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CRA announces Tax Reductions

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(October 30, 2014) The following proposed changes to income taxes where announced:

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Family Tax Cut

Under Canada's tax system, federal personal income tax rates increase with the level of taxable income of the individual. As a result, a couple in which one individual has a higher taxable income than the other often pays more federal income tax than a couple where both individuals have equal taxable income.

The October 30, 2014 announcement included a proposal to introduce the Family Tax Cut, a new non-refundable tax credit of up to $2,000 for eligible couples with minor children based on the net reduction of federal tax that would be realized if up to $50,000 of an individual's taxable income was transferred to the individual's eligible spouse or common-law partner.

This would take advantage of a spouse's lower income tax bracket.

This new tax credit will be effective for the 2014 and subsequent tax years.

To be eligible, your spouse or common-law partner must be a resident of Canada on December 31 of the year (or on the date of death) and you were not, because of a breakdown in your marriage or common-law partnership, living separate and apart from each other at the end of the year and for a period of 90 days or more beginning in the year.


Universal Child Care Benefit (UCCB) Enhanced for 2015

The UCCB is a benefit paid to eligible families for children under the age of 6 years. An amount of $100 is paid per month for each eligible child.

The October 30, 2014 announcement includes a proposal to increase the monthly UCCB benefit by $60, from $100 to $160 for each eligible child under the age of 6 years effective January 2015.

The October 30 announcement also includes a proposal for a monthly UCCB benefit of $60 for an eligible child who is at least the age of 6 until the child reaches the age of 18 effective January 2015.

While the increased UCCB is effective January 2015, the CRA cannot make increased payments until the proposal has received Royal Assent and the necessary changes are introduced in our processing systems. If Royal Assent has been received, the CRA will be in a position to make the first increased payment in July 2015. This payment will include any increased benefit applicable from January to June of 2015. Until July 2015, regular UCCB payments will continue to apply.


Child Tax Credit Eliminated for 2015

The Child Tax Credit is a non-refundable tax credit for parents of children who are under 18 years of age at the end of the year. A claim is made for the credit by completing line 367 of the Schedule 1, Federal Tax, when you prepare your personal income tax and benefit return.

The October 30, 2014 announcement includes a proposal to eliminate the Child Tax Credit for 2015 and subsequent taxation years in conjunction with the enhancements to the Universal Child Care Benefit.

There are no proposed changes to the Family Caregiver Amount. If you are otherwise eligible, you will be able to continue to claim the Family Caregiver Amount for a child who is under 18 years of age at the end of the year.


Child Care Expenses Deduction

You or your spouse or common-law partner may be able to claim a deduction for expenses that were incurred for someone to look after your child so that one of you could earn income, go to school, or conduct research. The expenses are deductible only if, at some time in the year, the child was under 16 years of age or had an impairment in physical or mental functions. Generally, only the spouse or common-law partner with the lower net income (even if it is zero) can claim these expenses.

The following dollar limits currently apply when determining the amount of expenses that can be deducted:

  • For each child who is eligible for the Disability Tax Credit, the deduction limit is $10,000;
  • For each child who is under seven years of age at the end of the year, the deduction limit is $7,000; and
  • For each child who is under 16 years of age or had an impairment in physical or mental functions, the deduction limit is $4,000.

The October 30, 2014 announcement includes a proposal to increase each of the deduction dollar limits by $1,000 for 2015 and subsequent tax years.


Children’s Fitness Tax Credit

The Children’s Fitness Tax Credit allows you to claim eligible fees paid in the year up to a maximum of $500 per child (an additional amount of $500 is available if the child is eligible for the Disability Tax Credit and a minimum of $100 has been paid for eligible fees in the year).

On October 9, 2014, a proposal was announced to increase the maximum amount per child to $1,000 for the 2014 and subsequent tax years. You will be able to take advantage of the increased maximum amount when you file your 2014 income tax and benefit return in the upcoming filing season.

The proposal does not include an increase to the additional amount of $500 available if a child is eligible for the Disability Tax Credit and a minimum of $100 has been paid for eligible fees in the year.

On October 9, 2014, a proposal was announced to convert the Children’s Fitness Tax Credit to a refundable tax credit for 2015 and subsequent tax years.


Small Business Job Credit

The Small Business Job Credit is a two-year measure that will help small businesses by lowering their Employment Insurance (EI) premiums from the legislated rate in 2015 and 2016. The savings small businesses will realize from this measure will help them create jobs and growth, and support Canada's sustained economic recovery in a time of ongoing global uncertainty.

You are eligible for this credit if you meet all of the following conditions in 2015 and/or 2016:
  • you deducted EI premiums from the remuneration you paid to your employees, or paid the worker's share of EI premiums for barbers, hairdressers, fishers, or drivers of taxis and other passenger-carrying vehicles, and you remitted these premiums (along with your businesses' share of EI premiums) to your payroll program (RP) account;
  • you reported the income and deductions on a T4 slip and filed this information on your RP account for 2015 and/or 2016; and
  • the total of employer EI premiums you paid for all of your RP accounts in 2015 and/or 2016 was $15,000 or less.

You don't have to apply for the credit. The CRA will automatically establish eligibility for 2015 and 2016 separately, based on the T4 information that you file for each of those years.



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