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Banka: New tax credits made available for your 2011 tax return

Now that we are in the middle of tax season, I thought I would bring everyone up to date on the changes for this year.

There aren’t too many changes that affect many people, but rather some very specialized changes this year.

Remember the Child’s Fitness Tax Credit? Now there is also a Child’s Arts Tax Credit which functions very similar to the Fitness Tax Credit.

The main thing to note is that the program provider is expected to know whether or not the class qualifies for the credit and is expected to issue the receipt. If the program provider is wondering what needs to be on the receipt, they can find it at www.cra.gc.ca/artscredit under, “What does Canada Revenue Agency consider to be an acceptable receipt?”

The programs are the same in that they apply to children under 16 registered in a prescribed program, both are limited to $500, both apply only to programs that last at least eight consecutive weeks or five consecutive days which can be a membership in an association where at least 50% of the activities offered are eligible for the deduction but cannot be part of a school’s curriculum.

But the program must be either a physical activity program or an arts program, it can’t be both.

For example, ballet has been accepted as a physical activity, so it does not also qualify for the arts credit. To be considered an arts program it must contribute to creative skills or improve dexterity in literary arts, visual arts, performing arts, music, media, languages, customs or heritage.

The program needs to assist with the development and use of intellectual skills, or interpersonal skills, or can focus on the natural environment or tutoring of an academic subject.

Another new item is the Volunteer Firefighter Tax Credit. This credit requires that at least 200 hours of volunteer firefighting services be performed in a year and does require written certification from someone at the fire department that has the authority to provide the certification.

This credit is 15 per cent of $3,000 and can’t be claimed in addition to the $1,000 honorarium that volunteer firefighters currently receive.

A new item for the 2012 tax year is the Family Caregiver Tax Credit, which is 15 per cent of $2000 and provided to the caregivers of dependants with a mental or physical infirmity and includes spouses, common-law partners and minor children.

This credit will be indexed for future years and basically replaces the infirmity tax credit that is being phased out.

For 2011, the $10,000 limit on eligible medical expenses has been removed for expenses claimed for self, spouse, common-law partner or child under 18 years of age.

In addition, a caregiver can now claim medical expenses up to $10,000 for of a dependent relative subject to the regular rules that the claimable medical must be more than three per cent of the dependent’s net income.

There is a change to the Child Tax credit for 2011 allowing more than one credit per household.

The credit is for parents of children under the age of 18 at the end of the taxation year.

There has been a change to the Tuition Tax Credit to allow fees paid to an educational institution, professional association or provincial ministry for the purpose of receiving professional status to be deductible.

Other fees and charges paid to occupational, trade, and professional examinations are also eligible, however this does not apply to entrance exams.

The fee must be more than $100 to qualify.

The current rules for students studying abroad require that they are in full-time attendance in a course of at least 13 weeks that will lead to a degree.

In 2011, the course requirement is reduced to three weeks from 13 and the students can claim tuition, education and textbook tax credits. The CRA has also expanded it list of eligible universities.

There have been some instances of tax planning schemes with the use of RRSPs called RRSP strip transactions or swaps, whereby the owner was able to remove RRSP assets from the plan without including the amount in income.

These swaps will now be considered prohibited investments and are no longer allowed without taking the asset amount into income on those transactions occurring after July 2011.

The capital gains that may have arisen from the transaction may be taxed as interest income.

The following web page has more information on all the changes—www.cra-arc.gc.ca/gncy/bdgt/2011/menu-eng.html.

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