Clarifying the rules for tax credits

A refresher on the tax credits introduced over the past couple of tax seasons.

Here’s a refresher on the tax credits introduced over the past couple of tax seasons still not fully understood, and perhaps not even known.

The Seniors’ Home Renovation Tax Credit was introduced April 2012 for B.C. residents.  This is a refundable tax credit of up to $1,000 available to seniors, or to those who have a senior living in their home, to make the home more elderly friendly.  It’s very detailed so check out the Canada Revenue Agency (CRA) website.

The new Family Caregiver Tax Credit kicks in for 2012.  This is an additional $2,000 non-refundable tax credit for a caregiver that increases a qualified claim for a disabled or infirm dependant.  Fortunately software packages appear to prompt the user if it applies, but if unsure, research the specific details.

Sticking with medical, the Medical Expense Credit for adult dependants had its $10,000 annual limit removed last year.  Also, 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.

For the kids, the Children’s Art Credit continues for 2012. This tax credit is equivalent to the Children’s Fitness Credit introduced a few years back.  Eligible programs are very inclusive – artistic, cultural, recreational organized activities but not school based programs.

Note, both this credit and the fitness credit can be claimed for each qualifying child.  It’s a 15 per cent credit on up to $500 of fees, so it’s a maximum $75 non-refundable tax credit for each child under the age of 16 (may turn 16 in 2012).

The expansion of the Tuition and Education Tax Credit continues in effect.  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 acceptable tuition expense.

For those who take courses offered in foreign countries, the consecutive week full-time enrolment rule has been lowered from 13 to 3 weeks.

And the sharing of funds from Registered Education Savings Plans between siblings is more flexible with no tax implications and repayment of federal education grants.

On-call firefighters have two options for tax relief.  There is a choice between the original $1,000 income exemption and the new 15 per cent credit on $3,000 of expenses that equals a $450 non-fundable tax credit.  It appears fire departments tend to deduct the $1,000 from the firefighter’s income reported on the T4.

To be fair to the payroll people, for the $450 credit to be the better option the firefighter has to have been paid very little and yet have worked at least 200 hours.  If the expense tax credit is the preferred choice, the $3,000 of expenses is assumed so the full $450 credit applies.

Lastly, the 2012 mileage rate set by CRA for travel claims for things like medical services and moving within B.C. has been lowered from $0.52/km to $0.495/km – I guess the cost of gas has been decreasing?  I hadn’t noticed that.  Good news, meal allowances remain at $17/meal with a $51/day maximum.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.