The beginning of March marks the end of RRSP season and the start of tax season. The Canada Revenue Agency began accepting electronic returns as early as last week. Last year, nearly 90 per cent of the over 29 million returns Canadians filed were completed online. Let’s take a look at what’s new this tax-filing season and provide some tips to help you start your return.
Most Canadians’ tax returns are due on April 30, 2019. If you or your spouse or partner are self-employed, you have until June 15, 2019 to file your returns; however, since June 15, 2019 falls on a Saturday, the CRA will consider your return to be filed on time as long as the CRA receives it by (or it’s postmarked by) midnight June 17, 2019. Note that any balance owing is still due by April 30, 2019.
The federal tax rates on your 2018 return haven’t changed at all from the prior year, although the brackets have been indexed to inflation by 1.5 per cent over 2017. The lowest bracket last year – 15 per cent federally — was for taxable income up to $46,605. Combined with provincial or territorial tax, that resulted in a combined rate of anywhere from 19 per cent in Nunavut to 30 per cent in Nova Scotia.
The highest income-earners were taxed at a 33 per cent federal rate on taxable income over $205,842 in 2018. Combined with provincial/territorial taxes, the top combined marginal rate for the top income-earners ranged from 44 per cent (Nunavut) to 54 per cent (Nova Scotia).
No new tax deductions have been added to the return for 2018 and only one obscure deduction (the “employee home relocation loan” deduction on former line 248) has been eliminated.
New Schedule 14 — Climate action incentive payment
For residents of Saskatchewan, Manitoba, Ontario and New Brunswick, the most significant change to the 2018 tax return is the climate action incentive (CAI) payment. Announced last fall as part of the government’s climate change plan, it directs proceeds from carbon pollution pricing received under the federal system back to the residents of the four jurisdictions that do not meet the Canada-wide federal standard for reducing carbon pollution. The federal government has stated that it would not keep any direct proceeds from carbon pollution pricing.
Saskatchewan residents can claim a base amount of $305, Manitoba residents $170, Ontario residents $154 and New Brunswick residents may claim $128. In addition, if you’re married or living common law, an additional 50 per cent can be claimed for your spouse or partner. If you have qualified dependents under age 18, 25 per cent of the base amount can be claimed for each child.
In addition, a 10 per cent supplement is available for residents of small and rural communities who live outside a Census Metropolitan Area (as defined by Statistics Canada), “in recognition of their increased energy needs and reduced access to clean transportation options.”
Being a rare, refundable credit, the CAI payment will first reduce any balance owing for the year, and may increase any refund.
No more Schedule 4
If you’ve been searching online or in your tax software for the Schedule 4, entitled “Statement of Investment Income,” that you used in prior tax years to report your dividend, interest and foreign income along with any carrying charges and tax-deductible interest, you can stop looking as it’s been eliminated for the 2018 tax year. It has been replaced by an optional “Federal Worksheet” which can be filled in (if you find it helpful) but is not ultimately submitted with your return. Instead, you can simply tally up each type of investment income and report it on the appropriate lines of the return: Canadian dividends on line 120, interest income on line 121, and carrying charges and tax-deductible interest on line 221.
Bye-bye “super” credit
If you were a first-time donor in 2018, you can claim your donation credit on Schedule 9, like the rest of us. But don’t go looking for that extra 25 per cent First-Time Donor’s Super Credit — it was eliminated for 2018 (and subsequent tax years). The 2017 federal budget announced that it would be allowed to expire, as planned, at the end of 2017, “due to its low take-up, small average amounts donated, and the overall generosity of existing tax assistance for charitable donations.”
Medical expense tax credit (METC)
For the 2018 tax year, valid medical expenses for you, your spouse or common-law partner, and your dependent children born in 2001 or later, qualify for a 15 per cent federal credit as well as a provincial credit, provided they exceed a minimum threshold equal to the lesser of 3 per cent of your net income or $2,302.
For a number of years now, the METC has provided tax relief for certain expenses incurred for an animal specially trained to assist a patient in coping with blindness, deafness, severe autism, severe diabetes or severe epilepsy.
Last year’s federal budget expanded the list to include expenses relating to service animals specially trained to perform specific tasks for a patient with a severe mental impairment in order to assist them in coping with their impairment (e.g., a psychiatric service dog trained to assist with post-traumatic stress disorder). These tasks could include guiding a disoriented patient, searching the home of a patient with severe anxiety before they enter or applying compression to a patient experiencing night terrors.
Eligible expenses include the cost of the animal, as well as costs for its care and maintenance, including food and veterinary care. Note, however, that these expenses won’t qualify if they are for an animal that provides comfort or emotional support but that has not been specially trained to perform these specific tasks.
Foreign exchange rate
Finally, if you received foreign income, incurred a foreign tax deductible expense or sold a foreign stock or vacation property in 2018, you’ll need to convert that income, expense or amount to Canadian dollars before reporting it on your tax return. You should use the Bank of Canada exchange rate in effect on the day you received the income or paid the amount. If the amount was paid at various times in the year, you can visit the Bank of Canada website for an average annual rate. For example, the average foreign exchange rate for 2018 to convert U.S. dollars to Canadian was $1.2957.