It’s been said the only sure things are death and taxes, and death is a lot easier than taxes it seems. It’s a complex subject, with myriad changes from year to year. To help you make sense of your taxes to prepare you when you do your income tax preparation, here’s some of the major tax changes for the 2012 tax year.
Federal Tax Changes
Family caregiver amount (FCA)
If you have a dependent with impairment in physical or mental functions, you may be eligible to claim an additional amount of $2,000 for one or more of the following mounts:
- Spouse or common-law partner amount (line 303);
- Amount for an eligible dependant (line 305);
- Amount for children born in 1995 or later (line 367); and
- Caregiver amount (line 315).
Note: The maximum amount for infirm dependants age 18 or older (line 306) includes the additional amount of $2,000 for the FCA. The dependant with the impairment must be:
- an individual 18 years of age or older and dependent on you because of an impairment in physical or mental functions; or
- a child under 18 years of age, with an impairment in Physical or mental functions.
The impairment must be prolonged and indefinite and the child must be dependent on you for assistance in attending to personal needs and care when compared to children of the same age. You must have a signed statement from a medical doctor showing when the impairment began and what the duration of the impairment is expected to be. For children under 18 years of age, the statement should also show that the child, because of impairment in physical or mental functions, is dependent on others for an indefinite duration. This dependence means they need much more assistance for their personal needs and care compared to children of the same age. You can claim the FCA for more than one eligible dependant.
Amounts for non-resident dependants
You may be able to claim an amount for certain dependants who live outside Canada if they are depended on you for support. If the dependants already have enough income or assistance for a reasonable standard of living in the country in which they live, we do not consider them to depend on you for support. Also, we do not consider gifts you send them to be support. Supporting documents – If you are filing electronically, keep all your documents (proof of your payment of support) in case we ask to see them at a later date. If you are filing a paper return, attach your documents. Proof of payment must show your name, the mount and the date of the payment, and the dependant’s name and address. If you sent the funds to a guardian, the guardian’s name and address must also show on the proof of payment.
Employee’s profit-sharing plan (EPSP)- (lines 229 and 418)
You may have to pay a new tax if you are a specified employee and contributions your employer made to an EPSP and allocated to you for the year exceed a threshold. If you are subject to this new tax, you may be eligible for a deduction on line 229. For more information, see pages 28 and 50.
Canada Pension Plan (CPP) working beneficiaries’ contributions (line 308)
As of January 1, 2012, the rules for contributing to the CPP changed. The changes apply to you if you are an employee or self-employed, you are 60 to 70 years of age, and you are receiving a CPP or Quebec Pension Plan retirement pension. You and your employer will be required to make CPP contributions if you are under age 65 You may voluntarily elect to make CPP contributions if you are 65 – 70 years of age, in which case your employer will also be required to contribute. This will allow you to continue to build up your CPP Post-Retirement Benefit.
Repeated failure to report income penalty
If you failed to report an amount on your return for 2012, and you also failed to report an amount on your return for 2009, 2010, or 2011, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount you failed to report on your return for 2012. However, if you voluntarily tell us about an amount you failed to report, we may waive these penalties under VDP program.
Announcement of Long-Term Old Age Security Benefits
The 2012 federal budget announced a significant long-term change in the age of eligibility for old age security (OAS) and the guaranteed-income supplement (GIS) from 65 to 67, beginning in 2023 and ending in 2029. This phase-in of a higher age for eligibility will only affect individuals who were under 54 as of March 31, 2012. The government also announced that, beginning on July 1, 2013, individuals who are eligible for the OAS pension may elect to defer receiving OAS for up to five years, in return for a higher annual pension. Their pension will increase by 0.6 per cent per month of deferral, or 7.2 per cent annually.
Ontario Tax Changes
The income levels and most provincial non-refundable tax credit amounts have increased according to the Ontario consumer price index.
Deficit Fighting High Income Tax Bracket
Ontario has introduced a high-income tax bracket with a rate of 13.16 per cent on individual taxable income over $500,000 a year. The Deficit Fighting High Income Tax Bracket is intended to apply as of July 1, 2012. Because tax rates are set on an annual basis, the top tax rate is 12.16 per cent for 2012 and 13.16 per cent for 2013 and subsequent years. Once the budget is balanced in 2017-18, the government proposes to return the tax rate on income over $500,000 to 11.16 per cent.
Ontario Statutory Tax Rates (%)
|$0 – approximately $39,000||5.05||5.05||5.05||5.05||5.05|
|Approximately $39,000 – $78,000||9.15||9.15||9.15||9.15||9.15|
|Approximately $78,000 – $500,000||11.16||11.16||11.16||11.16||11.16|
|Tax thresholds are adjusted annually for inflation.|
Ontario applies a surtax of 20 per cent on basic Ontario tax over $4,213 plus 36 per cent on tax over $5,392. This raises Ontario’s 11.16 per cent tax rate by .25 percentage points to 17.41 per cent.
The surtax applies to the tax rate for income over $500,000, raising the top effective tax rate by 3.12 percentage points when the rate is fully implemented in 2013. The tax credit rate for charitable donations over $200 is not changed.
All additional revenue from the Deficit-Fighting High-Income Tax Bracket will be used to reduce the deficit and accelerate Ontario’s five-year plan to balance the budget by 2017-18. It is expected that about 23,000 people, or 0.2 per cent of Ontario tax filers, will pay an average of about $19,000 more in Ontario personal income tax. This will generate additional personal income tax revenue of about $280 million in 2012-13, increasing to $470 million in 2013-14. The Canada Revenue Agency has posted revised payroll deductions formulas and online calculator to reflect this change starting July 1, 2012.
Healthy Homes Renovation Tax Credit: Schedule ON (S12), what is it?
The Healthy Homes Renovation Tax Credit is a new permanent, refundable Personal Income Tax credit to assist with the cost of permanent home modifications that improve accessibility or help a senior be more functional or mobile at home. The credit is worth up to $1,500 each year, calculated as 15 per cent of up to $10,000 in eligible home renovation expenses that will help seniors stay safely in their homes. It can also be claimed by senior homeowners and tenants, and people who share a home with a senior relative. Amounts claimed by couples are subject to a combined maximum of $10,000 in eligible expenses per year. Different family members in a shared home can claim the credit. However, the total amount of the eligible expenses that can be claimed, per year, by all of those family members cannot exceed $10,000. Spouses or common-law partners, who live in separate homes because of medical necessity or because of a breakdown in their marriage or common-law relationship, can each claim up to $10,000 of expenses.
Am I eligible?
You are eligible if you are a:
- Senior (65 years of age or older by the end of the taxation year for which the credit is claimed) who owns or rents your home, or
- A non-senior who is living with a family member who is a senior.
A landlord renting a home to a senior is not eligible. There is no income test to qualify for this credit.
What expenses qualify?
Some examples of eligible expenses include:
- certain renovations to permit a first-floor occupancy or secondary suite for a senior
- grab bars and related reinforcements around the toilet, tub and shower
- handrails in corridors
- wheelchair ramps, stair/wheelchair lifts and elevators
- walk-in bathtubs
- wheel-in showers
- widening passage doors
- lowering existing counters/cupboards
- installing adjustable counters/cupboards
- light switches and electrical outlets placed in accessible locations
- door locks that are easy to operate
- lever handles on doors and taps, instead of knobs
- pull-out shelves under counter to enable work from a seated position
- non-slip flooring in the bathroom
- a hand-held shower on an adjustable rod or high-low mounting brackets
- additional light fixtures throughout the home and exterior entrances
- swing clear hinges on doors to widen doorways
- creation of knee space under the basin to enable use from a seated position (and insulation of any hot-water pipes)
- relocation of tap to front or side for easier access
- hands-free taps
- motion-activated lighting
- touch-and-release drawers and cupboards
- automatic garage door openers
What expenses do NOT qualify?
Expenses are ineligible if their primary purpose is to increase the value of the home or if they are for annual, recurring or routine repair maintenance or service. Examples of ineligible expenses include:
- general maintenance – such as plumbing or electrical repairs
- repairs to a roof
- aesthetic enhancements such as landscaping or redecorating
- installing new windows or regular flooring
- installing heating or air conditioning systems
- replacing insulation
Devices are not eligible. These include:
- equipment for home medical monitoring
- equipment for home security (anti-burglary)
- vehicles adapted for people with mobility limitations
- side swing ovens and appliances with front located controls
- fire extinguishers, smoke alarms, carbon monoxide detectors
Services are not eligible. These include:
- security or medical monitoring services
- home care services
- housekeeping services
- outdoor maintenance and gardening services
How do I claim the credit?
Seniors or people living with a senior family member can claim the tax credit on their annual Personal Income Tax return, beginning with the 2012 tax return. If someone not living with the senior or not related to the senior pays for modifications to the senior’s home, the senior can still claim the credit and keep the supporting receipts.
Do I have to submit any supporting documents with my Personal Tax Return?
No. You don’t have to submit any records when you file your income tax return. However, you do have to keep the documentation – receipts from suppliers and contractors – in case the Canada Revenue Agency (CRA) asks for them to verify your claim. If you file electronically, keep all documentation in case the CRA asks to see it.
What is the eligible time period?
Eligible expenses incurred on or after October 1, 2011 qualify for the credit. For the 2012 tax year, the $10,000 maximum applies to expenses paid or payable from October 1, 2011 to December 31, 2012. For 2013 and all subsequent years, the maximum applies to expenses paid or payable from January 1 to December 31 of the year.
What does CRA consider to be acceptable documentation?
Receipts from suppliers and contractors are considered acceptable documentation. If the work is done by a family member, then the receipt must have an HST number.
What do I have to report on my tax return?
The credit can be claimed on 2012 income tax returns. While the forms have not been designed yet, we expect that they will ask for the following information: the date of final invoice, the name of the supplier or contractor, a description of the work done or supplies provided, the address of the home that was renovated and the amount paid.
Will work performed by electricians, plumbers, carpenters, architects, etc. qualify?
Generally, work performed by electricians, plumbers, carpenters, architects, etc. related to an eligible expense qualifies for the credit.
Will a renovation or alteration qualify for the credit if I perform the work myself?
If you do the work yourself, eligible expenses will include building materials, equipment rentals, building plans, permits, etc. The value of your labour or tools is not eligible.
If during the eligible period I incurred expenses for a house that I sold and also incurred eligible expenses for my new house, will both sets of expenses qualify for the credit?
If you occupied more than one principal residence in Ontario at different times during the eligible period, eligible expenses that you incurred for both dwellings qualify for the credit. However, the maximum amount of eligible expenses you, or your spouse or common-law partner, can claim at the end of a taxation year would be $10,000.
Will the credit be reduced by other government grants or credits that I may receive for the same expenses?
The credit will not be available for expenses reimbursed through another government-funded program. However, expenses will be eligible for both the Medical Expenses Tax Credit and the proposed credit, as long as all relevant criteria are met. Other programs available to help seniors stay at home include Forgivable Loans, Property Tax Assistance (Senior Homeowners’ Property Tax Grant, Ontario Energy and Property Tax Credit and Property Tax Relief for Low-Income Seniors and Low-Income Persons with Disabilities), HST Exemption and the Ontario March of Dimes Home and Vehicle Modifications Program.
My parents and I live in the same dwelling and are sharing the renovation costs. Can we all claim the credit?
Labour Sponsored Investment Fund Tax Credit
The labour sponsored investment fund tax credit has been eliminated.