Take advantage of new tax credits

The last Federal Budget brought in a number of tax changes that could have a positive impact on your tax payable in 2007. For families and seniors, there are new credits and deductions that could add up when filing a tax return.

Families will benefit from a new $2,000 child amount for each child under the age of 18 at the end of 2007. This will result in a federal tax saving of $300 per child. And if one parent cannot use the entire amount to lower their tax payable, the unused amount can be transferred to a spouse or common-law partner.

The 2007 tax season will also be the first year parents can claim the new Children’s Fitness Amount. Parents can claim up to $500 of expenses for a child under the age of 16 in an eligible program of physical activity. The program has to meet the guidelines outlined by the government’s panel of experts and receipts must be issued by the organization running the activity. There are rules on how long the activity must last and what actually qualifies to be claimed in the $500 so make sure you check before you file. It will result in a federal tax saving of $75 per child. If your child is disabled, there is an additional credit available for purchasing special equipment. Disabled children will also qualify for the credit up to age 18.

Also new in 2007 is an increase to the spouse or common-law partner amount. The government increased it to match the basic personal amount which is $9,600 for 2007. If a spouse or common-law earns no income, the tax savings will be $265. If the spouse has income, the amount of the savings will decrease depending on how much they earned during the year.

Single parent families will see an increase to the amount for an eligible dependant. Like the spousal amount, the eligible dependant has also been raised to $9,600 and if a dependant has no income, the tax savings would also be $265. Again, if the dependant earns income, the amount of the credit will be reduced accordingly.

Seniors were also included in the last budget. The government introduced pension income splitting between spouses or common-law partners. Any type or income that qualifies for the pension income amount qualifies for income splitting. The government estimates that all the eligible seniors will realize about $1 billion in tax relief. You could qualify even you are under 65 if the pension income benefits that you are receiving are due to the death of your spouse or common law partner.

The most benefit will be felt by couples where one spouse earns most of the income from an employer pension with the other earning little or no income. It may also reduce income below the threshold for the clawback of Old Age Security benefits or the age amount.

For seniors looking to convert their Registered Retirement Saving Plans (RRSPs) this year because they turned 69, the government increased the age limit for holding RRSPs to 71. Now Canadians have an extra two years to save for their retirement or hold funds in their RRSPs.

Other tax changes include enhancements to the Public Transit Passes Amount to include weekly passes purchased over a period of four consecutive weeks and electronic payment cards. The scholarship exemption was extended to elementary and secondary school students so they do not need to claim it as income. Students may also benefit from the increase in the Registered Education Saving Plan (RESP) amount to $50,000 lifetime contribution. There are also no longer any annual limits on RESP contribution and they still qualify for the Canada Education Savings Grant (CESG).

This article provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this bulletin can be accepted by H&R Block Canada, Inc.

For more information or to find the location nearest to you, please call 1-800-HRBLOCK or visit us online at www.hrblock.ca

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