There has been a lot of talk about changes to Canada's personal income tax rules, both throughout the long election campaign in 2015 and during the months since the Liberals took power.
Some, such as the means-tested Child Care Benefit meant to replace the Universal Child Care Benefit are not yet even drafted, though they are anticipated in this year's budget.
Others, such as the higher tax bracket for people who earn over $200,000, and lower taxes for those earning $45,283 to $90,563, are already making an impact on pay packets.
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Experts such as Jason Safar, a partner in tax services at PWC Canada, advise doing some planning around those changes in tax rates, especially for those earning over $200,000.
"If I'm a top-rate taxpayer, it may make sense for me not to take advantage of discretionary deductions in 2015," he said, adding that it's a matter of getting advice and crunching the numbers.
Federal marginal tax rates
|$45,282 or less||15%||15%|
|$45,283 to $90,563||22%||20.5%|
|$90,564 to $140,38826%||26%||26%|
|$140,389 to $200,000||29%||29%|
RRSPs, charitable returns, capital losses and even medical expenses can be moved forward to the 2016 tax year to bring down the marginal tax rate at a time when it might be higher, Safar said.
"That is very new. I can't remember in my career where I've advised a client to not take a deduction in a year. It's usually about paying as little as you can today," he said.
For the 2015 tax year, Canadians still have Stephen Harper's income-splitting scheme for families, termed the family tax cut, and the new UCCB, which is about to be clawed back.
Many of the changes for the 2015 tax year look set to be temporary as the Liberal government puts its plans in place and the tax regime for families is an area slated for change.
Gabriel Baron, tax partner at Ernst & Young, says it's worth looking a year or two down the road to see if there's anything you can do to leave yourself ahead financially.
"Tax planning is a year-round exercise. It's a continuous process. You shouldn't just fill out the tax return in April, but look forward and say what can I do differently for next year," he said.
Look for these changes in the 2015 return:
A mobile app from the Canada Revenue Agency now allows you to view your notice of assessment, tax return status, benefit and credit information, and RRSP and TFSA contribution room.
If you use electronic software to do your taxes, the CRA will fill in many of the boxes for you. You sign into a CRA MyAccount and agree to a download that will include information on your RRSP contributions, plus information from T4s, T4As and T5s. Users are advised to double-check the CRA's data before they file.
Child tax credit and UCCB
The child tax credit, worth an average of $337 per child, is gone and parents must pay tax on the Universal Child Care Benefit they started receiving last summer.
Families have been receiving $160 a month for every child under age six and $60 a month for children aged six to 17 since last July. If you had a spouse or common-law partner in 2015, the partner with the lower income claims the UCCB as income on line 117.
If you are a single parent, you can record the UCCB as income for your child and claim the child as an eligible dependant on line 305 of Schedule 1. Or you can claim the income as your own on line 117.
The UCCB is taxed at your marginal tax rate, so be prepared for the tax hit as you will no longer be getting the child tax credit. But it is not added to your income to qualify for GST/HST refunds, medical expenses and provincial and territorial tax credits.
Family tax cut
This is the controversial income-splitting benefit Stephen Harper designed for families in which one spouse earns much more than another. It took effect for the 2014 tax year. The higher-earning spouse in a couple with children can transfer up to $50,000 of income to the lower-earning spouse, for a tax credit of up to $2,000. If in 2015 you were a household with one member on maternity leave, staying home with small children, out of work or otherwise earning much less than his or her partner, this benefit will do you good. Use Schedule 1-A.
If you are a single parent, a couple without children or a couple where both partners have roughly equal income, the tax cut won't apply to you.
The Trudeau government has pledged to do away with this form of income-splitting, a move that is expected in the next budget. It's unlikely to survive into the 2016 tax year. For 2015, the new wrinkle is the ability to transfer unused tuition, education and textbook amounts from a spouse or common-law partner.
The maximum claimable has increased by $1,000 annually per child, to $8,000 for a child under age six, $5,000 for a child aged seven to 16 or $11,000 for a child with a disability. Only the lower-income earning spouse can claim this deduction.
"Keep your receipts. Make sure you claim those deductions which can be claimed by the lower income person in the household," Baron said.
Family caregiver amount
The additional amount for children with disabilities or impairments under age 18 has been eliminated and replaced with the UCCB. You can still make a claim for the family caregiver amount for a person under age 18 dependent on you because of an impairment in physical or mental function.
Children's fitness and arts tax credits
The amount you pay for instruction in arts programs or participation in sports used to be a non-refundable credit, meaning it couldn't reduce the amount of tax you pay to less than zero. Now it is refundable.
RRIF and RPP withdrawals
The minimum amount that must be withdrawn from a registered retirement income fund, pooled registered pension plan or registered pension plan has been reduced. Since the reduction came into effect mid-year, retirees may have arranged with their fund provider for a higher withdrawal than necessary. Part of the excess may be eligible to be re-contributed.
Personal income tax rates
Effective Jan. 1, the federal tax rate for people earning $45,283 to $90,563 was reduced to 20.5 per cent from 22 per cent and the federal rate for those earning over $200,000 was raised to 33 per cent from 29 per cent. Depending on your province or territory, the top marginal rate moves up from 47 to 53 per cent.
That opens some tax planning options for the highest-income earners, says Baron.
"In 2015, if I contributed to my RRSP … I'm entitled to record that contribution to my return, but I'm not required to do that," he said.
Baron suggests delaying the 2015 contribution to reduce taxable income in 2016, when the tax rate will be higher. It would depend on the individual's expectations for 2016 income and whether he or she has a hefty RRSP deduction to plan with.
"If you know you are going to make over $200,000 next year, maybe as a tax planning technique you could considering delaying taking that RRSP deduction to next year — that same RRSP contribution will save you four percentage points more," he said.
Baron says people in this situation should talk to an adviser to see if the strategy makes sense.
Capital gains and losses
The lifetime capital gains exemption for people selling a farm or fishing property has increased to $1 million as of April 20, 2015.
Safar said taxpayers should calculate foreign exchange carefully when claiming capital gains or losses on other securities.
"With the weakening of the Canadian dollar, we've had a lot of clients quite surprised by the foreign exchange impact that it has when disposing of market securities," he said.
People who sold U.S. securities in 2015 thinking they had had a capital loss are finding the foreign exchange gain actually offsets the capital loss, because the dollar is so low.
"If you have disposition of your securities later in the year in 2015, don't be surprised if you wind up owing more taxes than you expected come April."
Mineral exploration tax credit
Reintroduced in 2006, the mineral exploration tax credit was supposed to be a temporary measure to boost junior companies in the mining sector. It allows a 15-per-cent tax credit to flow-through shares, which allow mining companies to flow their exploration expenses through to investors, who deduct them against their taxable income. The Conservatives extended this program annually and it's due to expire in April 2016. However the Liberals have not said if they have plans for the tax credit.
Overseas employment tax credit
This credit applies to people who work outside of Canada for at least six months of the year, mainly in the oil and gas industry, but also in construction and engineering. It is being phased out and 2015 is the last year it will apply. For 2015, the tax credit has been reduced to 20 per cent of overseas income to a maximum of $20,000.
Foreign income verification statement
Over the last several years there have been several revisions to form T1135 that have increased the amount of information that people were required to disclose about their foreign property and income. But the tax community complained at the complexity of the form, which sometimes required documentation from overseas brokers and estate agents that were difficult to obtain, according to Baron.
For 2015, there is more simplified reporting for people who own more than $100,000, but less than $250,000 in foreign holdings, including rental properties, trusts and investments. So while people who own $100,000 to $250,000 need to report only the total income from property held and any gain or loss from its disposition, people with more holdings must give more detailed descriptions of each type of investment in each country.
Tax-free savings accounts
The contribution limit for 2015 is $10,000. That's a one-year offer as the federal government has already moved to reduce the contribution limit to $5,500 for 2016. But TFSA room doesn't disappear. If you didn't get the money into an account last year, the room accumulates and you can use it in later years.