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Now viewing: August 2018

Changes for the 2018 Income Tax Year

Posted August 29, 2018

As always, the federal government has included some income tax changes in 2019, for the 2018 tax year. Most of the changes that have been announced or proposed are related to businesses, with a few changes for individuals.

The small business tax rate is scheduled to be reduced from 10.5% to 10% for 2018, and reduced again to 9% for 2019. Passive income schemes, taxable dividends, securities lending arrangements, repurchase of shares, and at-risk rules for tiered partnerships have all had changes made; for an in-depth look at these changes, it is recommended that you talk to the accounting professionals at Shaw & Associates Chartered Accountants to see how these changes might affect you.

Certain trusts have had additional reporting and filing requirements added. Again, it is recommended that you talk to an income tax professional to see if the income tax changes for trust reporting will affect you.

A few of the changes that affect individuals include:

  • The Employment Insurance Caregivers Benefit for taking time off to be a caregiver has been extended to include maternity and sickness benefits.
  • Renaming the Working Income Tax Benefit to the Canada Worker’s Benefit has been proposed, and is set to be enhanced starting in 2019. The maximum benefit will be increased to $1,355 for singles, and $2,335 for families.
  • The Disability Tax Credit has increased.
  • Costs for a service animal for people with severe mental impairments such as post-traumatic stress disorder are proposed to be included under medical expense tax credits.

Interestingly, $90.6 million have been earmarked to be invested by the federal government over the next five years to fight tax avoidance.

Some past changes to tax measures that have been proposed but not implemented have also been addressed. Per Osler.com:

“Budget 2018, in accordance with the government’s customary disclosure of previously announced measures, confirms the government’s intention to proceed with the previously announced tax and related measures, as modified to take into account consultations and deliberations since their release, including the following:

  • Measures confirmed in Budget 2016 to expand the scope of the GST/HST joint venture election, which had been promised in previous budget proposals;
  • The measure announced in Budget 2016, on information-reporting requirements for dispositions of an interest in a life insurance policy;
  • The legislative proposals released on September 16, 2016, relating to technical amendments to the ITA;
  • The legislative and regulatory proposals to amend the Excise Tax Act released on September 8, 2017, relating to the GST/HST; and
  • Measures released on December 13, 2017 to address income sprinkling.”

For more details on the upcoming changes, look at summaries from Deloitte.com and Macleans

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Medical Expenses and Income Taxes: Changes and Unusual Items

Posted August 15, 2018

Canadians can claim medical expenses on their income taxes as a deduction, but it can be an underutilized deduction. 

You need to keep your receipts and total them up, and you don’t get to deduct the full amount of your medical expenses (there are thresholds and percentages involved), but you’re paying the expenses anyway—why not take advantage of any deductions you can get with them?

Fertility Treatment Deductions

The Canadian federal budget in 2017 included a clarification to rules on claiming medical expenses for the purposes of conceiving a child. In the past, only people who had been diagnosed as infertile were able to claim fertility treatment expenses as an income tax deduction. The changes included in the 2017 budget now allow anyone using fertility treatments to conceive a child to claim them as a Medical Expense Tax Credit (METC) on their income taxes. 

This clarification also included the rather unusual condition that the METC can also be claimed retroactively for up to 10 years—people wanting to claim a METC that they were previously ineligible for can re-file their taxes for that year with the updated METC amounts.

Other Medical Expenses

Another interesting thing about claiming medical expenses on your income taxes is just how many medical services and devices are eligible to be claimed. Some of the more unusual items that are allowed by the Canada Revenue Agency (CRA) are:

  • an air conditioner or air purifier;
  • computer peripherals;
  • electrolysis;
  • a furnace;
  • laser eye surgery;
  • medical marijuana;
  • medical services provided outside of Canada;
  • moving expenses;
  • premiums paid to private medical plans;
  • renovation or construction expenses;
  • tutoring services;
  • wigs.

These are just a small sampling of some of the medical expenses that might be considered a claimable medical expense by CRA. Many of these items require a prescription from a doctor to be eligible to be claimed, but if a doctor has decided that you need a specific item or service because of a medical condition, it’s worth looking into. 

Your next stop after seeing your doctor might be seeing Shaw & Associates Chartered Accountants—find out if you can claim the expenses or not, and what you need to do to claim them!

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Changes To Tuition Credit Usage And Accumulation

Posted August 3, 2018

Students in post-secondary institutions and trade schools in Canada have historically been able to claim tuition deductions, as well as education credits for time spent in school, and textbook credits to offset the cost of purchasing textbooks. 

Changes to Canadian federal tax laws beginning in 2017 eliminated the federal education and textbook credits (the tuition credit remains). Some provinces and territories have also done this—it varies from province to province. 

Alberta passed legislation to remove ties that caused Alberta to follow suit automatically when the federal government made changes to education tax credits. At this point, Alberta is maintaining the education tax credit.

As per the Canada Revenue Agency, the federal income tax changes regarding education also included a change to occupational skills course deductions. If a student is taking an occupational skills course at a post-secondary institution, they may qualify for a tuition deduction for that course, even if the student is not at the post-secondary level. The requirements for students to qualify for this deduction are that they must be 16 years of age or older at the end of the year, and they must be enrolled in the course for the purpose of becoming trained at an occupation.

This is not a change, but rather a strange part of Canadian tax law regarding carrying forward tuition credits that many people may not be aware of. If you CAN take the tuition credits, the federal government will assume that you HAVE taken the credits, and reduce your balance accordingly, whether you take them or not.

From the Advisor, “After careful review, the judge found that the law requires a taxpayer’s unused tuition, textbook and education credits to be reduced by the amount that the taxpayer “may deduct […] for the year.”

In other words, it’s irrelevant whether the taxpayer chooses to deduct her tuition, textbook and education credits in a year to reduce her tax to zero. Since she was permitted to claim the amounts, her credits are simply reduced whether she actually claims the amounts or not.

To support this conclusion, the judge referred to both the Department of Finance technical note that accompanied the rule’s enactment along with the 1996 federal budget, which states: “[T]he budget proposes to allow the student to carry forward these credits indefinitely until they have sufficient tax liability to make use of them.”

As the judge explained, such phrasing “indicates that a student will be forced to use the credit once he or she has income against which the credit could be applied.”

Canada’s tax laws can be a strange and mysterious place—using an accounting service to help you navigate these waters can save you time, money, and sanity.

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.