BUDGET ANNOUNCEMENTS for the T1-2007 tax year
Below is a summary of budget announcements that may come into effect in the T1-2007 tax preparation.
FEDERAL
CHANGES AFFECTING TOTAL/NET/TAXABLE INCOME (pages 2 and 3 of the T1 return):
* Pension splitting will be allowable beginning with the 2007 taxation year. Canadian residents who receive income that is eligible for the pension income amount will be permitted to allocate to their resident spouse or common-law partner up to one-half of that income (announced on October 31, 2006, reaffirmed in 2007 Budget).
New apprenticeship grant will be paid beginning in 2007 (to be included at line 130, other income).
UCCB -- repayments will be included at new line 213 beginning in 2007, special tax calculation available for lump sum payments of UCCB (same treatment as CPP/QPP LSPs).
2007 BUDGET PROPOSALS - MARCH 19, 2007
Elementary and secondary school scholarships and bursaries - will be tax-exempt for 2007 and subsequent years.
Truckers' meal expenses - the amount deductible in respect of food and beverages consumed by a long-haul truck driver during an eligible travel period will be increased for expenses incurred after March 18, 2007 (increase is phased-in over the years 2007 to 2010).
Northern Resident's Deduction - list of prescribed intermediate zones will be expanded to include the District Municipality of Mackenzie in British Columbia
Lifetime capital gains exemption - for capital gains on dispositions of qualified property after March 18, 2007, the lifetime exemption will be increased from $250,000 to $375,000 (affects Schedule 3, T657 and T2017, new fields required)
Donations of certain securities to private foundations -- the zero capital gains inclusion rate and additional deduction in respect of employee stock options will apply to gifts of certain securities made after March 18, 2007, to private foundations (T1170, pamphlet re: gifts).
* TAX RATE CHANGES (affecting Schedules 1 and 9 of the T1 return, AMT, various 428 forms, and T3 return): Lowest tax rate increases to 15.5% for 2007 (Consequential impact on rate applicable to non-refundable tax credits, first $200 of charitable donations, AMT and certain provincial rates)
NON-REFUNDABLE TAX CREDITS (affecting Schedules 1 and 11 of the T1 return):
* Basic personal amount, spouse or common-law partner amount and amount for an eligible dependant -- increases for 2007 to 2009 tax years per 2006 budget. (also see 2007 Budget proposals)*
* Canada Employment Amount increases to $1,000 for 2007 and will be indexed after 2007.
Children's Fitness Credit is introduced, effective for 2007 and subsequent years. Credit can be claimed at new line 365 on Schedule 1 by either parent for eligible expenses incurred in the year of up to $500 per child under 16 years of age. As announced on Dec. 19, 2006, for DTC-eligible children the age limit will be 18, rather than 16, and a separate $500 amount will be allowable based on a minimum of $100 being spent on registration fees for an eligible program.
Spouse or common-law partner amount/Amount for an eligible dependant -- will be increased to match the basic personal amount, and net income threshold will be eliminated for 2007 and subsequent years.
Non-refundable tax credit for children under 18 years of age -- will be introduced for 2007 and subsequent years, the amount for each child under age 18 at the end of the year will be $2,000 (indexed after 2007).
Public transit credit -- will be expanded to also include costs for certain weekly passes and eligible cost-per-trip electronic payment cards.
OTHER TAX CREDITS (affecting page 4 of the T1 return, new schedule, and T2038):
Working Income Tax Benefit (WITB) -- for 2007 and subsequent years, will provide a refundable tax credit (available via the T1, new line 453) equal to 20% of earned income over $3,000, to a maximum of $500 for single individuals with no dependants and $1,000 for families. The total benefit will be reduced based on family net income (i.e. adjusted net income) in excess of threshold amounts. A disability supplement to the WITB, of up to $250, is also provided for each individual (other than a dependant) who qualifies for the disability amount and has over $1,750 of earned income. The supplement (calculated for each individual) is also reduced based on net family income in excess of threshold amounts. All maximums and threshold amounts are indexed after 2007. WITB prepayments (administered by Benefit Programs) will be available beginning in April 2008 for the 2008 tax year. (New T1 schedule and keying fields will be required, plus application form for prepayments)
Mineral exploration tax credit (ITC) -- extended for flow-through share agreements entered into before April 1, 2008, i.e., expenses incurred by the corporation before April 1, 2008, or by the end of 2009 under the lookback rule. (affects T2038)
Investment tax credit (ITC) for Child care spaces -- new non-refundable ITC will equal 25% of eligible expenditures by employers incurred after March 18, 2007, to a maximum of $10,000 per child care space created in a licenced child care facility (ITC recapture may occur if, within 5 years of the creation of the new space, it ceases to be available or property that was an eligible expenditure is sold or leased to another person, or converted to another use). (affects T2038)
OTHER MEASURES
Instalment threshold for individuals -- will increase from $2,000 to $3,000 (from $1,200 to $1,800 for residents of Quebec) for the purpose of instalment payments for 2008 and subsequent tax years.
2010 Games - certain non-residents will be exempted from Part 1 tax (and no withholding will apply ) on income from activities in Canada after 2009 and before April 2010 in connection with the 2010 Games.
Non-res. withholding on interest -- no withholding will apply on interest paid to all arm's length non-residents, regardless of their country of residence, once exemption from withholding tax on interest is implemented in the Canada- US tax convention. (see Highlights re: timing)
REGISTERED PLANS
RESP changes -- for contributions in 2007 and subsequent years, the $4,000 annual limit will be eliminated, lifetime limit will increase to $50,000, maximum annual Canada Education Savings Grant will increase to $500 (to $1,000 if unused grant room), and educational assistance payments will be allowed (providing certain conditions are met) for programs involving at least 12 hours per month on courses (i.e., to include part-time students).
RPPs and RRSPs -- the age limit for maturing RPPs, DPSPs and RRSPs will increase from 69 to 71 years of age for 2007 and subsequent years; the list of qualifying investments for RRSP's is expanded for investments after March 18, 2007; phased retirement will be introduced beginning in 2008 to allow, under certain conditions, employees to receive pension benefits from a defined benefit RPP and simultaneously accrue further benefits.
Registered Disability Savings Plan ("RDSP") is proposed for 2008 and subsequent years (similar to the RESP), for any Canadian resident who is eligible for the Disability Tax Credit who is resident in Canada. Payments from the RDSP to the beneficiary will be taxable to the extent they represent Canada Disability Savings Grants or Bonds and accrued investment income, but will not affect certain income-tested benefits delivered through the tax system, OAS or EI benefits.
PROVINCIAL/TERRITORIAL
* Yukon
2007 Budget - April 19, 2007
- No change to personal income tax
* Northwest Territories
2007 Budget - February 8, 2007
- No change to personal income tax
Nunavut
- Cost of Living Tax Credit is increased to 2% of net income, to a maximum of $1,200 for 2007 (ITA amendment, R.A. Dec. 5, 2006). Cost of Living Tax Credit will include an additional credit for single parents equal to 2% of net income in excess of $60,000, to a maximum of $255.12 for 2007 & subs. years (Bill 8, R.A. Mar. 29, 2007)
2007 Budget - March 2007
No change to personal income tax
British Columbia
2007 Budget proposals - February 20, 2007
- UCCB payments and repayments are excluded from the calculation of the Refundable Sales Tax Credit. (effective for 2006 & subs.)
* - For 2007, the first four rates have changed from 6.05%, 9.15%, 11.7%, and 13.7% to 5.7%, 8.65%, 11.1%, and 13% respectively.
- For 2008, these same rates will be changed to 5.35%, 8.15%, 10.5%, and 12.29% respectively.
- The Royalty and Deemed Income Rebate has been repealed as of January 1, 2007.
- Adoption expense credit has been added, mirroring the federal calculation.
* - The rate used in the calculation of the BC Tax reduction has gone from 3.6% to 3.4% for 2007 and will be further reduced to 3.2% for 2008.
- BC is introducing a new training tax credit for 2007 and subsequent years.
Alberta
2007 Budget proposals - April 19, 2007
* - The tax credit rate for charitable donations over $200 is increased to 21% from 12.75% for donations made after 2006.
* - For 2007, the full-time education amount will be increased to $600 from $475, and the part-time education amount will be increased to $180 from $143.
* - For the dividend tax credit calculation, Alberta has already indicated that the rate applied to eligible dividends will increase to 8% in 2007, 9% in 2008 and 10% in 2009, while the rate for other dividends will decrease to 5.5% in 2007, 4.5% in 2008, and 3.5% in 2009.
Saskatchewan
2007 Budget proposals - March 22, 2007
- Post-secondary graduate tax credit is eliminated for 2007 and subsequent years (carryover of unused credits can still be claimed).
- A new non-refundable Graduate Tax Exemption is introduced for 2007 and subsequent years providing exemptions of $10,000 per year, beginning with the year of graduation and for each of the next consecutive 4 years (certificates will be issued by SK for each year's exemption, also available for a 4-year period to individuals who graduated and were entitled to the Post Secondary Graduate Tax Credit for 2006). Unused exemption amounts can be carried forward for up to 5 years after the year of the exemption.
- Indexing will apply for 2008 & subs. years based on All-Canada CPI (previously based on an annual prescribed factor)
Manitoba
2006 Budget proposals - March 6, 2006
- MB will parallel the new federal children's fitness tax credit (per 2007 Budget, same amounts as federal, including additional amount and higher age for DTC-eligible children).
* - The middle tax rate will be reduced to 13% effective January 1, 2007.
* - The basic personal amount increases by $100 to $7,834.
- A new component of the co-operative education tax credit - the co-op graduates hiring incentive is introduced for 2007 and subsequent.
- 2006 Throne Speech - November 15, 2006
- Tuition fee income tax rebate is introduced for 2007 and subsequent years (details covered in 2007 budget).
2007 Budget - April 4, 2007
* - Education property tax credit base amount will increase from $400 to $525 for 2007 (affects advance administered through Manitoba property taxes, and credit calculation on Form MB479.)
- Manitoba Mineral Exploration Tax Credit will be extended for flow-through share agreements entered into before April 1, 2008, i.e., expenses incurred by the corporation before April 1, 2008, or by the end of 2009 under the lookback rule (affects Form T1241).
- For 2008, basic personal amount, spouse or common-law partner amount and amount for an eligible dependant will increase to $8,034.
- For 2008, middle tax rate will decrease to 12.75% for individuals with taxable income over $30,544, and up to $66,000
- For 2008 and subsequent years, the Manitoba Tax Reduction will be eliminated and replaced by the new Manitoba Family Tax Benefit (to be included in the non-refundable tax credit block).
- Further changes to the tax brackets and lowest tax rate are planned for years after 2008.
- The Community Enterprise Development tax credit will be expanded to provide a new 30% credit for eligible securities acquired after 2007, the minimum investment will be $20,000, lifetime investment limit will be $450,000, and the maximum annual credit will be $45,000 (affects Form T1256).
Ontario
* For the dividend tax credit calculation, Ontario has already indicated that the rate applied to eligible dividends will increase to 6.7% in 2007, 7.0% in 2008, 7.4% in 2009, and 7.7% in 2010. 2007 Budget proposals - March 22, 2007
- Apprenticeship training tax credit will be extended to be available for apprentices employed before 2011, and expenditures incurred before 2015.
- Ontario Property and Sales Tax Credits -- the income threshold for seniors will increase to reflect increases to the OAS, GIS and GAINS.
- Ontario Child Benefit is proposed, beginning with an initial payment of up to $250 per child under age 18 in July 2007. Monthly payments will begin in July 2008, and OCB maximum amount per child will increase from $600 per year for 2008 to $1,100 per child in 2011 (administered by Benefit Programs based on information from the 2006 and subs. income tax returns)
New Brunswick
2006 Budget - March 18, 2006
* - The income threshold for the low income tax reduction will increase to $13,750. The reduction amounts will be adjusted accordingly.
Other announcements
- The labour-sponsored venture-capital tax credit is extended to the end of 2007. (News Release - December 22, 2006)
2007 Budget proposals - March 13, 2007
* - Effective Jan. 1, 2007, tax rates will be increased to 10.12%,15.48%,16.8%, and 17.95%.
- The allowable investment for the 30% Small Business Investment Tax Credit will be increased from $50,000 to $80,000, for a maximum credit of $24,000.
In addition, the types of shares eligible for this credit will be broadened and shares of businesses with net tangible assets of up to $40 million will now be eligible.
* - Dividend tax rate applicable to taxable amount of dividends other than eligible dividends will increase from 3.7% to 5.3% for 2007 and subsequent years.
Nova Scotia
2006 Budget - May 9, 2006
* - The NS basic personal amount will increase from $7,231 to $7,481. This amount will be increased by $250 over each of the subsequent three years.
- Other personal tax credits, such as the spousal, disability, pension, and age amounts will increase proportionately over the same period.
- Also, beginning in 2011, all non-refundable credits and income tax brackets will be indexed.
2007 Budget - March 23, 2007
- The post-secondary graduate tax credit will increase to $2,000 for individuals graduating from eligible programs after 2007.
- A refundable volunteer firefighters' tax credit of $250 is introduced for 2007, increasing to $375 in 2008 and to $500 in 2009.
- Increases to the various personal amounts as announced in the 2006 budget were confirmed for the 2007 to 2009 tax years.
Prince Edward Island
2007 Budget - April 10, 2007
* - The tax brackets and the basic personal amount, spouse or common-law partner amount, amount for an eligible dependant, and age amount will be increased by 2% for 2007, and by 4% for 2008, over the current values.
* - The full-time and part-time education amounts will be doubled for 2007 to $400 and $120, respectively.
- The surtax threshold amount will be increased so that middle income families will no longer pay the surtax.
Newfoundland & Labrador
2007 Budget - April 26, 2007
* - Effective July. 1, 2007, tax rates are reduced to 8.7%, 13.8% and 16.5%, resulting in the rates for 2007 9.64%, 14.98% and 17.26%, respectively.
* - The tax brackets and certain non-refundable tax credit values will be indexed for 2007 and subsequent years.
* - The surtax rate for 2007 is reduced to 4.5%, and the threshold is increased to $7,102. The surtax is eliminated after 2007.
* - The tax reduction thresholds will increase to $13,000 (single), $21,000 (couples), and are indexed after 2007.
- The income thresholds used in calculating the Seniors' Benefit will increase
to $15,333 (single) and $25,000 (couples) for 2007, and are indexed after
2007.