Tax Tips - Personal Tax Returns: Tax Credits
Registered Canadian charity donations attract a tax credit of 16% of the first $200 and 29% of any amounts over $200. An additional Ontario provincial credit of approximately 50% of the 16% is also included on the return. An official charitable donation receipt is required to be filed to prove the eligibility of the tax credit. Charitable donations are eligible to a maximum of 75% of net income. Any unused donations may be carried forward for up to five years. In the year of death and in the prior year charitable donations up to 100% of net income may be deducted.
PERSONAL CREDIT TRANSFERS TO SUPPORTING TAXPAYER
When your spouse has no tax payable, the age credit for persons 65 and over, the disability credit, the tuition and education credits and the pension credits can be transferred to the supporting spouse's tax return. The tuition and education credits may also be transferred to a grandparent's return. The transfer of credits are mainly available from spouses, students, handicapped individuals, and people over age 65.
SPECIALISED MEDICAL CREDITS
Items now eligible for the medical expense tax credit include; costs of modifying your home for a physically impaired family member, cost for specialised products, and cost of a part time attendant. These are in addition to normal medical expenses such as prescriptions, eyeglasses, dental bills, and excess medical insurance.
Medical expenses for a family may be claimed on the lower income spouse's tax return for any twelve month period ending in the current year. You may vary that period for future years providing that you do not claim the same medical expenses more than once. Medical expenses result in a federal tax credit equal to 17% of all eligible expenses greater than 3% of net income. The credit also includes Ontario provincial tax at approximately 50% of the federal tax. When income exceeds $54,550.00, the non-deductible federal tax credit portion is capped at $1,678. There are a wide range of allowable medical expenses.
A medical disability credit is allowed for disabled persons for any disability which markedly restricts activities of daily living where the disability has lasted for a continuing period of over 12 months. Canada Revenue has issued form T2201 which must be signed by a physician and submitted to Canada Revenue the first time the disability for a Federal tax credit of $960 plus a Ontario provincial credit of approximately 50% of the federal credit. Any unused credits may be transferred to your spouse or an eligible supporting person. Canada Revenue reserves the right to request an updated form at any time.
Tuition fees are to be claimed on the tax return of the student and include all tuition fees pursuant to a tuition fee receipt issued by a qualified educational institution and $200 per month for students in full time attendance at the institution. The tax credit is equal to 16% of the tuition fees paid plus the provincial tax. If the net income of the student is not in excess of the tax credit of the student, all or part of the tuition credits can be transferred to a supporting spouse, parent, or grandparent. The maximum transfer is $850.00 plus provincial tax.
FEDERAL TAX RATES
Federal tax brackets for 2012 are indexed and are as follows:
15% on the first $42,707 of taxable income,
+ 22% on the next $42,707,
+ 26% on the next $46,992,
+ 29% on the amount over $132,406.
FEDERAL PERSONAL TAX CREDITS
The federal tax credits are 17% of the following amounts: basic personal credit $ 7,412.00, spousal and married equivalent $ 6,923.00, age 65 or over $ 3,973.00 less 15% of income over $ 26,941.00, disability amount $6,000.00, caregiver $ 3,500.00, pension income credit maximum $ 1,000. Some of the credits are reduced where the individuals transferring the credit earns income on their own tax return. All of the credits give a tax reduction of 17% of the credit amount.