Happy New Year, happy Friday the 13th, and happy longer days as we see the end of winter on the horizon. (Honest, it is just the other side of that huge snowbank. Really.)
While we are talking about good news, let’s talk taxes, first the changes for 2017 and then an update on CRA services that may affect your 2016 tax filing.
Actually, the only good news this year is for families with children under 18. The Canada Child Benefit (CCB) began last July, and makes up for the elimination of the family income splitting introduced under the previous government.
What families must remember about the CCB is that tax returns must be filed every year by both spouses (or one for single parents) in order to claim, even if there is no income.
For 2017, the new government has eliminated tax credits on children’s arts and fitness expenses, and also eliminated education and textbook credits for university students. Those changes are ones I admit I don’t get.
Pension splitting is still allowed, where up to 50% of eligible pension income can be transferred (for tax purposes) from the pensioner’s return to that of the spouse.
A new credit in 2016 was the Home Accessibility Tax Credit, for qualifying renovations to homes of people with disabilities, and this continues.
I don’t have much more good news. High income earners and investors are being especially hard hit in 2017, with some additional changes being added to the 4% extra tax on high incomes that was introduced in 2016.
Investors who have been using corporate class mutual funds to adjust their asset mixes as they got older (without incurring capital gains) will now have to declare on their tax returns any gains incurred when making such switches.
Starting January 1, 2017, certain life insurance policies are subject to changes, as I detailed in my July 8 column. Universal life level cost of insurance (LCOI) policies will see a big change in the amount of cash value that can be accumulated long term without tax, reflecting the use of new mortality tables and some tax changes.
Corporately owned life insurance policies will especially be affected.
The TFSA contribution limit remains at $5,500, while the RRSP limit goes up with inflation. It will be $26,010 in 2017, versus $25,370 for 2016. But remember that your own limit is 18% of your Earned Income for the previous year, reduced by any Pension Adjustment you have, if you belong to a pension plan.
OAS and CPP maximums are also indexed to inflation (this year by 1.4%), as are federal tax brackets, the personal exemption, and contribution rates on CPP and EI.
For 2017, maximum monthly OAS benefits at 65 will be $578.53 and the CPP maximum at 65 can be $1,114 per month. However, the average CPP benefit in 2015 was just 60% of this amount, as most people do not contribute the maximum to CPP for the required 85% of their adult lives. You can apply for CPP at age 60, and delay either CPP or OAS until age 70, or any of the months in between.
When filing your 2016 return this spring, there are some new things to remember. If you sold a residence, you must report information about that sale. If you are declaring it as your principal residence, then the gain is still tax free, but the reporting requirement is new.
The ability to file and communicate online with CRA has been greatly enhanced this year. A mobile app called MyBenefits, Express Notice of Assessment, Online Mail (correspondence into your CRA My Account instead of paper), extended Auto-fill my return, and a common login for the CRA MY Account and My Service Canada Account should all make it easier to be in touch and speed up access to info from CRA.
As if filing taxes wasn’t too much fun already!
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is a Certified Financial Planner and senior advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.