The one constant in income tax is change and consequently, while Canadian taxpayers must prepare and file the same form – the T1 Income Tax and Benefit Return – every spring, that return form is never the same from one year to the next.
Some of the changes are the “automatic” result of the indexing of income tax brackets and credit amounts. As the result of such indexing, basic personal credits which can be claimed by most taxpayers increase every year, as do the income brackets which determine the tax rate which applies at each level of income, as both are changed to reflect the rate of inflation.
Changes in tax credit amounts or tax bracket figures are largely invisible to the average taxpayer, as they don’t require any change to the layout or organization of the tax return form, or the process of completing it. The more significant changes are those which provide new credits or deductions to qualifying taxpayers or, conversely, eliminate such credits or deductions which taxpayers might have claimed in previous years. What follows is a listing of some of the changes which will affect a significant number of taxpayers with respect to their 2019 tax situation.
Increased Canada Pension Plan/Quebec Pension Plan contributions
Changes to the Canada Pension Plan and Quebec Pension Plan which were implemented in 2019 meant that working Canadians contributed more to such plans in 2019 than in previous years. The silver lining to such increased contribution amounts is that the non-refundable tax credit which is claimed on the annual return for such contributions will also increase, resulting in a lower overall tax bill for the year.
Canada Training Credit
As of January 1, 2019, eligible taxpayers are able to save $250 per year (to a lifetime maximum of $5,000), with such amount used to calculate the new Canada Training Credit. Savings information provided on the return will be used by the Canada Revenue Agency (CRA) to determine an individual’s Canada Training Credit Limit.
In 2020 and future years, the taxpayer may then be able to claim a Canada Training Credit equal to the lesser of his or her Canada Training Credit Limit for the year, or 50% of eligible tuition and fees paid by the taxpayer to an educational institution in Canada.
Canada Workers Benefit
For several years, the federal government has provided a refundable tax credit – the Working Income Tax Benefit - for lower income working taxpayers. For 2019, that Benefit is replaced by the new Canada Workers Benefit (CWB). The new CWB is claimed on Schedule 6 to the annual return.
Home Buyers’ Plan
The maximum amount which an individual can withdraw from his or her registered retirement savings plan (RRSP) under the Home Buyers’ Plan (HBP) increased from $25,000 to $35,000 for withdrawals made after March 19, 2019. The HBP permits qualifying home buyers to withdraw funds from their RRSP on a tax-free basis, with such funds being re-contributed to the RRSP over several subsequent years, on a prescribed schedule.
Medical Expenses Tax Credit
For expenses incurred after October 16, 2018, certain cannabis products purchased for a patient for medical purposes will be considered eligible medical expenses for the medical expense tax credit.
Zero-emission vehicles
Taxpayers who are self-employed or who claim employment expenses may be able to claim capital cost allowance on zero-emission vehicles. As of 2019, there is a temporary enhanced first-year capital cost allowance of 100% for eligible zero-emission vehicles. In order to qualify for the enhanced capital cost allowance, eligible vehicles must be acquired after March 18, 2019, and become available for use before 2024.
The changes to the income tax return which will be most apparent to taxpayers aren’t any of the substantive tax changes outlined above. Rather, it’s the layout and organization of the form which will look unfamiliar. In previous years, the return package has been comprised of the basic 4-page T1 form, together with numerous supporting Schedules, on which tax payable for the year, or various tax credit or deduction amounts were calculated, with that information then transferred to the T1 form. This year, the CRA has eliminated some of those Schedules by incorporating them into the T1. The result is that the T1 General Form is now 8 pages long.
In part as a consequence of that re-organization of the T1 form, the CRA has found it necessary to change the line numbering on the return. Each line of the return has a corresponding number by which it is identified in the Income Tax Guide. In previous versions of the T1 Form, those identifying numbers were three digit numbers, but they have now been increased to five digits. Fortunately for taxpayers trying to make their way through the new return form, in most cases the numbering change has simply meant adding two zeros to the end of the existing number – for instance line 210 on the 2018 return has become line 21000 on the 2019 form.