Tax Documentation Changes for 2016

Tax season is once again upon us, and there are some changes that you will need to consider when bringing us your 2016 tax documentation.

Starting in 2016, you are required to report the sale of your principal residence. It is important to note that there has been no changes to the taxability of the sale of your principal residence. If your home qualified as you principal residence for the entire period of ownership, you will not have to pay income tax on the sale of the property. If you have sold your principal residence, the only information that you need to provide to us will be the address, the year you purchased the home, and the proceeds from the sale of the property. You do not have to provide any information on the original cost of the property.

If you are a teacher or an early educator, you can now qualify for the Eligible School Supply Credit. This credit allows eligible teachers and early childhood educators to claim up to $1,000 of eligible supplies used in the classroom. Eligible supplies must have been purchased in 2016. These would include most consumable items, such as pens, paper, and art supplies. Durable goods such as books, computer software, and bankers boxes, would also be eligible. Computers will not qualify for this credit. The Canada Revenue Agency may ask to see that your receipts  have been certified by a principal at your school. Please bring this certification with you when you bring us your eligible receipts.

Children’s arts and fitness credits can still be used for 2016, although the amount of the credit will be one half of what it was in 2015. You can receive a credit for up to $500 of eligible fitness expenditures for children under 16, and up to $250 for eligible arts credit expenditures. The federal potion of these credits have been eliminated for 2017.

If you qualified for the disability tax credit in 2016, you will now be eligible for the home Accessibility Tax Credit. A similar provincial credit has existed for Seniors in previous years. This credit will allow you to claim $10,000 of eligible expenditures. In order for the expenditure to qualify for the credit , it must be a renovation or alteration that is of an enduring nature.

The family tax cut has been removed for 2016. There have been no changes to pension splitting for 2016.

CERTAIN CAPITAL GAINS TO REMAIN TAXABLE

In our summer 2015 newsletter, we advised that the federal government was going to expand the types of transactions in which capital gains would be considered to be tax exempt.

Currently, if a taxpayer donates a public security or mutual fund, any gains that have accrued on the investment at the time of the donation are not taxable to the donor.

The plan at the time was to extend this policy to the donation of private company shares, as well as land, beginning in 2017.

However in their 2016 budget, the Liberal government indicated that they will not be introducing this measure.

TAXABLE BENEFIT GUIDANCE

The CRA recently provided additional guidance on the taxability of certain employment benefits that are provided by employers to their employees.

One issue that was discussed was related to happy hours and team lunches that are offered to all employees.

They advised that their policy regarding these types of social events is that as along as the cost per employee is less than $100, it would not be considered to be a taxable benefit. They did caution that the frequency of these events would have to be reasonable, although they did not provide any guidance as to what is considered reasonable.

For employers, these expenses may be deductible at 100%of the cost of the function, if the function is offered to all employees. Six functions per year would qualify for full deductibility. Only 50% of the costs of additional functions would be deductible to employers.

DID YOU KNOW…

Fair Pharmacare is a program which subsidizes prescription costs in BC. The amount that each family pays is based on the net income that is reported on their personal tax returns from two years prior. For a family with no eligible seniors, the maximum that they would pay for eligible prescriptions in a year is approximately 4% of their net income, if their net income is over $30,000. For a family with an eligible senior, the most they would pay would be approximately 3% of their net income, if their net income is over $50,000.

MEDICAL SERVICE PREMIUMS ADJUSTED

There will be changes to Medical Services Premiums in 2017.

Although the government has announced that there will be no premium increases in 2017, many taxpayers’ premiums will increase due to structural changes in the program.

Children under 19 will no longer be charged premiums. However, premium rates for two adult households have now increased to twice the amount of the single adult rate. Previously, the spouse’s rate was less than the account holder.

As a result, a two adult family with no children will now pay $150 per month, compared to $136 using the previous formula.

Full premium assistance will now be available for families with net income of less than $24,000, which is up from $22,000. If a senior couple has less than $30,000 of net income, they will also qualify for full premium assistance.

As long as a family has net income of less than $42,000, they will qualify for some premium assistance.