This year, there are a number of changes on the annual return which, unfortunately, involve the elimination of some very common credits which were previously available to, and claimed by, millions of taxpayers. All such changes were, of course, effective either at the beginning of, or sometime during the 2017 tax year, but most taxpayers will not become aware of them until they sit down to complete and file the annual return this spring.
What follows is an outline of the changes to individual tax credits which will impact taxpayers when filing their annual return this year.
Textbook and education tax credits repealed
For many years, post-secondary students (and their parents) have been able to offset, to a degree, the cost of post-secondary education through claims for federal and provincial non-refundable tax credits.
There were, prior to 2017, four such credits or deductions which were commonly claimed by post-secondary students, as follows:
- the education tax credit, which was claimed by students who were enrolled, either part-time or full-time, in post-secondary education;
- the textbook tax credit, which also provided a non-refundable tax credit to full-time and part-time post-secondary students;
- the tuition tax credit, which provided post-secondary students with a federal tax credit equal to 15% of eligible tuition amounts paid; and
- a deduction from income for interest amounts paid on eligible student loans. Such loans were generally those obtained through provincial or federal government student loan programs.
Both the education and textbook tax credits have been eliminated as of the 2017 tax year. Consequently, neither credit could be earned by post-secondary students in 2017 and so there is no current-year claim to be made for such credits on the annual return to be filed this spring. However, education and textbook tax credits which were earned prior to 2017 and were not claimed either in the year they were earned or any subsequent year can still be carried forward and claimed on the student’s return for 2017 or following years.
The two other tax benefits claimable by post-secondary students continue, however, to be available. For 2017, qualifying students can claim a federal tax credit equal to 15% of tuition fees paid, and students who took on student loans under a government-sponsored student loan program are entitled to deduct interest payments made in connection with those loans. Both the tuition tax credit and the student loan interest deduction are claimable by qualifying students on the return for the 2017 tax year.
Taxpayers should be aware, as well, that the provinces also offered tuition and education tax credits which could be used to reduce provincial tax payable. While changes similar to the federal ones have been made at the provincial level, those changes are not uniform. Some provinces have chosen to repeal both the education and tuition tax credits, effective July 1, 2017, while others have announced that only the education tax credit will be repealed, and not until 2018. Still other provinces have indicated that no change is planned to their current system of tuition and education tax credits. Consequently, taxpayers will need to determine whether and to what extent claims for provincial tuition and education tax credits remain available for 2017 in their province of residence. That information will be available in the General Income Tax Return Guide for the particular taxpayer’s province of residence. Those guides can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html.
Children’s fitness and arts tax credits repealed
For a number of years, parents were able to claim a federal tax credit for expenditures made to enroll their children in fitness and arts-related activities. The availability and amount of those credits has been gradually reduced over the past few years and all such credits were eliminated as of January 1, 2017. Consequently, no current-year claim for either the children’s arts or fitness tax credits can be made on the 2017 return and it’s not possible to carry over and claim such credits earned but not claimed in previous years.
Public transit tax credit repealed
Prior to 2017, individual taxpayers were entitled to claim a non-refundable federal tax credit for costs incurred in taking public transit on a regular basis. The definition of what constituted public transit was extremely broad, covering everything from buses to ferries. As well, it was possible to combine qualifying amounts incurred by family members and claim them on a single return, thereby maximizing the value of the credit.
That public transit tax credit was eliminated, effective as of July 1, 2017. However, since the repeal took place part way through the year, the computation of any available credit to be claimed on the return for 2017 is somewhat complicated. Effectively, the credit is not available for costs incurred for public transit use which took place after June 30, 2017. In other words, even if the expense was incurred prior to July 1, no credit is claimable if the associated travel takes place after June 30. So, for instance, taxpayers who purchased an annual transit pass for 2017 (or those who purchased several monthly passes before July 1 for travel after that date) will not escape the effect of the repeal. Only costs incurred for travel which took place in the first half of the year will qualify for a credit to be claimed on the 2017 return.
Taxpayers should retain receipts for such expenditures, in the event the Canada Revenue Agency wishes to verify that any claim made was a valid one. While that has always been the case, it’s a particularly good idea this year, in view of the mid-year withdrawal of the credit and the transitional rules governing the change.
Caregiver tax credits replaced
Individuals who live with or care for relatives in a variety of situations have been able to claim one or more caregiver tax credits to help offset the cost of providing such care. The number of tax credits related to caregiver activities had expanded over the years and had become a somewhat confusing patchwork of possible credit claims.
Effective as of January 1, 2017, that former patchwork of credits was replaced, for the most part, by a single Canada Caregiver Credit. The new single credit will generally provide caregivers with the same tax relief as the old system did, with one significant exception.
Prior to 2017, where an individual lived in the same residence with a parent or grandparent who was age 65 or older, that individual could claim a caregiver tax credit with respect to the parent or grandparent. There was no requirement that the senior parent or grandparent be disabled or infirm in any way.
As of 2017, no caregiver credit will be claimable in such situations. While the new Canada Caregiver Credit (which is claimed on Line 307 of the return) is claimable in a range of living situations and for individuals of various ages, the one constant requirement to qualify for that credit is that the person in respect of whom it is claimed be dependent by reason of infirmity. As indicated in this year’s Income Tax Guide “You cannot claim an amount on line 307 for dependants who do not have an impairment in physical or mental functions, including a parent or grandparent who was 65 years of age or older.” The requirements for claiming the new Canada Caregiver Credit are set out on page 47 of the General Income Tax Guide for 2017 returns.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.