Blog: Tax Tips 2017: For the FamilyDecember 20th, 2017
From our annual Tax Tips guide, here are the tips and suggestions for the Family for the year 2017.
If you have disabled or infirm dependents
1. The Registered Disability Savings Plan (RDSP) is a savings plan that is intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit.
- Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59 years of age.
- To help you save, the Government pays a matching grant of up to $3,500. You are allowed to carry forward unused grant entitlements for up to ten years.
- Contributions that are withdrawn are not included in the income of the beneficiary, although the Canada dis- ability savings grant, Canada disability savings bond, and investment income earned in the plan will be included in the beneficiary’s income for tax pur- poses when paid out of the RDSP.
- There is no annual limit on amounts contributed to an RDSP of a particular beneficiary, but the overall lifetime limit is $200,000.
- A deceased individual’s RRSP or RRIF can be transferred tax-free into the RDSP of a financially dependent infirm child or grandchild.
2. For 2016 and subsequent tax years, the Government has implemented a new non-refundable Home Accessibility Tax Credit.
- The tax credit is available for eligible expenses incurred in making a home more accessible to individuals aged 65 or older or to individuals who are disabled or infirm.
- Either the individual who incurred the expenses or the individual for whom the expenses are made can claim the tax credit. The individual who incurred the expenses can only claim the tax credit in respect of expenses incurred for his or her spouse or common-law partner, or for disabled or infirm dependants.
- You can claim up to $10,000 in eligible expenses under the Home Accessibility Tax Credit, resulting in a non-refundable tax credit worth up to $1,500. Expenses eligible for the claim must be permanent and non-routine renovations to the home. The alterations must allow the individual for whom the expenses were incurred to be mobile within the home and/ or reduce the risk of harm to the individual within the home.
If you have young children
3. Save for your child or grandchild’s education with a Registered Education Savings Plan (RESP).
- An RESP is a trust arrangement that earns tax-free income to be used to fund the cost of a child or grandchild’s post-secondary education. Contributions to an RESP are not deductible for tax purposes and withdrawals of capital from the RESP are not taxed. The beneficiary is taxed on the income portion when withdrawn from the RESP for the purpose of funding his or her post- secondary education. While at school, the child or grandchild tends to have relatively low sources of other income, and, as a result, the income is usually taxed at lower rates, if at all.
For RESP contributions in 2017:
- There is no annual contribution limit;
- The lifetime contribution limit is $50,000 per beneficiary; and
- A federal Government grant of 20% of annual RESP contributions is available for each beneficiary under the “Canada Education Savings Grant.” The maximum annual RESP contribution that qualifies for the federal Government grant is $2,500.
4. Maximize child-care expense deduction.
- The maximum amounts deductible for child-care expenses are $11,000 for a disabled child, $8,000 for children under age seven, and $5,000 for other eligible children (generally, children aged 16 and under). In most cases, the spouse with the lower net income must claim the child-care expenses against his or her earned income.
5. Apply for the Canada Child Benefit (CCB).
- The Government has merged the Universal Child Care Benefit (UCCB) and Canada Child Tax Credit (CCTB) in to a new Canada Child Benefit (CCB). The CCB is a tax-free payment based solely on the family’s income from the previous year. The program provides parents with monthly benefits of up to $533.33 ($6,400 annually) for children aged six and under and up to $450.00 ($5,400 annually) for children aged 6 to 17.
- It is expected that families making below $150,000 will receive more in monthly child-benefit payments than they were otherwise receiving under the UCCB and CCTB programs. However, the benefit is gradually clawed back for families making over $30,000 and fully eliminated for families making over $200,000 annually.
- The application for the CCB can be made online through the CRA “My Account” when you complete your child’s provincial birth registration form or by completing Form RC66. More information can be found here.
- If your family already receives the CCTB or UUCB, an application for the CCB is not necessary but both parents must have filed a tax return.
- The CCB is effective for 2016 and subsequent taxation years.
Did you know?
On July 18, 2017, the Government announced proposed changes to the tax on split income (TOSI) rules which may impact the ability to split dividend and other types of income (paid by private corporations) with adult family members. The proposed TOSI rules aim to curtail the splitting of income with related family members who have not otherwise made a meaningful contribution to the business, be it a labour contribution, capital contribution, and/or an assumption of business risks. The Government confirmed its intention to enact these proposed rules to be effective for 2018 and later taxation years. Read more in our article 8 Highlights from the New Income Splitting Rules here.
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.