New tax credits and policies impact 2011 returns

An overview of the new tax credits brought in by the 2011 budget and tax policy changes applicable to 2011 personal taxes.

The 2011 budget brought in several new tax credits and tax policy changes applicable to 2011 personal taxes.  Here is an overview but visit the Canada Revenue Agency (CRA) website for specific detail.

First, if you have heard about the new Family Caregiver Tax Credit, it’s not applicable to the current 2011 tax year.  In 2012 this credit kicks in and will be available for caregivers of disabled dependants, including spouse and minor children.

Back to 2011, there now is a Children’s Art Credit.  This is a catch-up tax credit to match the Children’s Fitness Credit introduced a few years back.

It’s a 15 per cent credit on up to $500 of fees, so it max’s as a $75 non-refundable tax credit for each child under the age of 16 (may turn 16 in 2011).  Eligible programs include artistic, cultural, recreational or developmental organized activities.  Programs in the school curriculum are not eligible. The credit can be claimed by either parent or shared.

The current Medical Expense Credit for adult dependants has had its $10,000 annual limit removed, a change that could make thousands of dollars difference in tax liability.

Staying with the health theme, an owner of a Registered Disability Savings Plan who has a life expectancy of five years or less may now withdraw more from the plan annually without adversely affecting the tax situation.

The Tuition Tax Credit has been expanded.  Fees paid to an educational institution, professional association or government ministry for a required examination to obtain professional status recognized by provincial or federal statute or necessary for licensing or certification in order to practice a profession or trade in Canada are now an acceptable tuition expense.  This has been a perennial discussion point with taxpayers and is certainly welcomed.

For those who enrol in educational courses offered in foreign countries, the 13 consecutive week full-time enrolment rule has been drastically reduced.  It now only has to be three weeks to qualify for the tuition and Education Tax Credits.

Also on the education front, there is now greater flexibility with the sharing of funds from Registered Education Savings Plans between siblings without tax implications and repayment of federal education grants.

Finally, on-call firefighters are getting a second option for a tax break with the introduction of the Volunteer Firefighter Tax Credit.  It’s a 15 per cent credit on up to $3,000 of expenses, so it’s a maximum $450 non-fundable tax credit.   To qualify the firefighter must perform at least 200 hours of service, and this includes time training and at meetings.  However, if the current $1,000 income exemption is claimed on the fire department’s T4 issued, this new credit cannot be claimed in addition to that income exemption.

When the math is calculated, it appears that this new tax credit option is more tax beneficial than the $1,000 income exemption only if a firefighter’s taxable income is below the top marginal tax rate of 45 per cent and has a full $3,000 in expenses thus maximizing the credit at $450.

Having said this, do take the time to calculate the tax impact under both options.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Tax Tips & Pits runs the first and third Mondays until April. Email him or see all previous columns at