22 - Tax Credits Lesson 2

7/25/2019 22 - Tax Credits Lesson 2

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Taxable Income and Tax Payable

for Individuals

Lesson 2

Tax Credits Continued


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Non-Refundable Tax Credits

Basic Personal Amount !ousal Amount

"li#ible $e!endent Amt

Care#iver Amount

Amounts for an Infirm$e!endent over %&

A#e Amount

Pension Income Amount

Canada "m!loyment

Ado!tion "x!enses

'edical "x!enses $isability Amount

Tuition ( "ducation

Textboo) Tax Credit

Interest Paid on tudentLoans

CPP*+PP Contributions

"I Premiums

Public Transit Passes C,ild itness*Arts

C,aritable $onations*.ifts

Political Contribution


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'edical "x!enses

Not all medical and ,ealt, care costs are coveredby !rovincial or !rivate ,ealt, care !lans

'edical costs not reimbursed by ,ealt, care!lans/ in excess of t,e lo0er or 12/23 and 45 of

NITP/ 6ualify for t,e %75 medical tax credit 'edical ex!enses must be !roven 0it, recei!ts

and must be !aid 0it,in any %2 mont,s endin#

0it,in t,e year8J F M A M J J A S O N D J F M A M J J A S O N D


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+ualifyin# "x!enses

+ualifyin# ex!enses include amounts !aid to8 doctors and dentists ull-time ,ome attendants ull-time nursin# ,ome care or institutions for t,e disabled

Ambulance trans!ortation Reasonable travel ex!enses for medical care Artificial limbs/ !rescri!tion eye#lasses or contact lenses/ or

any device !rescribed by a medical !ractitioner9 ,omemodification for a 0,eelc,air

:xy#en eein# eye do#s/ ca!tionin# for ,earin#*s!eec, im!airment $ru#s/ medicine/ laboratory 0or)/ or#an trans!lant Premiums !aid for !rivate ,ealt, service !lans

:ver 2 !ara#ra!,s of "tc;


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'edical "x!enses

for !ouse and $e!endent

'edical ex!enses for a tax!ayer include t,ose of t,etax!ayer


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"xam!le

'r; >ones/ ,is s!ouse/ and ,is c,ildren/ %?year old 'ary and %@ year old Tom/ ,ave

incurred medical ex!enses of 1//

14// 12/ and 13// res!ectively;'r; >ones 0ill claim ,is c,ildrenones< medical ex!ense tax

credit;


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olutionTotal 'edical "x!enses8

'r; >ones 1 /'rs; >ones 4/

'ary under %3 2/

$educt t,e lesser of8

4513/ or 12/23 2/23ubtotal 1 ?/&@2

Tom over %38 Lesser of8

13/ D Eleast of 12/23 or 451@/2F &/&2"li#ible for Credit 1%/ 7%?

Rate %75

'edical "x!ense Tax Credit 1 2/%&&


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Refundable 'edical "x!ense

u!!lement T,ere is an additional su!!lement for lo0 income

Canadians 0it, ,i#, medical ex!enses

T,e individual must be %3 and over and ,ave earnedem!loyment*business income of at least 14/2% T,e credit is t,e lesser of8

1%/%&2/ or 27*%7 of t,e 'edical "x!ense Tax Credit

T,is amount is reduced by 75 of family NITPover 127/@4@ and is com!letely eliminated0,en family NITP reac,es 1@/4&@


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"xam!le of 'edical "x!ense u!!lement T,e tax!ayer earned 1%@/ durin# t,e year and

incurred 17/ in medical ex!enses; 'edical "x!ense Tax Credit8

'edical "x!enses 17/

Less8 Lesser of 12/23 or 451%@/ 7&

1/4 x %751 ??7

u!!lement8 Lesser of

1%/%&2 :R 27*%7 x 1??7 G 1%/%3 1%/%3Less 75 of NITP :ver 127/7? NIL

Refundable Amount 1%/%3

T,e taxes !ayable 0ill be reduced by 1%/%3 and any

excess 0ill be refunded;


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$isability Amount

An individual is eli#ible for t,e $isability Tax credit0,en t,ey suffer from a !,ysical or mental im!airment0,ic, restricts t,e activities of daily livin# and ,aslasted or can be ex!ected to last for at least %2 mont,s

Basic activities of daily livin# include8D mental functions necessary for everyday !erceivin#/ t,in)in#/rememberin#

D eedin# or dressin# oneselfD !ea)in# suc, t,at t,e individual can be understood in a 6uiet

settin# by someone familiar 0it, t,emD Hearin# suc, t,at t,e individual can/ in a 6uiet settin#/

understand someone familiar 0it, t,emD Bo0el or bladder functions/ orD 0al)in#


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To 6ualify for t,e disability credit/ a doctor

must certify t,at t,e individual is severelyim!aired on form T22%

T,e disability tax credit is 1&/3@@

T,ere is an additional su!!lement of 1/?& fora disabled c,ild 0,o is under t,e a#e of %3 at

t,e end of t,e year Total credit of 1%2/7?

DT,is su!!lement is reduced by c,ild care orattendant care costs in excess of 12/?@@


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Transferrin# t,e $isability Tax Credit

T,e disabled !erson often ,as little or noTaxable Income a#ainst 0,ic, to use t,e

credit

In t,ese situations/ all or !art of t,e creditt,e unused !ortion can be transferred to a

s!ouse or a su!!ortin# !erson 0,o claims

t,e disabled individual as a de!endent undert,e eli#ible de!endents !rovision !arent/

#rand!arent/ c,ildren/ #randc,ildren/

brot,er/ sister/ aunt/ uncle/ niece or ne!,e0


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Tuition Tax Credit Individuals can receive a tax credit of %75 of

6ualifyin# tuition fees !aid for t,e calendar year to8D A university/ colle#e or ot,er !ost-secondary institution

D An institution certified by t,e 'inister of Human Resource$evelo!ment for a course t,at develo!s or im!roves s)ills

in an occu!ation for a student %? years of a#e or over

A university outside Canada/ ifenrolled full time in a course t,at

0as at least %4 consecutive 0ee)sin duration or individuals near t,e J;;

border/ a J;; colle#e oruniversity


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Tuition Tax Credit

T,e tuition tax credit includes all mandatoryancillary fees suc, as library c,ar#es/

laboratory c,ar#es/ ,ealt, services/ at,leticsand various ot,er services

Non-mandatory eli#ible ancillary fees to amax; of 127 can be included


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"ducation Credit

tudents receive an education credit of 1 !er mont,of full-time attendance at a desi#nated institution

ull-time is a !ro#ram t,at runs for at least 4 consecutive0ee)s and !rovides at least % ,ours of instruction eac,

0ee) t,rou#,out its duration Part-time students may claim an education credit of 1%2

!er mont,

Part time is defined as receivin# less t,an % ,ours of

instruction at a 6ualifyin# institution Individuals 0,o 6ualify for t,e disability tax credit may

claim an education tax credit as a full-time studentre#ardless of 0,et,er t,ey attend full or !art time


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Textboo) Tax Credit

T,e tax credit for textboo)s is 1?7 for eac,mont, of full-time education tax crediteli#ibility and 12 for eac, mont, of !art-time

education tax credit T,e credit is not based on t,e actual !urc,aseof textboo)s

Any unused textboo) tax credit can

be transferred to a s!ouse/ !arent or#rand!arent


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Transfer of Tuition/ "ducation and Textboo)

Tax Credits

Jnused education-related tax credits can be transferredto a !arent/ #rand!arent or s!ouse of t,e student to amaximum of 17/ less amounts used by student

To 6ualify/ t,e student must desi#nate/ in 0ritin#/ t,e

amount transferred To determine t,e amount transferable8

tudent


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Carry or0ard

of Tuition ( "ducation Credits A student may not ,ave sufficient income to use t,eir

education-related tax creditsD Per,a!s t,e student may not ,ave transferred t,e tax credits

to a su!!ortin# !erson/ orD Per,a!s t,e student may ,ave more t,an 17/ of

education-related tax credits

T,e student can carry t,ese tax credits for0ardindefinitely

Jnused amounts t,at are carried for0ard can nolon#er be transferred to a su!!ortin# !erson

c,edule %% calculates t,e amounts 0,ic, must beclaimed


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Credit for Interest Paid on

tudent Loans An individual is entitled to deduct %75 of amounts

!aid in t,e year/ or in any of t,e five !recedin#

years/ on account of interest !aid on loans under t,eCanada tudent Loans Act/ t,e Canada tudent

inancial Assistance Act or a !rovincial statute

#overnin# t,e #rantin# of financial assistance to

students at t,e !ost-secondary sc,ool level T,ere is a five-year carry for0ard on unused student

loan interest deductions


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CPP Contributions

Tax!ayer


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"m!loyment Insurance Premiums

"m!loyment Insurance !remiums are based onmaximum insurable earnin#s of 1@/7 on

0,ic, em!loyee


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:ver!ayments to CPP and "I

:ver contributions may occur due to error

or 0,en em!loyees c,an#e ob

"xcess contributions are not tax credits9t,ey are refunded to t,e tax!ayer in t,e

form of an increased refund or a decrease in

t,e tax liability


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Cla0bac)s

or tax!ayers 0,ose incomes exceed

s!ecific t,res,old levels/ benefits received

under :ld A#e ecurity and "m!loyment

Insurance !ro#rams must be re!aid

T,e income t,res,olds8

D:ld A#e ecurity :A is 1&2/3@

D"m!loyment Insurance benefits is 1?%/3&7


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=or)in# Income Tax Benefit

:ften/ individuals 0,o are on socialassistance and obtain some ty!e of 0or) loset,eir benefits and*or t,eir subsidiMation

T,is incentive to 0or) a!!lies to individuals0,o are %@ years of a#e or older/ and not full-time students or in !rison for @ days or more

T,e benefit is a refundable tax credit on t,elesser of8D275 of eac, dollar of income in excess of 14/

D1@@3


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Limits on =ITB

T,e =or)in# Income Tax Benefit is calculated onfamily income earned from em!loyment or business0it,out reference to any losses

T,e maximum benefits are8D 1@@3 for a sin#le individual and is reduced by %75 on

income in excess of 1%%/442

D 1%/3%4 for a family cou!le or sin#le !arent and isreduced by %75 on income in excess of 1%7/?@

or a disabled individual/ a =ITB disabilitysu!!lement of 275 commences on earned income of1%/%7


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Public Transit Passes Credit

Transit services include trans!ortation by bus/ferry/ sub0ay/ train or tram

T,e tax credit is %75 of t,e cost of mont,lytransit !asses or electronic !ayment cards

T,e tax!ayer can claim t,e cost of !asses fort,emselves/ t,eir s!ouse and for de!endentc,ildren under %@ years of a#e

T,e tax!ayer must retain all recei!ts


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C,ild Arts Tax Credit

T,e C,ild Arts tax credit a!!lies for t,e enrollmentof a c,ild under %? in an eli#ible !ro#ram

T,e credit is %75 on amounts u! to 17 to a

maximum tax credit of 1&7 %75 of 17

or ,andica!!ed c,ildren/ t,e a#e limit is increased

to %3 and t,e credit is 1%/


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C,ild itness Tax Credit

T,e C,ild itness tax credit a!!lies for t,eenrollment of a c,ild under %? in an eli#ible !ro#ram

T,e credit is %75 on amounts u! to 1%/ to amaximum tax credit of 1%7 %75 of 1%/

or ,andica!!ed c,ildren/ t,e a#e limit is increasedto %3

T,e C,ild itness Tax Credit is refundable


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irst Time Home Buyeranuary 2&/ 2@


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olunteer irefi#,ter Credit

A volunteer firefi#,ter 0,o !erforms at least

2 ,ours of volunteer firefi#,tin# services

durin# a taxation year receives a tax credit of14/


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Amounts Transferred from a !ouse

ive s!ecific tax credits can be transferred to a s!ouse

or common-la0 !artner8 A#e credit $isability credit Pension income credit Current year tuition/ education and textboo) tax credits to a

maximum of 17// and

T,e transferrin# s!ouse must first use t,ese credits to

reduce t,eir o0n tax liability to Mero before t,e excess

can be transferred


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All of t,e Tax Credits 0e

,ave examined so far !rovide

a %75 tax relief

T,e follo0in# Tax

Credits !rovide

uni6ue amounts of

tax relief


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C,aritable $onations

C,aritable donations include all amounts donated to8

% Total c,aritable #ifts/ includin# #ifts to8 a re#istered Canadian c,arity/ includin# Canadian

Jniversities a re#istered Canadian amateur at,letic association

a Canadian munici!ality t,e Jnited Nations or an a#ency t,ereof a !rescribed university outside of Canada/ and a c,aritable or#aniMation outside of Canada to 0,ic, t,e

.overnment of Canada ,as made a #ift in t,e current year

or !recedin# year2 Total Cro0n #ifts

4 Total cultural #ifts as !er t,e Cultural Pro!erty ( Im!ort Act

Total ecolo#ical #ifts ecolo#ically sensitive land


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$onation Limits

C,aritable donations eli#ible for t,e tax credit arelimited for individuals to &75 of t,e tax!ayer


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Calculatin# t,e Tax Credit T,e tax!ayer receives a %75 tax credit on

t,e first 12 of contributions and 2@5 ont,e remainder of t,e donation

"xam!le8

A tax!ayer 0it, a NITP of 177/ ,as made12/7 in c,aritable donations durin# t,e year;

'aximum $onation8 &75 x 177/ G 1%/27

Tax Credit8

%75 x 12 1 4

2@5 O 12/4 1??&

Total Tax Credit 1?@&


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Political Contribution Tax Credits

Individuals contributin# to a federal!olitical !artys or candidates can claim tax

credits for t,eir contributions in t,e

follo0in# manner8Contributions Credit ate Tax Credit

irst 1 4* 14

Next 147 %*2 1%&7

Next 1727 %*4 1%&7

'aximum 1%/2&7 1?7


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Also Remember

$ividend Tax Credit8

D :n "li#ible $ividends8 435 #ross-u! of dividends

received and federal tax credit of ?*%% of #ross-u!

D :n Ineli#ible $ividends8 %35 #ross-u! of dividendsreceived and federal tax credit of %4*%3 of #ross-u!

D Provinces 0ill offer t,eir o0n rate of tax credit

orei#n Tax Credits8

D t,e federal #overnment 0ill offer Canadian tax!ayers aforei#n tax credit for taxes !aid to a forei#n nation on

income earned abroad

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22 - Tax Credits Lesson 2

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