2011 New Personal Tax Credits and Deductions in Canada

Hi, my name in Allan Madan; I’m a chartered accountant and tax expert in the Toronto, Mississauga and Oakville areas of Ontario, Canada. This article will take you through all you need to know about 2011 New Personal Tax Credits and Deductions Canada.

It is very important that you go through this article so when it comes to preparing your personal tax return you can take 2011 personal tax credits and 2011 personal tax deductions into account; and you’ll definitely save personal taxes

Increases in Existing Tax Credits:

I’ll first take you through the increase in existing tax credits from the 2010 to 2011 taxation year.

1. The first credit is the basic personal amount. It has been increased to $10,527. That means that the first $10,527 of income that you earn is not subject to any income tax whatsoever.

2. The second increase in 2011 personal tax credits is the spousal tax credit to $10,527. If you have a low income spouse or if your spouse is not working, you can take advantage of this credit. Spouse for the purposes of this credit means someone you’re married to or you’re in a common-law relationship with.

3. The third increase in 2011 personal tax credits is the eligible dependant tax credit, which has also increased in value to $10,527. You can take advantage of this credit if you are a single parent, divorced or separated, and are supporting a child that lives with you.

4. The fourth credit is the child tax credit which has increased to $2,131 for each child that resides with you and is under 18 years of age.

5. The fifth credit is the age credit which has gone up in value to $6,537. The age credit is an automatic credit that is given to individuals that are 65 years or older. The age credit is reduced if your income is above a certain amount.

The final credit of the 2011 personal tax credits that have gone up in value is the caregiver credit. This credit has a value of $4,282 and is meant for individuals who are supporting an elderly parent or grandparent.

New 2011 Personal Tax Credits:
So, what are the new credits that have come into play in the 2011 year? Let’s go through them next.

1. The first one that has been widely advertised is the children’s arts credit. This credit is available for monies paid for activity programs such as artistic, cultural and recreational activities for your children who are under 16 years of age. The maximum amount is $500 per child. Examples include music lessons, dancing classes, acting classes, etc.

2. The family caregiver credit is also a new credit that was introduced but it will not start until 2012. So we’re still one year away from benefiting form it. This credit has a value of $2,000 and is meant for individuals that are supporting an infirm dependant (i.e. disabled).

3. Also new for 2011 is the tuition credit for examination fees paid to a professional association or a professional institution. Many of you might have a professional designation and you might have had to write an exam to obtain that designation. Now, the examination fees are eligible for the tuition tax credit.

4. If you study abroad you can claim a tax credit for tuition fees that you incurred while studying aboard. Previously, you would have to study abroad for at least 13 weeks to qualify for this credit. Now, you only have to study abroad for a period of at least three weeks to qualify.

What About Flow-Through Shares?

The CRA has closed a loophole for flow-through shares. They did this because they thought taxpayers were taking advantage of this and it was far too great an incentive. Flow-through shares are special types of shares that are issued by mining and exploration companies. If you purchase a flow-through share you can deduct the full amount of the purchase price, plus, you can receive an investment tax credit.

What individuals were doing was as follows. They bought flow-through shares, got a full write-off on their tax returns, got a lucrative investment tax credit, but then they then donated those flow-through shares to a charity. And guess what, they got a donation tax credit. What really offended the CRA is that there was a loophole that allowed you to donate your flow through shares without having to pay any tax on the gain. So, they’ve closed that particular loophole.

If you own flow-through shares now and donate them to a charity you will still get the donation tax credit but you will have to pay capital gains tax on the gains resulting in the transfer from yourself to the registered charity.

Something else that is new for 2011 is sub-dividing the Canada child tax benefit between both parents in the case of shared custody of a child. Previously, only one parent could receive the Canada child tax benefit in shared custody circumstances.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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