What’s new for your 2015 and 2016 tax returns

With every new government it seems must come a bunch of tinkering with the incredibly complex income tax system, as each government rewards some groups and takes more from others.  IN 2016 Canada elected a new Federal Government and they have already announced a batch of changes, with final details to come shortly in a budget.  Here are some of the items on the table that may affect many clients. I have no doubt that the bottom line is an increase in the taxation of Canadians, but it is virtually impossible to tell until later.

• Children’s fitness amount, lines 458 and 459 – This tax credit ($1,000 per child under 16) is now refundable, which means the credit ($1,000 × the federal rate of 15% = $150) can lower your taxes owed below zero, creating a tax refund. (If you do owe tax, it’ll reduce the amount owed by $150.)
• Calculation change for the Family Tax Cut, line 15 of Schedule 1-A, Family Tax Cut – For 2014 and subsequent years, a calculation change allows unused tuition, textbook and education credits transferred from a spouse or common-law partner. Although this change won’t affect many Canadians, those who are affected may see an additional $2 to $750 for the Family Tax Cut, says CRA. No need to ask for an adjustment for your 2014 return; CRA will automatically reassess affected taxpayers.
•  Child care expenses, line 214 – The maximum limit has increased by $1,000 per child.
• Universal Child Care Benefit (UCCB), line 117, claimed by parent with lower net income – This taxable benefit was enhanced in 2015 to $160 monthly for each child under 6, and $60 monthly for children 6–17. (The enhanced UCCB replaced the amount for children under 18.) This will probably be your last year to claim the benefit because the government plans to cancel it.
• New tax-free family benefit – One of the biggest changes is the new Canada Child Benefit (CCB), part of the new government’s election platform, and intended to simplify family benefits. The CCB will be tax-free and tied to income, and will replace the UCCB, the Canada Child Tax Benefit (CCTB) and the National Child Benefit Supplement (NCBS, part of CCTB). CCB is intended to replace those existing three programs, and that would be as of July 1, 2016.
• The government also plans to get rid of the textbook and education credits, but if those amounts are factored into the new CCB, families will still benefit, and will do so regardless of whether or not children attend university.
• Also on the chopping block: the Family Tax Cut, introduced in 2014. A December 2015 press release says the government will “repeal income splitting for families with children (not pension income splitting)” for 2016 and onward.
• Another change is a decreased to the federal tax rate for income between roughly $45,000 and $90,000 and an increase in the rate on income over $200,000.
• The TFSA limit has been decreased from $10,000 in 2015 to $5,500 in 2016. For a taxpayer who has been eligible for the TFSA since its inception and never contributed, her total contribution room is $46,500.
• There is also talk of raising taxes on small businesses that have less than three full time employees by raising the tax rate on net business income.