The Liberal federal government was voted in as a majority government so there will be some changes to the tax act and personal tax credits.
The Liberal’s budget was presented on March 22, and was the first for the new government.
The first tax credit to go is the Family Tax Cut.
That was the ability to split income with your spouse if you had children under 18 and were in a lower income bracket.
One spouse could transfer to the other spouse up to $50,000.
The tax savings were approximately $2,000.
The reason for this credit was because our current tax system does not tax everyone fairly.
For example, a husband and wife who both make 50,000 will have a lower tax bill than those where one spouse makes 80,000 and the other makes 20,000.
There is nothing on the horizon to replace this credit, however, there are some studies in the works to determine how feasible it would be to revamp our taxation system to make it more equitable for all.
The education and textbook non-refundable tax credits will be eliminated after 2016.
Instead, there will be increases to Canada Student Grants and methods of qualifying for grants and student loans will be improved to make them more accessible.
Any unused tax credits will still be available and will be carried forward until used.
Any student can transfer any unused credits to their spouse, parents or grandparents.
The Children’s Fitness tax credit will be phased out allowing only $500 deductible for 2016 and none for 2017.
The Children’s Arts tax credit will be phased out allowing only $250 deductible for 2016 and none for 2017.
Removing these credits will help to simplify the tax code. The new government has reduced the middle tax bracket from 22 to 20.5 per cent to help families in the middle income area.
The new tax credit for 2016 is the Teacher and Early Childhood Educator Supply Tax Credit. This credit is to help teachers who spend their own money for extra curricular activities or projects.
It is a 15 per cent refundable tax credit based on an amount of $1,000 of expenditures.
So if you haven’t been keeping your receipts, now is probably a good time to start.
The Universal Child Care Benefit (UCCB) received from January to June 2016 is taxable.
After that, it has been rolled into the new non-taxable Canada Child Benefit.