2017 Personal Income Tax Updates and a 2016 Refresher
Hi, my name if Craig Murata. I am a Chartered Professional Accountant and sole practitioner at my accounting practice Murata Tax & Accounting CPA. Pleases visit www.muratacpa.ca for additional information and resources.
As the upcoming tax season is approaching I thought it would be valuable to my clients and others to have the following resource outlining some changes coming for the 2017 tax season.
2017 Personal Income Tax Changes
Children’s fitness and arts tax credits:
For the 2017 the children’s fitness and arts tax credits have been eliminated by the federal government.
Please note that in British Columbia (BC) these tax credits are still available 2017 on the provincial level and will be eliminated in 2018. In 2017 eligible expenditures up to $500 per child are eligible to receive the provincial tax credit.
Education, textbook and tuition tax credits:
In prior years eligible students received education and textbook tax credits based on the number of months of part or full time courses. The federal government eliminated these tax credits for 2017. Please note that the education and textbook tax credits are still available at the provincial level for 2017 but will be eliminated in 2018.
Eligible tuition tax credits are still available at both the federal and provincial levels for 2017.
Tuition tax credits of up to $5,000 may be transferred to a spouse, parent or grandparent if the student does not adequate income to utilize the full credit in the current year.
Canada caregiver tax credit:
New for 2017 is the Canada caregiver tax credit. The Canada caregiver tax credit is available to an eligible relative of an infirm dependant. This new credit is more restrictive than and replaces the following three tax credits that were available in 2016 and prior years: caregiver tax credit, infirm dependant tax credit and family caregiver tax credit.
Canada Child Benefit:
Also new for 2017 is the Canada child benefit which replaces the universal child care benefit and Canada child tax benefit. The Canada child benefit is a tax-free benefit made to eligible families to assist in the cost of raising children under 18. The benefit amount is calculated based on family net income of the previous year; for this reason it is important to file your taxes each year to continue receiving the benefit payments.
Work in process for professionals:
Prior to 2017 designated professionals had the option to elect to exclude their work in process income on their tax returns until the work had been completed. This election allowed the professional taxpayer to defer the income tax related to the work in process. Beginning in 2017 this election is no longer available and all prior year work in process must be recognized over a five year transition period.
2017 Other Notable Items
Canada Pension Plan:
The maximum Canada Pension Plan contribution rates for 2017 increase to $2,564.10 based on pensionable earnings (salary and wages) of $55,300.00.
The maximum employment insurance contribution for 2017 was reduced to $1,170.67 based on insurable earnings (salary and wages) of $51,300.00.
Registered Retirement Savings Plan (RRSP):
The maximum addition to RRSP contribution room for 2017 is $26,010.00 based on a 2016 net income of $144,500.00.
Tax Free Savings Account (TFSA):
The maximum TFSA contribution limit increased by $5,500.00 in 2017 to $52,000.00.
2016 Refresher of Changes
Family Tax Cut (income splitting):
The family tax cut tax credit was introduced to allow a maximum of a $2,000 tax credit when splitting income between eligible spouses. This tax credit has been eliminated for 2016 and future years.
Charitable Donation Tax Credit:
Prior to 2016 the maximum federal tax credit for donations over $200.00 was 29%. Beginning in 2016 the maximum tax credit is increased to 33% for those at the highest personal income tax rate.
Eligible Educator School Supply Tax Credit:
In 2016 and future years eligible educators (teachers and early childhood educators employed at eligible facility) are allowed to claim a tax credit for the purchase of educational supplies. The tax credit is available for purchases up to a maximum of $1,000.00 of supplies purchased by the educator that have not been reimbursed.
Principal residence and investment property reporting:
Prior to 2016 if you sold your home and it qualified as an eligible principal residence you were not required to report the sale on your income tax return. In 2016 and future years it is now mandatory to report the sale of your principal residence.
In all years it is mandatory to report the sale of investment properties even if there is no capital gain. There are tax planning strategies that can be used to reduce the capital gains in certain cases which may potentially save significant capital gains in implemented and reported properly.
Also, in 2016 there was a change in the principal residence calculation. Non-residents for tax purposes are no longer entitled to the additional year (+1) in the formula. This change will increase the capital gains on the sale for some tax payers.
The sale of a principal residence or any investment can be complicated and consulting with a qualified tax professional can potentially result in significant tax savings. Contact Murata Tax & Accounting for more information.