Income tax changes clients should know

A new year means new tax laws are in effect.

Top of mind for business-owner clients, the small-business corporate tax rate was reduced to 10% from 10.5% effective for 2018, and will be further reduced to 9% for 2019.

Here are other changes likely to have the biggest impact on client returns, courtesy of H&R Block Canada.

Also read: Essential tax numbers, updated for 2019

New EI parental sharing benefits

Budget 2018 included a supplemental parental sharing benefit, which will provide an additional five weeks of benefits when both parents agree to share parental leave.

Also, working while on claim rules now apply to sickness and maternity benefits. While on maternity leave, some people return to work before their EI benefits end, which requires an adjustment in how much they receive in benefits.

Claimants receive 55% of their weekly salaries as their EI benefits. When they return to work, they must subtract 50 cents of each dollar they earn, and this amount will be subtracted from their overall EI benefits.

More medical expenses to claim

Effective this year, a taxpayer who suffers from a severe mental impairment can claim the costs of caring for a service animal. However, animals that provide comfort or emotional support but haven’t been specially trained aren’t eligible.

Higher rates for accelerated capital cost allowance

The federal fall economic statement included a temporary change to the half-year rule for claiming CCA, which will have an impact on Canadian business owners.

The change takes effect for purchases of depreciable equipment (such as computers or furniture) made on or after Nov. 21, 2018 and before 2024, and will affect the amount that may be claimed on the 2018 tax return.

The new measure, referred to as the “accelerated investment incentive,” allows for 150% of the normal CCA rate to be claimed in the year of purchase. The amount of CCA that could be claimed in the year of purchase was previously subject to the half-year rule, meaning the amount that can be claimed has tripled.

Elimination of home relocation loan

Budget 2017 eliminated the home relocation loans deduction for 2018 and subsequent years.

Pension splitting for veterans retirement income security benefits

Retirement income security benefits received by veterans are now eligible for pension income splitting, retroactive to 2015. The amount that can be split is subject to a cap of $103,056 for 2018.

Climate action incentive

As part of the federal government’s climate change plan, residents of New Brunswick, Ontario, Manitoba and Saskatchewan will receive a new tax credit called the Climate Action Incentive when they file their 2018 tax return.

The government estimates that the average household will receive incentives as follows:

• N.B.—$248
• Ontario—$300
• Manitoba—$336
• Sask.—$598

Clients living in more rural areas receive 10% more than those in cities because they likely use more energy and don’t have as many public transportation options as a way to reduce their fuel consumption, says Lisa Gittens, senior tax expert at H&R Block, in a release.