Tax tips for tax season

While this provision is ideal for couples for whom one individual is a high-income earner and the other a low- or no-income earner, the income-splitting strategy still can provide tax savings in other situations.

“As long as a couple’s income levels span two different tax brackets, there’s potential for at least some tax savings, if not the entire $2,000 capped amount,” says Caroline Battista, senior tax analyst with H&R Block Canada Inc. in Vancouver.

– Children’s fitness tax credit: For the 2015 tax year and beyond, the children’s fitness tax credit – which provides parents with a 15% credit of up to $1,000 of eligible fitness expenses for children age 16 and under – converts from a non-refundable to a refundable tax credit. Non-refundable tax credits can be used only to lower the amount of federal taxes you pay, whereas refundable credits provide a credit to be used against taxes owed or as a cash refund if the value of the credit exceeds the value of taxes owed.

“The refundable credit is going to help lower-income people [who may not have taxes owing] so that everybody can benefit from the program, not just people who need the credits,” Battista says.

– Universal child-care benefit (UCCB): Starting Jan. 1, 2015, the previous Conservative government enhanced this benefit to provide parents with $160 per month, up from $100, for each child under age six, and expanded the program to offer $60 a month for each child aged six through 17. In July 2015, parents received a lump sum reflecting the value of the increased amounts for the first six months of 2015. Regular monthly instalments for the new higher amounts of the benefit began the same month.

Clients should be reminded that these amounts are taxable income and must be reported. “[That the child-care benefit is taxable] is something that may come as a surprise to parents who hadn’t been receiving money for their older children before the [benefit] was expanded,” Battista says.

Clients also should know that when the Conservatives enhanced and expanded the benefit, they eliminated the Child Amount Tax Credit, a non-refundable credit for children under 18 years of age, starting in 2015.

The new Liberal government has indicated that it intends to eliminate the UCCB in favour of its own Canada Child Benefit program, the details of which have not been announced.

– Registered retirement income fund (rrif) minimums: In last year’s budget, the Conservatives lowered the RRIF withdrawal factors, which are the annual minimum withdrawal percentages that RRIF accountholders must withdraw from their plan. If your client had already withdrawn more than the new minimum percentages for 2015 before the change in withdrawal factors was announced, the client was allowed to recontribute the excess into the RRIF, but only until Feb. 29, 2016.

– Reporting of foreign property: Canadian taxpayers who have specified foreign property with a cost of more than $100,000 at any time in a year must file a Form T1135, which provides the government with information about the property. In 2014, the from was changed, making it more onerous to prepare.

“It’s dreadful,” says Mariska Loeppky, director of tax and estate planning with Investors Group Inc. in Winnipeg. “And the penalty for not filing it is significant – up to $2,500 per year – so there’s a big impetus to make sure that the form is filed correctly.”

In 2015, the federal government provided a measure of relief by introducing a simplified T1135 reporting regime for individuals who own foreign property with a cost of more than $100,000 but less than $250,000 at any time in the year, reducing the compliance burden for these taxpayers.

© 2016 Investment Executive. All rights reserved.