Happy New Year:  2015 is Brimming with Generous Tax Preferences

Happy New Year and welcome to a brand new tax year. 

There is a lot to report on already, with generous new tax provisions and indexing changes that will line the pockets of Canadian seniors, families and qualifying small owners who sell their companies in 2015.  These and numerous other tax changes will be discussed in detail at Knowledge Bureau’s Distinguished Advisor Workshops, held in Winnipeg on January 20, Toronto on January 21,  Calgary on January 22 and Vancouver on January 23.

But for today, here are some highlights to take note of:

Owners of qualifying small businesses who sell or transfer shares in 2015 will be pleased to know the Lifetime Capital Gains Deduction has been indexed to $813,600.

Seniors who collect benefits from the Canada Pension Plan will enjoy a 2.5% increase in benefits due to the indexing provisions.  This means that the maximum CPP retirement benefit will increase to $1,065.00 per month starting in January 2015 for a maximum pension of $12,780 for the year.

Those who receive the Old Age Security in January to March of 2015, on the other hand, will receive the same $563.74 amount they received in the last quarter.  While also indexed to changes in the CPI, the indexing period for OAS is different.   The Age Amount has also risen to $7,033 in 2015, being phased out when net income for the year reaches $35,466.  MFA Retirement Income Specialists and their teams will want to review and equalize income generation for the 2015 tax year for couples whose combined pensions and investment earnings are in the $71,000 range to maximize the Age Amount.  For those with higher incomes, the 22% federal tax bracket starts when income exceeds $44,701. The OAS clawback threshold will be an issue in planning incomes as well, which this year starts at $72,809.

Families with minor children will receive more money from the government in 2015.  The Universal Child Care Benefit will increase to $160 for each child under the age of 6 ($1920 per year) and a new benefit of $60 a month for children ages 6 to 17 ($720 per year)  will be available, but the enhanced amounts won’t be paid until July 2015; that is, the extra $60 per month.  This means that parents with a pre-schooler and a 8 year old can expect to receive the following:

• For the pre-schooler:  January to June = an extra $60 per month = $360 plus the July payment of $160 = $520
• For the 8 year old:  January to June  = $60 x 6 or $360 plus the July payment of $60  = $420

That’s a total of $940.  This makes July a great month in which to fund RESP or other educational savings plans for children.

In addition, starting in July, families whose combined net income levels are less than $44,701 will receive a full Canada Child Tax Benefit of $1,471 for each of the first two children with an additional supplement for the third child for a total benefit of $1,574 for that child.  Families with net incomes under $26,021 receive an additional supplement of $2,279 for the first child, $2,016 for the second and $1,918 for the third.

Because the amounts claimable for babysitting expenses will also increase by $1,000 in the 2015 tax year, and the Child Fitness Tax Credit will be refundable, DFA-Tax Services Specialists and their staff should be sure to consult with their clients in January to prepare 2015 tax estimations. Withholding will increase due to the loss of the amount for dependent children and can only be adjusted for child care.

The bad news? The amount for dependent children under 18 has been eliminated.

It’s Your Money.  Your Life.   As you ring in 2015, include sound family tax planning in your New Year’s resolutions.   It will pay off handsomely.  The tax system in Canada has evolved to provide so many generous benefits for families of all types.  It’s important for every family member to file a tax return to his or her very best benefit to receive every tax preference available.  Then, because family net income is used to apply for many tax benefits, be sure to apply tax-efficient investment and retirement planning principles to ensure the receipt every tax benefit the family is entitled to.  This will help to secure a sound financial future and the peace of mind that comes from every worry-free month.

Evelyn Jacks is President of Knowledge Bureau, a national educational institute focused on continuing professional development courses for advisors. See www.knowledgebureau.com for an invitation to the Knowledge Bureau Report, or register for professional online courses to shore up your knowledge on tax, retirement, business, succession and bookkeeping services.