Every year, the federal government tinkers with the rules that determine how much income tax we pay.
This year, as Canadians prepare to file their 2014 returns, we highlight 10 changes that could affect how much you owe — or how much you save.
- Special report: Tax season 2015
- Income splitting: What it is and who benefits
- Stephen Harper announces family tax cut, child care benefit boost
Family tax cut credit
Last October (the day before Halloween, actually), the Harper government announced a package of tax changes for families with children. But only one of those changes — the family tax cut — is in effect for the 2014 tax season. Enhancements to the universal child care benefit and increases to child care expense deductions don't take effect until this year, as does the elimination of the child tax credit.
The family tax cut is a modified version of an income-splitting move first promised by the Tories in 2011. It allows couples with at least one child under the age of 18 to effectively transfer up to $50,000 of taxable income from the higher-earning spouse or common-law partner to the lower-earning one.
The difference in federal taxes owing results in a non-refundable credit that one spouse can claim. The credit is capped at $2,000.
Single parents, parents who each earn about the same amount, and couples without children will have to look elsewhere for tax relief, as the family tax cut won't provide it.
Children's fitness tax credit
Last fall, the government announced that the children's fitness tax credit would be doubled, beginning with the 2014 tax year. Total fitness expenses that can be claimed go from $500 to $1,000. Since the credit is worth 15 per cent of each child's registration or membership fees, the federal credit is now worth up to $150 per eligible child under 16 (or under 18 if the child is eligible for a disability tax credit.
- Disability tax credit and the push for fee caps
- 8 things to know about the family tax cut
- Test your tax knowledge with our quiz
Starting with the 2015 tax year, the credit is also being made refundable, which will allow low-income families to take full advantage of it, too.
Adoption expense tax credit
The maximum eligible adoption expenses that qualify for this tax credit were boosted to $15,000 in 2014, up from $11,669 in 2013. In 2015 and subsequent years, this credit will be indexed to inflation.
Medical expense tax credit
There are two changes to note here. The long list of eligible medical expenses now includes the cost of designing a therapy plan for someone who qualifies for the disability tax credit. It also includes the cost of service animals that help people with severe diabetes.
Search and rescue volunteers credit
People who spent at least 200 hours as a search and rescue volunteer in 2014 now qualify for $450 in tax relief, thanks to a new credit that was introduced in the 2014 federal budget.
Sharing information on snowbirds with U.S.
As of June 30, 2014, new rules came into effect that will allow Canadian and U.S. authorities to keep closer track of the cross-border movements of their residents.
What does this mean for Canadians?
Well, for snowbirds and other Canucks who spend significant amounts of time south of the border, it will make it very easy for Uncle Sam to figure out if you meet the "substantial presence" test, which requires the filing of a statement with the IRS.
"With the new rules, U.S. immigration and tax authorities will be able, for the first time, to independently tally the number of days a Canadian resident has spent in the U.S. when travelling to and from the country," warns accounting firm Ernst & Young.
Safety deposit box deduction eliminated
As of the 2014 tax year, you can no longer deduct the cost of renting a safety deposit box to store all those precious investment records. For corporations, that change already took effect in March 2013.
Federal tax brackets - 2014 tax year:
- Up to $43,953 — 15%
- $43,954-$87,907 — Tax Rate 22%
- $87,908-$136,270 —Tax Rate 26%
- $136,270 — 29%
Gifts of cultural property
The 2014 federal budget closed a loophole that amounted to little more than an abusive tax shelter for gifts of certified cultural property. Here's how these arrangements used to work: Donors would buy a "culturally significant" artifact or property through the promoter of a tax shelter. The property would then be appraised at a value far higher than what the donor paid for it. Then, the buyer would gift the property to a charity, and the donor would claim a big tax benefit, thanks to the inflated valuation. The CRA would usually reject these claims and disallow the deductions, sometimes years later. Now, people won't even by able to try to slip these through.
As of Feb. 10, 2014, the value of a cultural property gift made through a tax shelter arrangement is limited to what the donor paid for it in the first place.
Tax-free savings accounts
People could put another $5,500 into a tax-free savings account in 2014. Another $10,000 can be socked away in 2015, thanks to a big boost to contribution limits unveiled in the 2015 federal budget. That brings the total cumulative contribution room since 2009 to $41,000 as of this year. Amounts withdrawn from a TFSA in 2014 can also be recontributed this year, increasing 2015's available contribution room.
You no longer need to apply for the GST/HST credit. The tax department's computers will now analyze your return and figure out if you're eligible.
Mineral exploration tax credit
The government announced in March that it will extend the 15 per cent tax credit for investors in flow-through shares of mineral exploration companies for another year — until the end of March 2016.
Flow-through shares are a way for junior mining companies that have trouble raising capital to finance exploration and development to shift these expenses onto shareholders by passing on the tax credits they accrue from their expenses to investors, who use them to offset their taxable income.
The temporary credit was introduced in the October 2000 budget update and has since been extended several times. The aim of the credit, according to Natural Resources Canada, is to "assist junior mining companies in raising new equity through flow-through shares" in order to help "maintain or increase the amount of exploration activity in Canada." The credit is a non-refundable tax credit that can be carried back three years and carried forward 20 years.
The government said the credit has helped junior mining companies raise more than $5 billion to fund exploration and development since 2006.