will receive 25% of $1,000 in charitable donations
Note that the first time donor super credit (available to all taxpayers) will expire starting with tax year 2017.
Children’s Arts Tax Credit
The allowable amount for the Children’s Arts Tax Credit has been reduced to $250 per child for the 2016 tax year. Additional amounts are available for children who qualify for the disability tax credit. Any amounts paid in 2016 for eligible activities that occur in 2017 will be eligible. Beginning with tax year 2017, this tax credit will be eliminated.
Children’s Fitness Tax Credit
While this credit remains refundable for 2016, the allowable amount has been reduced to $500 per child. Additional amounts are available for children who qualify for the disability tax credit. Any amounts paid in 2016 for eligible activities that occur in 2017 will be eligible. Beginning with tax year 2017, this tax credit will be eliminated.
Education and Textbook Credits
Beginning in 2017, Education and Textbook credits will be eliminated; however, Tuition credits will still be eligible. Note that any carryforward Education and Textbook amounts from tax year 2016 or earlier will be honoured and can still be claimed in 2017 and future years.
Family Tax Cut (Income Sharing)
This tax credit was in effect until tax year 2015 and was discontinued beginning in tax year 2016.
Home Accessibility Tax Credit
Beginning in tax year 2016, the Federal government has introduced a non-refundable tax credit that benefits the taxpayer by 15% of up to $10,000 spent on qualifying home renovations. To qualify, the taxpayer must be 65 years or older or claiming the DTC or have a family member meeting these requirements living with them. This new federal credit is non-refundable. Taxpayers may have an eligible expense that also qualifies as a medical expense. If so, the expense can be claimed as a medical expense and a home accessibility expense.
Pre-Authorized Debit Agreement
Beginning in tax year 2016, taxpayers have the option to set up a one time payment for individual income tax amount owing on their T1 tax return. The taxpayer would need to complete the required portion of the T183 form and the information must be submitted when the return is eFiled.
Principal Residence Disposition Reporting Requirements
Beginning in 2016, Canada Revenue Agency is requiring taxpayers to report the sale of all properties, including those that are considered to be their primary residence and therefore eligible for a full exemption from capital gains or losses. The taxpayer must report:
a) Description of the property (address)
b) Date of acquisition
c) Proceeds of disposition
· The penalty for late reporting is $100/month to a max of $8,000 and is payable even if no tax was payable on the disposition
· In some cases where the gain does not qualify for a full exemption, form T2091 must be completed.
Retirement Income Security Benefits (RISB) for Armed Forces
Beginning in 2016, these pensions will now be eligible for pension splitting.
Teacher and Early Childhood Educator School Supply Tax Credit
This new tax credit will allow employee taxpayers who are eligible educators to claim a 15% refundable tax credit based on an amount of up to $1,000 of purchases of eligible teaching supplies by the employee in a taxation year. To be eligible, the supplies must be:
· purchased for teaching or facilitating learning, and directly consumed or used in an elementary or secondary school or in a regulated child care facility in the performance of the teacher or educator’s duties of employment;
· not reimbursable and not subject to an allowance or other form of assistance
· not deducted or used in calculating a deduction from any person’s income for any taxation year.
· consumable, with the exceptions of games and puzzles, books, containers such as plastic boxes or bankers boxes, and educational software, which will all be eligible
Other non-consumable items such as tablets, computers, rugs for children to sit on are NOT eligible.
To claim this credit, the taxpayer must be able to produce a signed certificate from a school official on request