Tax season is here and things have changed a bit for your return this year so let’s take a look at some of the major changes that can affect you…
New tax brackets
The Liberal government campaigned on a tax cut for the middle class and a tax hike for the top one per cent of income earners. So, beginning this year, the federal marginal tax rate on those earning between $45,283 to $90,563 will drop from 22 per cent to 20.5 per cent. Those earning more than $200,000 will see their tax rate increase from 29 per cent to 33 per cent. That means it’s important for higher-income earners to keep these changes in mind when filing their 2015 taxes.
Experts say for those higher income earners, there’s some thought of not deducting your RRSPs in 2015 and applying it in 2016 and the same goes for other discretionary deductions, such as charitable donations and certain medical expenses. So in a nutshell you are not getting a benefit in 2015, but in theory you should get a bigger bang for your buck in 2016, when you’re taxed at potentially a higher level.
The controversial income-splitting benefit brought in 2014 is on its way out, but some families can still benefit from the tax cut in their returns this year. The Family Tax Cut allows parents or common-law partners with children under 18 years old to split their income to shrink their tax burden. The higher-earning partner can transfer up to $50,000 of income to the lower-earning partner, for a tax credit of up to $2,000.
Income splitting is most beneficial for spouses or common-law partners who have a big difference between their incomes, but it is recomended that all families take a look at the credit.
Enhanced Universal Child Care Benefit
The Enhanced Universal Child Care Benefit, (which came into effect in just 2015), is also on its way out, with the Liberal government promising to introduce a new, tax-free Canada child tax benefit later this year. However, families will have to account for the UCCB when they file their tax returns this year.
The UCCB gave families about $160 per month for each child under six years old, and $60 per month for each child aged six through 17. Experts say families will have to pay tax on the UCCB, which replaced the Child Tax Credit that was worth an average of $337 per child.
The amount parents can claim for child-care expenses has increased by $1,000 per year per child, to $8,000 for a child under six and $5,000 for a child aged between seven and 16 years old.
Child fitness tax credit
The child fitness tax credit has changed from a non-refundable to a refundable credit, meaning that families who claim the program cost or registration fee for a physical activity can now receive up to $150 per child.
Canada Apprentice Loan
Students in a designated Red Seal trade program can now claim interest on their government student loans.
Tax-Free Saving Accounts
The Liberal government is reducing the contribution limit for Tax-Free Saving Accounts to $5,500 after the former Conservative government raised the limit to $10,000 in 2015.
But experts say it’s important to keep in mind that there’s no loss of the $10,000, as the room in your TFSA accumulates, and you can use it in later years.
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