Take Advantage of Non-Refundable Tax Credits
With personal tax return season just around the corner, several new nonrefundable tax credits previously announced in the 2011 Federal Budget will be coming into effect. In addition, there are numerous other tax credits available to help reduce your income tax payable. It is worthwhile being aware of these credits as you assemble the information for your 2011 personal income tax return to ensure you maximize any available claims.
Children's art tax credit
The new children's art tax credit is available for children under 16 years of age (under 18 years of age if they qualify for the disability tax credit). Activities eligible for the credit will include:
- Supervised activities, suitable for children, that contribute to the development of creative skills or expertise in an artistic or cultural activity
- Activities that provide a substantial focus on the wilderness and natural environment
- Activities that help children develop and use particular intellectual skills
- Activities that provide structured interaction among children, where supervisors teach children to develop interpersonal skills or provide enrichment or tutoring in academic subjects
To be eligible, the activity must be either a weekly program lasting a minimum of eight consecutive weeks or, in the case of children's camps, a program lasting a minimum of five consecutive days.
You may claim up to $500 in such eligible expenses, creating a tax reduction of up to $75.
Family caregiver tax credit
While this new tax credit does not come into effect until 2012, it will provide an additional $2,000 tax credit for caregivers of dependants as an enhancement of the spousal or common-law partner credit, child tax credit, eligible dependant credit, caregiver credit or infirm dependant credit. One credit per dependant is available and will be phased out based on the dependant's net income.
Now let's consider some previously existing tax credits.
Children's fitness tax credit
Introduced in 2007, this tax credit allows taxpayers to claim up to $500 in fees paid for a child for eligible physical programs (a spouse's child or common-law spouse's child will also qualify). To qualify for this tax credit, the program must:
- Be ongoing (either a minimum of eight consecutive weeks or, for children's camps, five consecutive days)
- Be supervised
- Be suitable for children
- Require a significant amount of physical activity that contributes to cardiore spiratory endurance, plus one or more of muscular strength, muscular endurance, flexibility and balance
The following activities do not qualify:
- Activities in which riding in or on a motorized vehicle is an essential part
- Self-directed (unsupervised) activities
- Activities that are part of a regular school program
- Sports-academic programs
Fees paid by parents for accommodation, travel, food or beverages (e.g. room and board at a fitness camp) also do not qualify.
Amount for an eligible dependant
This tax credit is available to single, divorced or separated taxpayers supporting an eligible dependant. The restrictions on claiming this tax credit include:
- The child must be under 18, unless mentally or physically infirm
- Only one dependant may be claimed per taxpayer
- Only one claimant is entitled to the credit
If the taxpayer separated from his or her spouse during the year, the parent paying support may either claim the tax credit (assuming the other spouse has not) or claim a deduction for spousal support paid.
After the year of separation, only the parent with whom the child lives may claim this amount, and only if that parent is not paying support. It should be noted that cooperation with respect to the application of this tax credit is key to improving both spouses' financial positions. For example, if there are two or more children, each parent could claim one child (unless one parent is paying child support). The ability to share this tax credit is a factor that should be considered for inclusion in a separation agreement.
Spouse or common-law partner tax credit
Taxpayers can claim this amount if, at any time during the year, they supported a spouse or common law partner whose net income was below a specified amount ($10,382 in 2011).
If you maintained a dwelling in which you and one or more of your dependants lived, you may be able to claim this tax credit for each dependant (e.g. child, grandchild, parent, grandparent, sibling, aunt, uncle, niece, nephew). In addition, each dependant must have:
- Been 18 years or older at the time he or she lived with you
- Had income of less than $18,906 in 2011
- Been dependant on you due to a mental or physical impairment, or have been your or your spouse's or common-law spouse's parent or grandparent. If the claim is being made for a parent, he or she must have been 65 years or older during the taxation year
If you were required to make support payments for any of these dependants, you are not eligible for this credit unless you were separated or divorced for only part of the taxation year. In that case, you may either claim the caregiver amount or deduct any support payments you made.
Disability tax credit
If you have had a prolonged (12 months or longer) severe mental or physical impairment, you may be able to claim the disability tax credit if you meet certain conditions and obtain a certificate (Form T2201) from a qualified medical practitioner. If the Canada Revenue Agency accepts your claim, you may also be eligible to set up a Registered Disability Savings Plan to assist you with funding future living costs and to obtain matching grants from the federal government.
Be aware that these nonrefundable tax credits will only reduce personal income tax otherwise payable; they will not generate a refund if no tax is payable. The figures noted here refer to the federal component only. Most provinces offer similar credits but the particulars may vary from province to province.
If you are eligible for any of these tax credits and have not applied for them in the past, you can apply for them for up to the last 10 taxation years by making a "fairness request" to the Canada Revenue Agency. Contact your Collins Barrow adviser for more information and to ensure you claim all the tax credits for which you are eligible.
Jason Kinnear, CA•CBV, is a Senior Tax Manager in the Kingston office of Collins Barrow.
Information is current to February 7, 2012. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.