What’s new for your 2015, 2016 and 2017 tax returns

Get your CRA tax package and make the most of your 2015 tax return — and prepare for 2016 and 2017 — with the following changes for families. (Editor’s note: this story has been updated to reflect the 2016 Federal Budget.)

2015 changes

1. Children’s fitness amount, lines 458 and 459

This tax credit ($1,000 per child under 16) is now refundable, which means the credit ($1,000 × the federal rate of 15% = $150) can lower your taxes owed below zero, creating a tax refund. (If you do owe tax, it’ll reduce the amount owed by $150.)

2. Calculation change for the Family Tax Cut, line 15 of Schedule 1-A, Family Tax Cut

For 2014 and subsequent years, a calculation change allows unused tuition, textbook and education credits transferred from a spouse or common-law partner. Although this change won’t affect many Canadians, those who are affected may see an additional $2 to $750 for the Family Tax Cut, says CRA. No need to ask for an adjustment for your 2014 return; CRA will automatically reassess affected taxpayers.

3. Child care expenses, line 214

The maximum limit has increased by $1,000 per child.

4.Universal Child Care Benefit (UCCB), line 117, claimed by parent with lower net income

This taxable benefit was enhanced in 2015 to $160 monthly for each child under 6, and $60 monthly for children 6–17. (The enhanced UCCB replaced the amount for children under 18.) This will probably be your last year to claim the benefit because the government has introduced the Canada Child Benefit (CCB).

2016 changes

Doug Carroll, vice-president of tax and estate planning at Invesco in Toronto, says the payment period for many benefit programs runs from July 1 to June 30, and uses the most recent April filing to determine payments.

Now that the federal budget’s been released, Carroll suggests families determine what their own new budgets will be. “For some people it’ll be change to the positive; for others it’ll be knocked down somewhat,” he says.

New tax-free CCB

One of the biggest changes, says Carroll, is the new CCB, part of the new government’s election platform, and intended to simplify family benefits and the tax code.

The CCB is tax-free and tied to income, and will replace the UCCB, the Canada Child Tax Benefit (CCTB) and the National Child Benefit Supplement (NCBS, part of CCTB).

“CCB is intended to replace those existing three programs, and that would be as of July 1,” says Carroll.

Also on the chopping block: the Family Tax Cut, introduced in 2014. The new budget eliminates this so-called income splitting for 2016 and subsequent taxation years.

“Getting rid of the Family Tax Cut would coordinate with the fact that [the government has] a new program [the CCB] which deals with the same constituency: people with kids under 18. There would be duplication […], so it’s going to go,” says Carroll.

According to the 2016 federal budget, “nine out of 10 families will receive more in child benefits than under the current system.” CCB provides a maximum annual benefit of up to $6,400 per child under 6, and up to $5,400 per child aged 6 to 17. Families with net income under $30,000 receive the maximum benefit. Generally, families with income over $150,000 will receive lower benefits under CCB than under the current system.

If you have a child with a disability, you can still get the child disability benefit (CDB), previously included in the CCTB. The CDB is an additional amount of up to $2,730 per child eligible for the Disability Tax Credit.

Changes to tax credits

For 2016, the maximum eligible expenses for the children’s fitness amount and the children’s arts amount will be cut in half, to $500 and $250, respectively. That means families lose up to $75 ($500 × the federal rate of 15%) on the refundable children’s fitness tax credit, and up to $37.50 ($250 × the federal rate of 15%) on the children’s arts tax credit. Both credits will be cut for 2017.

The government will cut the textbook and education credits, effective January 1, 2017, but amounts carried forward from prior years can still be claimed. The government is using the savings to “enhance student financial assistance.”

Starting in 2016, teachers get a refundable tax credit for out-of-pocket school supply expenses up to $1,000. If you’re a teacher, that’s a potential $150 to reduce your tax bill, or to pocket if no taxes are owed.

Personal income tax brackets

2015 income	2015 federal tax rate	2016 federal tax rate	2016 income
$44,701	15%	15%	$45,282
$44,401–$89,401	22%	20.5%	$45,282–$90,563
$89,401–$138,586	26%	26%	$90,563–$140,388
more than $138,586	29%	29%	$140,388–$200,000
		33%	more than $200,000

Example: Charitable donation federal tax credit

Net income: $215,000 Charitable donation: $16,200

2015 tax return	2016 tax return
15% × $200 = $30	15% × $200 = $30
29% × $16,000 = $4,640	29% × $1,000 = $290
	33% × $15,000 = $4,950
Total $4,670	Total $5,270

Difference: an increase of $600 in 2016 federal tax credits

Federal tax bracket changes

In December 2015, the federal government announced rate changes for middle- and high-income earners.

For the 2016 and subsequent tax years, the personal income tax rate on taxable income of $45,282 to $90,563 (the second income tax bracket) will be reduced to 20.5% from 22%.

That government press release says “single individuals who benefit will see an average tax reduction of $330 every year, and couples who benefit will see an average tax reduction of $540 every year.” The savings are significant, says Di Pietro.

High-income earners will face a new tax bracket: Taxable income over $200,000 will be subject to 33%. (For 2015, income greater than $138,586 is taxed at 29% — the last tax bracket.)

A positive result of the new tax bracket is how the Charitable Donation Tax Credit will be calculated. For donations made after December 31, 2015, the tax credit rate for donations over $200 will be 33% — to the extent you have taxable income at that rate. Otherwise, the rate for donations more than $200 remains at 29%. (Complete Schedule 9 and input the result on line 349 of Schedule 1.)

Says Di Pietro, “Generally, the tax planning strategy is always to combine donations and claim them on the higher-income-earning spouse. Now, once you hit that $200,000, [the calculation] makes it even more important to do so.”

TFSA limit change

The limit for 2016 is a return to $5,500, down from 2015’s limit of $10,000. For a taxpayer who has been eligible for the TFSA since its inception and never contributed, her total contribution room is $46,500. Over-contributions will be taxed, but CRA says if you correct your mistake immediately by removing the excess amount, “you may apply for relief and your case will be reviewed.”