2007 Tax Law Changes
For the 2007 taxation year, there is a reduction in the lowest tax rate to 15%, as well as a number of new tax credits and deductions.
- Canada Employment Credit
- Tax Credit for Transit Passes
- Amount for Children Born in 1990 or Later
- Children’s Fitness Tax Credit
- Working Income Tax Benefit
- Special Rules for Long-haul Truckers Claiming Meals
- Pension Income Splitting
- Scholarship, Fellowship and Bursary Income
- Registered Education Saving Plan (RESP)
- Capital Cost Allowance Changes
- Farming Income
- Capital Gains Exemption
- Installment Threshold Increased
- Registered Disability Savings Plans (RDSPs)
Federal Budget
The last Federal Budget and the Economic Statement of October 30, 2007 brought in a number of tax law changes that could have a positive impact on your tax payable in 2007. For families and seniors, there are new credits and deductions that could add up when filing a tax return.
Families will benefit from a new $2,000 child amount for each child under the age of 18 at the end of 2007. This will result in a federal tax saving of $300 per child. And if one parent cannot use the entire amount to lower their tax payable, the unused amount can be transferred to a spouse or common-law partner.
The 2007 tax season will also be the first year parents can claim the new Children's Fitness Amount. Parents can claim up to $500 of expenses for a child under the age of 16 in an eligible program of physical activity. The program has to meet the guidelines outlined by the government's panel of experts and receipts must be issued by the organization running the activity. There are rules on how long the activity must last and what actually qualifies to be claimed in the $500 so make sure you check before you file. It will result in a federal tax saving of $75 per child. If your child is disabled, there is an additional credit of $500 available. Disabled children will also qualify for the credit up to age 18.
Also new in 2007 is an increase to the spouse or common-law partner amount. The government increased it to match the basic personal amount which is $9,600 for 2007. If a spouse or common-law earns no income, the tax savings will be a total of $1,440. If the spouse has income, the amount of the savings will decrease depending on how much they earned during the year.
Single parent families will see an increase to the amount for an eligible dependant. Like the spousal amount, the eligible dependant has also been raised to $9,600 and if a dependant has no income, the tax savings would also be a total of $1,440. Again, if the dependant earns income, the amount of the credit will be reduced accordingly.
The Working Income Tax Benefit (WITB) is a new refundable tax credit introduced in 2007. It is designed to help lower-income taxpayers that are part of the work force. The WITB is calculated as a percentage of working income over a certain threshold figure, to a specified maximum amount. However, it is also reduced by a percentage of net income (as opposed to working income) over a certain threshold. The actual amounts and thresholds depend on whether the taxpayer has an eligible spouse or eligible dependant. There is also a supplement for disabled taxpayers.
Seniors were also included in the last budget. The government introduced Pension Income Splitting between spouses or common-law partners. Any type of income that qualifies for the pension income amount qualifies for income splitting. The government estimates that all the eligible seniors will realize about $1 billion in tax relief. You could qualify even if you are under the age of 65, if you are a retired employee and are receiving annuities under a pension plan or, if the pension income benefits are due to the death of your spouse or common law partner.
The most benefit will be felt by couples where one spouse earns most of the qualifying pension income with the other earning little or no income. It may also reduce the total income below the threshold for the clawback of Old Age Security benefits or the age amount.
For seniors looking to convert their Registered Retirement Saving Plans (RRSPs) this year because they turned 69, the government increased the age limit for holding RRSPs to 71. Now Canadians have an extra two years to save for their retirement or hold funds in their RRSPs.
Other tax law law changes include enhancements to the Public Transit Passes Amount to include weekly passes purchased over a period of four consecutive weeks and electronic payment cards.
