Updated tax folios provide guidance on personal tax credits

Income Tax Folio S1-F4-C2, Basic Personal and Dependant Tax Credits (for 2017 and subsequent tax years) was first released for a three-month comment period on April 8.

As part of Budget 2017, the federal government consolidated three dependent tax credits — the caregiver tax credit, the infirm dependent tax credit and the family caregiver tax credit — into the Canada Caregiver Credit for 2017 and subsequent tax years. The updated folio provides separate guidance for Canada Caregiver Credit (adult; for an infirm dependent 18 or older) and Canada Caregiver Credit (child; for an infirm dependent younger than 18).

The updated folio also confirms that when a taxpayer is entitled to claim a spousal or common-law partner tax credit in respect of a person, he or she is prevented from also claiming the Canada Caregiver Credit for that same tax year. However, an additional tax credit is available to the individual if the restriction on the Canada Caregiver Credit “results in the spouse or common-law partner tax credit being less beneficial to the individual compared to claiming the Canada Caregiver Credit (adult) for that same person,” the folio indicated.

Finally, the updated folio says that when calculating the income of a spouse, common-law partner or dependent, in relation to the amount of a personal tax credit a taxpayer can claim in respect of that individual, the deduction for tax on split income (TOSI) should not be included in the calculation of income for 2018 and subsequent tax years. As the income of a spouse, common-law partner or dependent may reduce or eliminate the amount of a personal tax credit that an individual can claim in respect of that person, TOSI may therefore reduce or eliminate the amount of personal tax credit available.

This week, the CRA released an updated Income Tax Folio S1-F4-C1, Basic Personal and Dependent Credits (for 2016 and prior tax years), which was originally published April 29, 2017. Income Tax Folio S1-F4-C1 and Income Tax Folio S1-F4-C2 provide information for personal tax credits for before and after the Budget 2017 tax changes affecting personal tax credits.

“Given the extent of the legislative changes, providing two separate folios makes it much easier for users to access the relevant information in an efficient manner,” indicated the CRA in an emailed response to questions from Investment Executive.

The July 2019 update to Folio S1-F4-C1 provides indexed amounts for the basic personal and dependent credits for the 2012 to 2016 tax years. As the CRA’s online indexation table provides amounts for only the current and previous three tax years, it will no longer provide information for the 2016 and previous tax years once it is updated next.

The four-year chart in the updated Folio S1-F4-C1 “should be sufficient for the majority of users as it provides information for individuals filing up to seven years late,” the CRA said in the email.