Common Cents: Personal Tax Matters – the Year in Review

by Chris Cowland, Cowland & Associates

There were quite a few changes to personal tax matters in 2016 introduced by the new Liberal government. I would like to highlight a few, and provide you with reference material if you wish to explore this more extensively.

Effective July 2016, an alphabet soup of child tax benefits (the CCTB, the NCBS and the UCCB) were replaced by the Canada Child Benefit (CCB), a monthly tax-free payment for families with children under 18. The amount you receive depends on the age and number of children in your care, and your family net income. Maximum amounts are $533 per month for a child under six, and $450 a month for one between six and 17. Don’t get too excited – if your income is over $30,000 the payments are reduced, based on a fairly complex formula. For example, if you have two eligible children, the payment is reduced by 13.5% of your family income between $30,000 and $65,000, plus 5.7% of income over $65,000.

Some less positive family tax credit changes: the Family Tax Cut is now gone; the fitness credit has been reduced from $1,000 to $500; and the arts credit from $500 to $250. So be sure to contribute at least $2,500 to your child’s RESP to take advantage of the Canada Education Savings Grant (before it too disappears!).

The current heated real estate market has led to changes in the treatment of the sale of your principal residence. Until now, if you sold your house and it was exempt from tax because you claimed the Principal Residence Exemption (PRE), you did not have to claim this on your tax return. Also, non-residents could claim a partial exemption. Many people were jumping on the bandwagon and buying, restoring and flipping properties, and paying no tax, but CRA has now tightened the controls. You now have to file a form T2091 to claim the PRE, and it is fairly complex, so you might like to discuss this with your accountant. It’s even more complicated if you own more than one property, for example a home, a rental property and a cottage. Because the T2091 will now be in CRA’s computer files, they will be able to search for multiple property flips, and will probably try to designate these as business income rather than capital gains taxed at half the normal rate.

Just to end on a happy note, there is a new credit this year called the “home accessibility tax credit” which can be claimed by seniors who spend up to $10,000 on permanent improvements making their homes safer or accessible.

Check out the web site for some great information on these and other related subjects.

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