From students to parents to seniors, the 2016 federal budget announced on March 22 has something for almost everyone. Here’s how the new changes will affect you tax-wise.
Canada Child Benefit
Beginning in July, 2016, the Canada Child Benefit (CCB) replaces both the Canada Child Tax Benefit (CCTB) and the Universal Child Care Benefit (UCCB). This new benefit is a significant change because
- The CCB is income-based which means that not all families will qualify. Unlike the UCCB, which granted a monthly amount based on the age of the child alone, the new CCB takes your family’s income into account when determining your monthly amount. Lower income families will receive a larger payment – higher income families will receive a lower payment. Families with incomes exceeding the cap of $190,000 will not qualify for the benefit at all.
- The current UCCB is a taxable benefit, which means you must include the amounts on your tax return as income. The new CCB is tax-free. It’s important to note that UCCB payments received between January and June of this year will still be included on your 2016 return as taxable income.
- The Child Disability Benefit will continue and offer additional amounts up to $2,730 for each child who is eligible for the Disability Tax Credit.
- To calculate how much you may be eligible to receive under the new Canada Child Benefit, you may wish to use the calculator provided by the government at this link: http://www.budget.gc.ca/2016/tool-outil/ccb-ace-en.html
Northern Residents Deduction
For qualifying taxpayers living in the North, 2016 brings an increase to both the basic residency amount and the additional amount.
- The basic residency amount for Prescribed Northern Zone residents (Zone A) rises from $8.25 to $11.00 per day. The additional amount (for taxpayers who are the only ones in the household claiming the residency deduction) rises from $16.50 to $22.00 per day.
- For taxpayers residing in an Intermediate Northern Zone (Zone B), the daily rate is 50% of the new rates.
- To determine which zone you’re in, please visit: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns248-260/255/zns-eng.html
School Supply Tax Credit
Many teachers and early childhood educators purchase teaching supplies at their own expense. Beginning in 2016, a new refundable credit will allow for a portion of these expenses to be reimbursed. Teachers and educators can claim up to $1,000 in qualifying expenses such as art supplies, educational software, and science-related educational materials. After the tax rate is applied, this translates to a refund of up to $150.
Phase out of Children’s Fitness and Arts Credits
Both the Children’s Fitness Credit and the Children’s Art Credit are on their way out – but not immediately. In 2016, the phase-out begins with a 50% reduction in the maximum credits for each. The fitness credit will remain as refundable, but only up to $500 in eligible fees may be claimed. Similarly, the children’s arts credit will remain non-refundable and will fall from a $500 maximum to $250. Beginning in 2017, neither of these credits will be available.
Education and Textbook Credits
Qualifying full-time and part-time post-secondary students can currently claim extra credits over and above their actual tuition amounts. The education amount allots $400/month of full-time study ($120/month for part-time) and the accompanying textbook credit gives an extra $65/month of full-time enrolment ($20/month for part-timers). Beginning in 2017, neither of these credits will be available. If you have unused education and textbook amounts built up, don’t worry. You can still claim those until they are completely used up.
Other Notable Budget Items
- 2015 marks the end of the Family Tax Cut. As previously announced in December’s mini-budget, this income splitting measure disappears for tax years 2016 and beyond (pension splitting for seniors remains unchanged). Additionally, the introduction of a lower tax rate for the middle-income earners and a new tax rate for those earning $200,000 and above will go ahead as planned for 2016.
- Taxpayers who receive assistance with their electricity bills in Ontario through the OESP will no longer include these amounts on their tax returns. Although the amounts were previously untaxed, the income was factored into calculations for benefits programs such as the CCTB and GST/HST benefit. Beginning in 2016, that’s no longer the case. This assistance will no longer have any effect on eligibility for such programs.
- The Labour-Sponsored Venture Capital Corporations (LSVCC) tax credit has been restored. This 15% credit was on its way out beginning with rate reductions for 2015 and 2016, with a complete phase out scheduled for 2017. For 2016 and subsequent years, the credit will return to its 15% rate.
- Single seniors receiving the Guaranteed Income Supplement can receive an increase in this benefit by up to $947/year beginning in July. For seniors who are forced to live apart from their spouses (due to health reasons for example) will also benefit from new calculation of Allowance benefits.
- The retirement age stays at 65 for OAS and GIS benefits. Under the previous government, this qualifying age was set to increase to 67 in 2023.
For full details on the 2016 budget announced on March 22, please visit: www.budget.gc.ca
The changes outlined above do not impact your 2015 taxes that are due this spring. Get more information on tax changes that do apply to 2015 taxes.