Although there’s no escaping the taxman’s bite, a series of changes at the provincial level should relieve some of the sting.

The majority of provinces are providing taxpayer relief for 2007 in the form of reduced rates, tax credit increases and increased brackets, while the federal government’s move to allow income-splitting among pensioners is being mirrored at the provincial level to provide notable tax breaks for seniors.

“Pension income-splitting is one of the most significant tax changes to happen in years,” says Paul McVean, a regional wealth planning consultant with United Financial Corp. in Toronto. “Most seniors will be able to keep an additional 7%-8% of their income as a result.”

Although this change was a federal measure, McVean notes that most provinces are following suit.

This may bode well for future changes to federal and provincial rules regarding the splitting of income, says Karen Yull, tax specialist and principle with Grant Thornton LLP in Toronto. “I’ve heard rumblings about the splitting of other types of income between spouses. This may be something the federal government will consider down the line.”

Aside from pension income-splitting, taxpayers of all ages will benefit from tax breaks in many provinces. Both British Columbia and Newfoundland have reduced personal income tax rates for 2007. Newfoundland, for example, has pared rates by more than one percentage point per bracket (representing the largest tax cut in the province’s history). As a result, taxpayers in the first bracket — those earning $29,886 or less — pay taxes at a rate of 8.7%, compared with the previous rate of 10.57%. Reductions of a similar magnitude apply in the other two tax brackets.

Meanwhile, Saskatchewan and Quebec have increased their tax brackets to trigger tax savings. For instance, Saskatchewan’s brackets have been increased by 2.2%, based on the annual change in the consumer price index. (By making changes to brackets, taxpayers are not automatically pushed into higher brackets by the impact of inflation.) And virtually all provinces have hiked tax credits.

Only one boosted its personal income tax rate. New Brunswick increased its rate slightly, possibly the result of a troubled provincial budget. Those in the second bracket — people earning between $34,186 and $68,374 a year — will experience the largest increase as the personal rate goes to 15.48% from 14.82% .

Other changes to income taxation at the provincial levels — which can account for anywhere from 30%-50% of a taxpayer’s total bill — are less significant, with a few notable exceptions.

Yull is excited about two recently unveiled initiatives for post-secondary education graduates: Manitoba’s new tuition fee income tax rebate and Saskatchewan’s graduate tax exemption. The former, for Manitoba taxpayers who graduated after Jan. 1, 2007, will create a rebate of 60% of eligible tuition fees paid after Jan. 1, 2004, to a lifetime maximum rebate of $25,000.

Saskatchewan’s graduate tax exemption, aimed at enticing young people to settle in the province after graduation, offers new graduates $100,000 in tax-free income during their first five years of employment, with a total tax savings of $5,500 over five years.

McVean calls attention to Alberta’s significant increase to the charitable donations tax credit. In order to encourage giving, Alberta’s 2007 budget increased the credit by more than 60% for amounts greater than $200. Combined with the federal charitable donations credit, Albertans will receive 50¢ in tax credits for every $1 donated over the $200 threshold, a move that McVean calls “a little unusual.”

Looking forward, Ontario’s changes to rules for locked-in accounts are something to keep an eye on, notes McVean. Under the new rules, a new life income fund will be introduced in 2008, providing more flexible payments and the one-time option to withdraw or transfer up to 25% of its total value to an RRSP or RRIF. The new LIF will be available in January 2008, and withdrawals and transfers must occur within 60 days of the date the assets are transferred to the new LIF.

“In the past, people weren’t able to access lump sums from a LIF but had to draw payments as per the prescribed rules,” says McVean.

Other personal income taxation changes across Canada include:

> B.C.’s new adoption expense credit, which is based on actual adoption expenses up to a maximum of $10,445;

> Alberta’s move to unlock up to 50% of the value of a pension plan benefit or locked-in account, effective Nov. 1, 2006;

@page_break@> Quebec’s new refundable tax credit for volunteers providing respite for caregivers; caregivers will have $1,000 at their disposal and can allocate a maximum of $500 to an eligible person who provides them with approximately 50 days of volunteer home respite services a year;

> A 20% increase in Quebec’s refundable tax credit for infertility treatment, applicable to eligible expenses for a third or any additional attempt at in vitro fertilization;

> A $500 increase in Quebec’s non-refundable tax credit for retirement income; the total credit is now $1,500 per person;

> Quebec’s new refundable tax credit to support RESP savings; the credit corresponds to 50% of the Canada education savings grant for a year;

> New Brunswick’s tuition rebate, whereby post-secondary graduates who live and work in the province are eligible for a non-taxable rebate of 50% of their tuition costs, with a maximum lifetime rebate of $10,000; graduation must have taken place on or after Jan. 1, 2005;

> Nova Scotia’s post-secondary graduate tax credit. Those who graduated in 2006 and 2007 are eligible for a credit of up to $1,000; those who graduate in 2008 and beyond are eligible for a credit of up to $2,000;

n Prince Edward Island’s boost of its disability tax credit. The maximum provincial disability amount rises to $6,890 and the disability supplement rises to $4,019. IE