2016 Taxes: Will Families Win or Lose ?

As we celebrate family day with our families, it also marks the start of another tax season. Taxes for families will be a mixed bag this year as a tax rate cut comes with a cut in tax credits too.
So, the big tax changes that will impact the tax bill for families are the following:

Middle Class Tax Rate Cut

The tax rate has been reduced from 22% to 20.5% for middle class earning individuals for the tax bracket for income between $45,282 and $90,563. This will not impact any tax payers that have an income below $45,282.

Tax Increase for High Income Earners

The tax rate has increased from 29% to 33% for all individual taxpayers making an income higher than $200,000. This tax increase has been made to compensate for the tax revenue loss that would be caused by middle class tax rate cut

Income Splitting Discontinued

The income splitting used to save up to $2000 for a lot of families with children where one spouse had income in a higher tax brackets as compared to the other spouse. This tax credit was extremely popular in families where one partner was making little and no income and the other partner was making most of the family income. The income splitting is no longer available for the 2016 Tax Year

Children’s Fitness and Arts Amounts Reduced

The fitness and arts amounts have been reduced by 50% for the 2016 Tax Year. The maximum eligible fitness amount is $500 for the 2016 tax year whereas the maximum eligible arts amount is $250 for the year. The fitness and arts amounts have been discontinued starting 1st January,2017 and will not be available for the 2017 tax season.

So overall, if you are couple with no children and making similar incomes, you will be most likely paying less in taxes this year unless you make more than $200,000.

If you are family where only one spouse was working and you were spending money on fitness and arts activities for your children, you might end up paying more or about the same in taxes depending on your income information.

If you are a family where one spouse makes more than $200,000 and the other spouse was not working and you used to take advantage of the arts and fitness amounts for children, the tax bill will be significantly higher this year as you pay a higher tax rate with no income splitting or fitness and arts credits.

Visit a Softron Tax location today to call 905-273-4444 for an appointment to plan and file your taxes with an expert

Canadian Taxes for Families – File Together and Win!

A family that prays together stays together but if a family wants to stay ahead financially, they need to file their taxes together too. The Canadian government has tailored tax benefits that would cater to families with young children, families having senior parents living with them or families with children in college/ university. In order to reap the maximum benefit, it is extremely important that families plan and file their taxes together.

Following are the benefits of filing your taxes together:

  • Family Tax Cut: If you are married with a child under 18 years of age, you may be able to save up to $2000 in taxes by splitting income with the spouse
  • If you are a couple where one spouse goes to school while other earns taxable income, you can transfer up to $5000 of tuition tax credit to the spouse that earns and save hundreds of dollars in taxes
  • If your spouse is not working, you can claim a spousal amount deduction of up to $11,138
  • If you are paying for the college / university tuition of your child, he/she can designate up to $5000 of tuition tax credit to you and help you reduce your taxes
  • The donations and transit passes can be combined and claimed on the higher income spouse to get maximum benefit
  • The medical expenses can be clubbed and claimed on the lower income spouse in order to have the highest tax credit
  • If you have your senior parents living with you, you can claim caregiver amounts for them, single taxpayers may be able to claim them as eligible dependents and some home renovations for seniors are tax deductible too!

All of the above is only possible if families file their taxes together, put together all the information and use it to their advantage. As all of this information might seem overwhelming and tax professionals like Softron Tax can help you file your taxes efficiently and accurately.

While there are huge benefits in filing taxes together, there can be negative consequences for not filing together. The GST credit, the Ontario Trillium Benefit and the Child Tax Benefit are all calculated on the basis of family net income. In order to accurately estimate these benefits, the returns should be prepared together. Any mistake in reporting family income may cause a loss of benefits and unnecessarily attract reassessments and audits by the Canada Revenue Agency

Let me share a real life example to put the theory in perspective. Brad and Christie are my clients for past few years. They used to come together every year and file their taxes until this year when Brad’s buddy at work filed his taxes at work and Christie came to my office alone. They missed taking advantage of the Family Tax Cut and Christie brought $1000 worth of donation receipts with her which I could not use as she did not have any taxable income. As Christie was also going to part time school, Brad’s buddy did not claim any spousal tuition tax credit on his return. They were set to lose about $3500 due to all this and it was tedious work to file for all the adjustments and get the taxes done right. Needless to say, it got highly stressful for Brad and Christie. It is therefore recommended that families should file their taxes together and professional advice should be sought to ensure that taxes are filed efficiently and accurately.

Let’s do it together, let’s do it right!!!

Income Splitting for Families Announced by Federal Government

The Conservative government announced an income-splitting tax break for parents last Thursday.The measure will allow the higher-earning parent of children up to 18 years of age to transfer as much as $50,000 of income to the lower-earning spouse for tax purposes.