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The Canadian Personal Tax Changes for the 2016 year

As we again approach filing season in Canada for another year we know we have heard of changes over the past months in taxation, but many are wondering, "How does it affect me"?

  • 2016 is the last year for the federal education and textbook tax credit. The tuition tax credit will remain but after 2016 there will no longer be a federal credit based on the number of months in attendance at post-secondary education which previously maxed at 15% of $400 per month as well as a credit for textbooks which previously was 15% of $65 per month.
  • In 2016 the children's fitness credit will be 50% of what it was in 2015 (which was a maximum of 15% of up to a $1,000 of eligible fees) and in 2017 will be totally eliminated.
  • In 2016 the children's arts credit will be 50% of what it was in 2015 (which was a maximum of 15% of up to $500 of eligible fees) and in 2017 will be eliminated.
  • The income splitting tax credit for couples with at least one child under 18 years of age is eliminated in the 2016 tax year. This was a benefit of up to $2,000 per couple.
  • A new Teacher and Early Childhood Educator School Supply Tax Credit will be available in 2016. This is a 15% refundable tax credit based on an amount up to $1,000 of eligible supplies purchased by an eligible educator. and
  • The Labour-Sponsored Venture Capital Corporation tax credit will be reinstated to the full 15% federal credit in 2016, rather than be phased out like previously planned.

Corporate and Business Tax Changes

Very significant changes were introduced in this last year, which are beyond the scope of this article to explain completely, but briefly are as follows:

  • Various measures were introduced to prevent business owners from multiplying the small business deduction (the low tax rate of 12.5% on the first $500,000 of active business income). A very wide net was thrown out there which will catch some business owners who own more than one company, or have relatives that own companies doing business with their company by surprise and create higher tax than expected for yearends after 2016.
  • The small business deduction rate is frozen at 12.5% in SK. This was scheduled to drop to 11% by 2019. and
  • Major changes have been implemented for 2017 to the manner that quota is dealt with for tax purpose.