Credits and Employment expenses are those expenses which an employee incurs a condition of employment

Canada Employment Credit

Effective July 1, 2006 Canadians will get a tax relief of up to $500.00 on employment income. This will double to $1000 as of January 1 2007

Universal Child Care Benefit

The Universal Child care Benefit (UCCB) is a new taxable benefit paid monthly to help eligible families provide child care for children less than 6 years of age. The UCCB will pay families $100.00 each month for each child under six years of age. The payment will be paid separately from the Child tax credit and will not affect federal income-tested benefits.

To be eligible you have to meet all of the following conditions  You must be a resident of Canada  You or your spouse or common-law partner must be either a Canadian citizen or as defined under the Immigration and Refugee Protection Act:  A permanent resident  A protected person  A temporary resident who has lived in Canada for the last 18 months and who has a valid permit in the 19th month.

To apply for the Child tax credits you need to complete Canada Revenue Agency Form RC66, Canada Child Tax Benefit Application. If you already receive the CCTB, you do not need to apply, the benefit will be sent to you automatically.

Child Fitness tax credit

Families will receive a child fitness tax credit for up to $500.00 in eligible fees for physical fitness programs for each child under age 16

The maximum annual Child Disability Benefit has been increased from $2044 to $2300. Middle and high income families caring for children who are eligible for the disability tax credit are also eligible.

In addition, the maximum amount of the refundable medical expense supplement has been increased from $767 to $1000.00

Charitable donations

Publicly listed securities which are donated to public charities are exempt from the capital gains tax, effective immediately. Also exempted are donations of ecologically sensitive land under the Ecogift program.

The Home Buyer's Plan (HBP) is a program which allows taxpayers to withdraw funds from an RRSP on a tax free basis towards the purchase of a home. The maximum amount at present is $20,000.00 and must be repaid to the RRSP, starting in the second year after withdrawal. Repayments may be made over a 15 year period but can be repaid earlier. The repayment is not tax deductible, but will be taxed if not repaid. Contributions to the RRSP will be reduced by the amount of the repayment, if so designated , thus lessening the tax deductible portion of the contribution. If no designation is made, then the repayable portion is added to income and taxed at the taxpayer's marginal tax rate.

If the contribution is equal to or exceeds the amount repayable there is no difference to the bottom line, since either the tax deductible portion of the RRSP contributions decreases or the taxable income increases by the amount of the repayment.

Lifelong Learning Plan (LLP)

Under the lifelong learning plan a taxpayer can withdraw funds from her RRSP to pay for continued education. The withdrawal amounts and rules governing the withdrawal are similar to the Home Buyers Plan. $20,000 maximum repayable over 15 years.


Pension income Credit

Effective 2006 the maximum amount eligible for the pension income credit has been increased to $2000

Student tax credits

Students may now claim a tax credit to help offset the cost of textbooks. Again although no receipts are required you should still keep any receipts to substantiate your claim if required. A typical full-time post secondary student stands to save about $80.00 per year. These credits can be carried forward to future years along with other unused tuition amounts.

The current $3000.00 limit on the amount of scholarship, bursary and fellowship income a post-secondary student can receive without paying federal income tax has been eliminated.

Starting in August 2007, there will be a reduction in the expected parental contribution to make it easier for students to be eligible for Canada Student Loans.

Transportation employees

Effective with their 2006 tax returns, qualifying transport employees will see an increase in the flat rate when claiming meal expenses. The new rate is up to $17 per meal up to a maximum of $51 a day. Transport employees always have the option of keeping receipts and claiming actual expenses or using the flat rate. In either case CCRA allows a deduction of 50%.

Tradespeople and Apprentices

Tradespeople who are required to buy their tools as a condition of employment can now claim a new a $500.00 deduction for costs in excess of $1000.00. The limit on the cost of tools eligible for the 100 percent capital cost allowance has been increased from $200.00 to $300.00.

First and second year apprentices will be eligible for a new $1,000.00 grant. Usually grants do not have to be repaid.

Employers who hire apprentices will also receive a new tax credit of up to $2000.00

Transit Tax credit

You will now be able to claim a tax credit for the amounts you have paid for public transit passes for travel that occurred after June 30, 2006. This applies even if the pass was paid for prior to July 1, 2006 as would be the case of the July pass. This is a non-refundable tax credit and applies to monthly or longer duration passes used on buses, streetcars and subways, commuter trains and local ferries.

Although you do not have to submit any documentation when you file your return, you should keep, at the very minimum, your expired monthly transit pass. The transit pass should display all or most of the following information 1. the name of the transit authority or organization issuing the pass 2. an indication of the duration of the pass and the period for which it is valid. 3. the amount paid for the pass 4. the identity of the rider

It is a good idea to keep any information which can support your claim, in case the Canada Revenue Agency (CRA) asks for it in verifying your claim. This includes receipts, cancelled cheques or credit card statements.

If you use multiple public transit methods to commute you can claim the full amount of any combination of transit passes. You can also claim the credits on behalf of your spouse, common-law partner and your children under the age of 19, as long as they have not already been claimed.

Lower corporate taxes Qualifying small business income will have the 12 percent tax rate reduced to 11.5 percent in 2008 and 11 percent in 2009. The amount of small business income eligible for the 12 percent tax rate will also increase from $300,000 to $400,000

As of January 1, 2006 the federal capital tax is eliminated while the corporate surtax will be eliminated by January 1, 2008. There is also a proposed reduction in the corporate income tax rate to 19 per cent from 21 percent by 2010.

Employment Expenses

Employment expenses are those expenses which an employee incurs a condition of employment. The specific expenses that an employee can claim are usually disclosed on a T  Declaration of Conditions of Employment form , which must be signed each year by the employer.

Eligible expenses may include motor vehicle expenses, home office, meals, entertainment and accommodations, cell phone and any expenses that the company may deem necessary. Many companies reimburse the expenses directly, but some companies may pay various allowances to offset expenses. These may or may not be included in the employees salary and reported on a T4 at the end of the year.

The employment expenses are reduced by the amount of the reimbursements and allowances. When the expenses exceed the reimbursements the difference is deductible from your income.

Tax Free Savings Accounts

In January, 2009 Canadian eligible residents will be able to open a tax free savings account (TFSA) which will allow funds to accumulate tax free and also to allow tax free withdrawals. These accounts will be able to hold similar investments as an RRSP and opens up the opportunity to reduce RRSP holdings before retirement and still maintain growth while reducing tax exposure during retirement.




Maximum Contribution $5000, 2009, indexed to inflation thereafter   18% of previous years earnings, up to maximum
Contributions made with after tax dollars. Not tax deductible   Contributions made with pre-tax dollars. Tax deductible
Contributions grow tax free   Contributions grow tax free
Tax free withdrawals   Withdrawals fully taxable
Contribution room not lost on withdrawal   Contribution room lost on withdrawal
Unused contribution room can be carried forward to future years   Unused contribution can be carried forward to future years

Under some circumstances, it may be advantageous for a tax payer to drawdown her RRSP portfolio, before retirement. How she withdraws it can determine the amount of taxes paid.


More about Credits and Deductions

More about TFSA's.....