Every year, the Canadian federal government introduces new tax policies that directly affect the tax filings of local citizens and immigrants, and this year is no exception. According to statistics from local English-language media CBC, there are 10 changes this tax year that will most significantly impact taxpayers. Some policies may result in higher tax refunds, while others may lead to higher tax payments.
1. Family tax cut credit
On October 30 last year, the Harper government announced a series of tax reduction plans for families with children, among which the Family tax cut will affect this year's tax filings. Specifically, for families with a child under 18, the higher-income earner can transfer $50,000 of income to their lower-income spouse, with a maximum tax reduction of $2,000. Single parents, couples without children, and families where both spouses have similar incomes will not benefit from this tax cut.
Other items in the family tax reduction package, such as the increase in the universal child care benefit and the increase in the child care expense deduction limit, will be introduced in the middle of this year and will affect next year's tax filings.
2. Children's fitness tax credit
Last autumn, the government announced that the children's fitness tax credit would be doubled, increasing the maximum eligible expense limit from $500 to $1,000. Given that the tax credit is 15% of the total fitness expenses, this means each child under 16 (or under 18 for children with disabilities) can receive a maximum tax credit of $150.
Starting from the next tax year, this tax credit will be converted into a refundable tax credit, allowing low-income families to fully benefit from it.
3. Adoption expense tax credit
The maximum amount of adoption expenses that can be used for tax deductions has increased from $11,669 in the previous tax year to $15,000 this year. Starting next year, the tax credit for these expenses will be adjusted annually in line with the inflation rate.
4. Medical expense tax credit
There are two major changes to this tax credit this year: first, for individuals who qualify for the disability tax credit, expenses for designing therapy plans are now eligible for tax deductions; second, for individuals suffering from severe diabetes, expenses for purchasing or renting service animals are also eligible for tax deductions.
5. Search and rescue volunteers credit
Individuals who performed at least 200 hours of volunteer work for search or rescue teams last year are eligible for a $450 tax credit.
6. U.S. and Canada share "snowbird" information
"Snowbirds" refers to Canadians who travel south to spend the winter or reside for long periods in the United States. Starting June 30, 2014, Canada and the U.S. began sharing information on "snowbirds," which means the U.S. Internal Revenue Service (IRS) will know how many days you have spent in the U.S., and once you exceed the limit, you will be required to pay taxes.
7. Safety deposit box fees are no longer tax-deductible
Starting this tax year, fees for renting a safety deposit box to store important investment records will no longer be tax-deductible.
8. Closing the loophole for tax deductions through art donations
In the past, there has been a loophole in the Canadian tax system involving the use of art donations for tax deductions. Specifically, an individual would purchase a cultural artwork from a tax-avoidance broker at a low price, then declare that the artwork had "appreciated" in value, and donate it to a non-profit organization. In this process, they essentially purchased a very high tax deduction at a very low cost.
This year, this loophole has been closed. The new law stipulates that the tax deduction obtained from donating artwork cannot exceed the price the buyer originally paid for it.
9. Tax-free savings accounts
The contribution limit for tax-free savings accounts in 2014 increased to $5,500, an increase of $500 from before. Since the account was introduced in 2009, a total of $36,500 can be deposited.
10. GST/HST tax credit
In this tax year, taxpayers no longer need to manually apply for this tax credit; the tax department's computer system will automatically analyze your tax return to calculate whether you are eligible.