Apr
3
By Fin MacDonald
With only a month to go to file your taxes (unless you are self-employed , in which case you have until June 16, but any amount owing is due April 30), in this article I'm going to look at the Non-Refundable Tax Credits - as always through my lens of Helping You to Keep More of YOUR Money.
First, what are Non-Refundable Tax Credits? These are credits that you receive that serve to reduce the amount of income tax that you have payable. This is a way that the federal and provincial governments assign a value to certain categories, for example there is a Non-Refundable credit for the amount of money you spend on college or university tuition. And there is the Canada Employment Amount of up to $1,117 for those who have employment income.
For Seniors
All Canadian residents are entitled to claim the Basic Personal Amount (Federal -$11,038; BC - $10,276). This means that the first $11,038 Federally and the first $10,276 Provincially of your income are not taxable. For those 65 and over the Age Amount is available. The maximum available Federally is $6,854 for those whose net income is below $34,563; the amount is clawed back gradually until none is available at a net income of $80,256. The Provincial numbers are $4,421 to a net income of $32,911, with the amount reduced to zero at a net income of $62,385. In practical terms this means that a Senior in BC can have Taxable Income of $17,892 (Federally) and $14,697 (Provincially) and have no tax payable. (Because of the BC Tax Reduction the income a senior can have and not owe Provincial Tax rises to $17,007.) This means that many of my readers will have no tax payable; one reason is that the Guaranteed Income Supplement and the Provincial Supplement for Seniors are not taxable and therefore not included in the amounts above. Another credit available mostly to seniors is the Pension Income Amount (up to $2,000 Federally and $1,000 Provincially), which also enhances the Pension Splitting by making the first $2,000 of pension income tax free.
Another amount available is the Spousal Amount. Federally this is $11,038 minus the spouse's net income; Provincially it is $9,746 minus the spouse's net income. This is most often available for single income families where one spouse is in school or not working outside the home. This is the type of family that would benefit most from the Federal Government's much talked about income splitting for families, which may be available for the 2015 tax year.
For Families
For families with children there are a number of Credits. First is the Amount for Children, for children under 18, this Federal-only credit is $2,234. Then there are the Children's Fitness Amount and the Children's Arts Amount, each being up to $500 per child both Federally and Provincially. Either parent may claim these child-related credits.
For older children there is the Tuition, Education and Textbook Amounts. This may be transferred, up to $5,000, to a spouse or parent if it is not required to reduce the student's taxes. Any amount that is not used the year it is earned is carried forward. Once it is carried forward it may only be used by the student. Similarly, the Student Loan Interest Credit may only be claimed by the student.
The Public Transit Amount allows monthly and yearly bus pass costs to be claimed against Federal Taxes only. All the passes for a family can be claimed by one parent, or split among the parents to best reduce total tax payable. None of the provinces offer this Amount.
Charitable Donations
The Donations and Gifts Credit is available both Federally and Provincially, and this year the Federal Return features the First-time Donor's Super Credit. The FDSC allows an extra credit of 25% on the first $1,000 donation, and is only available to those with no charitable donation in the past five years. Donations attract a 15% credit on the first $200 and a 29% credit on the balance. Tax Tip - Save up your donations to get the 29% credit; Donations may be saved for up to 5 years.
Disability and Medical
The Disability Tax Credit (DTC) is available to those who have a condition that interferes with one of the tasks of daily living in a substantial way. It provides about $1,400 in tax relief, and any unused amount may be transferred to a spouse or other supporting person. The DTC is also the gateway, for those under 49, to federal contributions to the Registered Disability Savings Plan.
The Medical Expense Credit provides relief for people, who are taxable and who have medical expenses that qualify. Non-qualifying medical expenses are characterized by having a GST or Provincial Sales Tax on them. A good example is that a prescription will qualify but an Over-The-Counter product will not. Examples of non-qualifying expenses are: BC Medical Services Plan premiums, Herbal Supplements, Pro-biotics, cosmetic surgery, bandages, condoms, gym fees and 'health foods',
There is a 3% of Net Income deductible on the amount of medical expenses that can be claimed. An example: a husband and wife have a total of $2,000 in qualifying medical expenses. His income is $30,000 and hers is $40,000. The amount he would be able to claim would be $2,000 minus 3% of his net income (20,000 x 3% = $600) for a total of $1,400. If she made the claim the amount would be $2,000 minus 3% of her net income (40,000 x 3% = $1,200) for a total of $800. So, if the husband could fully use the claim, then it would make sense to put the claim on his return.
Recognising that medical expenses often are grouped together in time, you are allowed to choose any day in 2013 and go back 365 days to find the most advantageous claim. If you had a large amount of medical expenses late in the year, but not enough to be more than the 3% deductible (see above), save the receipts - they may be deductible on your 2014 return.
If you are not taxable your medical expenses are not of much use unless you have employment income and a relatively low income. The Refundable Medical Expense Supplement requires you to have at least $3,333 of employment or self-employment income. This allows up to 25% of your allowable medical expenses to be paid to you. This Supplement is clawed back starting at an income of $25,278, and disappearing completely at $48,118.
Next month some tax planning ideas. Was your refund too big? Too small? Let's look at ideas through my lens of Helping You to Keep More of YOUR Money.