It is that time of year again when most people are getting close to taking their personal tax information to their accountant.
It is important to know the changes that have taken place in 2016 with personal taxes to ensure you provide the appropriate information and ask the right questions.
Let’s start with the changes that may affect you and your family:
Principle residence exemption
Homeowners previously weren’t required to report the sale of their principle residence if claiming the entire exemption. However, in response to issues that occurred in the Vancouver housing market earlier this year, the federal government now requires individuals who sell their principal residence to report the sale on Schedule 3, Capital Gains, of the T1 Income Tax and Benefit Return. Therefore, you need to be more careful if you own more than one property on which may want to claim the exemption.
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Tax credits
The children’s fitness tax credit amount has dropped to $500 from $1,000 and will be eliminated after 2016. This is similar to the children’s art credit, which was reduced to $250 from $500 and will be eliminated after 2016.
If you have children in post-secondary education, 2016 will be the last year they can use the education tax credit and textbook tax credit. However, they can still claim the amount paid for tuition, and any carry forward amounts can be claimed in future years.
Teachers should be aware of the Eligible Educator School Supply credit. To make a claim, they should keep their receipts on school supplies they bought but did not receive reimbursement. They can submit receipts totalling up to $1,000 and claim the 15 percent credit on the tax form.
Other tips to keep in mind when taking information to your accountant:
- Medical travel: You can claim this mileage if you are required to travel more than 40 kilometres for medical services. However, you should get a letter from your doctor stating that these services are not available in your community.
- Medical prescriptions: Rather than adding up all your receipts, you should ask your pharmacist for a summary. This saves you and your accountant time and ensures no receipts are missed.
- Registered Retirement Savings Plan: The government has started to crack down on people who pay their RRSP fees from a non-registered account and deduct them. This can lead to adding taxable income to previous tax returns and over-contributions. You will want to consider talking to your investment adviser to ensure you are paying your RRSP fees from your RRSP account.
- Eligible Capital Property : This does not affect you until 2017, but if you have quota or water rights on your farm statement, the way this is depreciated will change starting Jan. 1, 2017. Talk to your accountant to determine if this will significantly affect your situation.
We will be watching the next federal budget to see if rumours were correct about raising the capital gains inclusion rate in 2017. This could increase taxes on land transactions.
Even if the change does not occur in this budget, you should be aware that it is something that federal tax officials have considered. As a result, you should keep this possibility in mind as you plan your retirement and succession.
Ensure you have a conversation with your accountant on major events that took place in the last year. You never know what changes may have tax implications.
Riley Honess and Bailey O’Donnell of KPMG contributed to this article.
Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca.
