Personal Income Tax Measures in Federal Budget of 2011

Highlights of Personal Income Tax Measures in Federal Budget of 2011. This is very important information for families, self employed, sole proprietors and partnership businesses.

These tax incentives will cost the federal government about $35 million in 2010-11 and rising to $168 million in 2012.

Non-refundable Tax Credits ( Important to know, that you do not get any tax refund for these credits. These tax credits only can reduce your existing tax bill and give you a bigger share of tax refund).

1. Children’s Arts Tax Credit – allows parents to claim a 15% tax credit based on an amount not exceeding $500 in artistic, cultural, recreational or development activities per child under 16 years of age. It seems it is an additional tax credit along with Children’s Fitness Tax Credit ( I will need to confirm that.)
2. Volunteer Fire Fighters Tax Credit – allows volunteer fire fighters to claim a 15% tax credit based on an amount of $3,000.
3. Family Caregiver Tax Credit – 15% tax credit based on an amount of $2,000 to be applied in 2012 to support caregivers of dependents with a mental or physical infirmity. This credit will be in addition to the amounts claimed under one of the existing dependency-related tax credits.
4. Medical Expense Tax Credit – removes the $10,000-limit on eligible expenses that can be claimed for a dependent relative.
5. Child Tax Credit eligibility – removes the rule that limits the number of child tax credit claimants to one per household.
6. Tuition Tax Credit – expands costs eligible for the tuition tax credit to include fees paid to take an examination that is required to obtain a professional status recognized by statute or to be licensed or certified to practice a profession or trade in Canada. So, now any professional body tuition is claimable for tax credit, which is a great news for new Canadians.
7. Tuition, Education and Textbook Tax Credit – reduces the minimum course-duration requirement that must be met by Canadian students studying abroad to three consecutive weeks from 13 weeks. Similar rules would apply to Educational Assistance payments.

RESPs – allows transfers between individual Registered Education Savings Plans for siblings without tax penalties and without repayment of Canada Education Savings Grants, provided the beneficiary of a plan receiving a transfer of assets had not attained 21 years of age when the plan was opened.
RDSPs – allows earlier access to savings in a Registered Disability Savings Plan for beneficiaries with shortened life expectancies without requiring the repayment of Canada Disability Savings Grants and Canada Disability Savings Bonds.
RRSPs – proposes anti-avoidance rules to curtail the use of RRSPs in tax planning schemes including “RRSP strips” using rules similar to those that currently apply to Tax-Free Savings Accounts: the advantage rules, the prohibited investment rules and the non-qualified investment rules.
Tax on Split Income – expanded to include capital gains realized by a minor on the disposition of shares of a corporation to a non-arms length person.
Mineral Exploration Tax Credit – extended by one year for flow-through share agreements entered into on or before March 31, 2012.
Individual Pension Plans – annual minimum amounts will be required to be withdrawn once a plan member attains the age of 72. Any contributions made to the plan that relate to past service must be funded first out of a member’s existing RRSP assets or by reducing the individual’s accumulated RRSP contribution room before new deductible contributions based on past service can be made.

Administrative Changes:
Individuals receiving the Canada Child Tax Benefit must notify the government of a marital change before the end of the month following the month in which the change in status occurs.

(Source: Federal Budget 2011, CGA Canada, National Post and others)