Ontario Budget 2018

The 2018 Ontario budget features a number of new measures and billions of dollars of enhanced spending across the spectrum, as announced by the province’s Finance Minister, Charles Sousa. Read on for some of the key proposals.

Personal

Eliminate Surtax

A new sliding scale for personal income tax will be introduced, with seven personal income tax rates which will be applied directly to taxable income, in an attempt to eliminate Ontario’s surtax. The province estimates that approximately 680,000 will pay less tax as a result.

Free Tuition

Access to further education will be income linked, with those families with an income of less than $90,000 per year receiving free tuition and families with an income of between $90,000 and $175,00 per year receiving financial aid for tuition costs.

Free Pre-School Child Care

Effective in the Fall of 2020, children aged two-and-a-half until they are eligible for kindergarten can receive free licensed child care. 

New Ontario Drug and Dental Program

For those without workplace benefits or not covered by OHIP+, this program offers up to 4.1 million Ontarians a benefit that pays up to 80% of expense up to a cap of $400 for a single person, up to $600 for a couple and $50 per child in a family with two children, regardless of their income.

Free Prescription Drugs

The budget announces the introduction of free prescription drugs for those aged 65 or older, resulting in an average of $240 per year in savings per senior.

Charitable Donation Tax Credit

The non-refundable Ontario Charitable Donation Tax Credit will be tweaked to increase the top rate, remaining at 5.05% for the first $200 but increasing to 17.5% for anything above $200.

Seniors’ Healthy Home Program

$750 is offered to eligible households with seniors of 75 years of age or older to help them to care for and maintain their residence.

Corporate

R&D Tax Credit

The budget introduces a non-refundable tax credit of 3.5% on eligible costs relating to R&D, or an enhanced rate of 5.5% for eligible expenditures of $1 million plus. Note that this enhanced rate would not be payable to corporations where eligible R&D expenditures in the current tax year are less than 90% of eligible R&D expenditures in the tax year before.

Innovation Tax Credit

The existing Ontario Innovation Tax Credit will see changes to its credit rate in the following way:

·      If a company has a ratio of R&D expenditures to gross revenues of 10% or less, they will continue to receive the 8% credit.

·      If their ratio is between 10% and 20%, they will receive an enhanced credit rate of between 8-12%, calculated on a straight line basis.

·      If their ratio is 20% or more, they will receive an enhanced credit rate of 12%.

Ontario Interactive Digital Media Tax Credit

Eligibility to receive this tax credit will be broadened to include film and television websites.

Tax Lines to look out for

It’s that time of year again, when many of us sit down to complete our income tax return and hope that we have done enough preparation to ensure a smooth and speedy process. Unfortunately, there are a number of complexities that can cause us problems – here are a few of the most common issues experienced by individuals when submitting their tax returns:

Medical Expenses

Expenses relating to medical expenses such as prescriptions, dentures and many more can be claimed for a non-refundable tax credit. You should also be aware that you can claim for yourself, your spouse or common law partner and any dependent children under the age of 18. You can also claim for certain other individuals whom you can clearly evidence are dependent on you (and the list of such individuals has recently been widened and can include grandparents, uncles, aunts, nieces and nephews).

Charitable Donations

You can claim tax credits for qualifying charitable donations that you made in 2017, though they are subject to an annual limit at 75% of your net income. You may also be eligible for a provisional donation tax credit. To receive such credits, you must supply a charitable donation receipt as evidence of your donation.

What’s more, there is a new formula for calculating the federal tax credit, depending on the value of donations. This is as follows:

1.    15% of the first $200 of donations

2.    33% of donations equal to the lesser of the amount of taxable income over $202,800 or the amount of donations over $200

3.    29% of total donations not included in the two stages above.

Public Transit Pass

Although this credit ended in the 2017 federal budget, it can still be claimed for the time period of January 1 – June 30, 2017. There are a range of eligible passes, including passes allowing unlimited travel within Canada, short term passes allowing unlimited travel for five days of which at least 20 days’ worth are purchased during a 28 day period and electronic payment cards.

Interest Expense and carrying charges

Interest on money borrowed to earn business or investment income is generally deductible, however interest expenses incurred on money borrowed to generate a capital gain is not tax deductible.

Carry forward information

Take note of the notice of assessment from your previous year’s tax return as it will contain important information that will apply to the submission of your current year’s return, such as your RRSP contribution limit and any carry-forward amounts.

Remember that you may be required to submit receipts alongside your electronic return at a later date, as requested by the CRA.

Child care expenses

Child care expenses include payments made to caregivers, nursery schools, day care centres and camps and other similar institutions. The deduction is usually best claimed by the lower earning spouse.

The deduction is the lesser of the following three:

·      the total qualifying child care expenses which have been incurred

·      $8,000 for each child under the age of 7, as well as $5,000 for each child between 6 and 16 and $11,000 for each child for whom the taxpayer has claimed the disability tax credit.

·      two thirds of the income earned by the individual making the claim.

If you owe money when your income tax return is complete, the only way to delay payment is to delay the filing until the April 30th deadline. Alternatively, if CRA owes you money, then file as early as possible. 

2018 Federal Budget Highlights for Families

Several key changes relating to personal financial arrangements are covered in the Canadian government’s 2018 federal budget, which could affect the finances of you and your family. Below are some of the most significant changes to be aware of:

Parental Leave

The government is creating a new five-week “use-it-or-lose-it” incentive for new fathers to take parental leave. This would increase the EI parental leave to 40 weeks (maximum) when the second parent agrees to take at least 5 weeks off. Effective June 2019, couples who opt for extended parental leave of 18 months, the second parent can take up to 8 additional weeks, at 33% of their income.

Gender Equality

The government aims to reduce the gender wage gap by 2.7% for public servants and 2.6% in the federal private sector. The aim is to ensure that men and women receive the same pay for equal work. They have also announced increased funding for female entrepreneurs.

Trusts

Effective for 2021 tax filings, the government will require reporting for certain trusts to provide information to provide information on identities of all trustees, beneficiaries, settlors of the trust and each person that has the ability to exert control over the trust.

Registered Disability Savings Plan holders

The budget proposes to extend to 2023 the current temporary measure whereby a family member such as a spouse or parent can hold an RDSP plan on behalf of an adult with reduced capacity.

If you would like more information, please don’t hesitate to contact us.

RRSP Deadline is March 1, 2018. How much tax can you save?

RRSP Deadline: March 1, 2018

 

The deadline for contributing to your Registered Retirement Savings Plan (RRSP) for the 2017 tax filing year is March 1, 2018. You generally have 60 days within the new calendar year to make RRSP contributions that can be applied to lowering your taxes for the previous year.

 

If you want to see how much tax you can save, enter your details below!

 

 

Families: 2017 Year End Tax Tips

Calculating and figuring out how much tax you have to pay is nobody’s favorite time of the year, but if you plan carefully there are many tactics available at your disposal to make sure that your tax bill is not more than it has to be in 2017. Which tactics make the most sense can be figured out by analyzing your current finances, estimating your tax situations and identifying the financial transaction that might take place either this year or next year. You should get started now, and consider these tax tips before Dec. 31, 2017.

Make a loan to your family member/Family income splitting

You can set yourself for tax savings in 2018 by making a loan to your lower-income spouse, family members or family trust so that he or she can pay the tax on any investment income on these dollars going forward. To avoid the attribution rules, you will need to charge the prescribed rate of interest on the loan. Until Dec. 31 the rate is 1% and can be locked at this rate indefinitely. Your family member will have to pay the interest on the investment by Jan. 30 each year, for the previous year’s interest charge. You will have to report the interest on this investment and your spouse can claim a deduction for it. You can come out ahead as a family, if your family member earns more than 1 percent annually on the investments.

Lend money for a TFSA contribution

In a TFSA account, all dividends, interests and capitals gains your investments make are tax-free. This is a huge advantage because as you continue to reinvest dividends and interest, the compounding income will also be tax-free. So before Dec. 31 consider lending money to your spouse or adult child to contribute towards his or her TFSA. The contribution limit to a TFSA for 2017 is $5,500, and up to $52,000 in total if you have been 18 or older since 2009 when TFSA was introduced, and you haven’t contributed yet. The attribution rules won’t apply to TFSAs since there is no taxable income, as long as the money remains in the plan. 

Tax Loss Selling

If you own investments with unrealized capital losses, consider selling them before year end to realize the loss and apply it against any of the net capital gains you have realized during the year or in the prior three years. If you intend on doing this, consider completing all trades prior to December 22, 2017.

Invest the Canada Child Benefit in your child’s name

Canada Child benefit (CCB) was introduced in 2016 and provides a meaningful payment to many families on a monthly basis. CCB is a tax-free monthly payment made to eligible families to help them with a cost of raising children under the age of 18. The benefit payments are recalculated every year in July based on the income tax and benefit return information of the previous year. Consider investing these dollars in your child’s name, in an in-trust account. The attribution rules will not be applied to the income and growth of these dollars, as they can be reported in the hands of your child, generally facing little or no tax. This strategy can allow the funds to compound at a much faster rate.

Utilize first-time home buyer incentives

If you purchased your first home in 2017, or plan to buy a place before Oct. 1, 2018, You should consider making a withdrawal of up to $25,000 from your registered retirement savings plan (RRSP) before Dec. 31, under the home buyers’ plan. The withdrawals can be made tax-free if you qualify, even though you will have to repay the withdrawal amount over a 15-year period. The withdrawals under Home buyers’ plan must normally be made in a single calendar year. You may also qualify for the first time home buyers’ credit i.e. a maximum of $750 (and if you live in Saskatchewan you may be entitled to an additional provincial credit of up to $1100.)

Utilize the Lifelong Learning Plan

The lifelong learning plan (LLP) allows you to withdraw amounts from your RRSP to finance full-time training or education (or part-time if you have a disability) for yourself and your spouse or common-law partner. Consider making a withdrawal before Dec. 31, you are entitled to withdraw up to $10,000 annually or $20,000 in total from LLP. You will have to repay the withdrawal amount over time.

Have you maximized your RRSP Contributions or is it time to wind-up your RRSP?

Technically, you have until March 1, 2018 to make your RRSP contribution for 2017, however if you turned 71 in 2017 and need to wind up your RRSP, remember you only have until December 31, 2017 to make a contribution to your RRSP for 2017, not March 1, 2018.

Evaluate your estate plans for non-resident children

You should revisit your estate planning if your children are not currently residing in Canada, and particularly if they plan to remain non-residents long term. Consider adjusting your will or other planning for non-resident children and plan it together with your kids.

Consider tax changes south of the border

If you are a U.S. citizen residing in Canada, you should be alert to any proposed taxed changes in U.S which can affect your tax planning heading into next year. President Donald Trump’s tax proposals include reducing the number of tax brackets and increasing the dollar thresholds where the rates apply, increasing the standard deduction, eliminating the deduction for medical costs and state and local taxes, and eliminating the alternative minimum tax, among other things.

Consider talking to us prior to year end if you would like to act on any of these tips.

Payments due by December 31, 2017

●     RESP Contributions

●     Charitable gifts

●     Contribution to your RRSP if you turned 71 during 2017 (you will also have to wind up your RRSP by this date.)

●     Medical Expenses

●     Union and professional membership dues

●     Investment counsel fees, interest and other investment expenses

●     Political contributions

●     Deductible legal fees

●     Interest on student loans

●     Certain child/spousal support payments