Quebec’s provincial budget for 2017-2018 reduces taxes in multiple areas
Quebec has made some important changes to the provincial budget for 2017-2018. Released on March 28, 2017, the budget contained a number of notable tax reductions that will be of interest to many taxpayers – the most significant of which is a retroactive refund of health contributions, which takes effect immediately and will impact your 2016 tax return.
A Healthy refund for many taxpayers
In October 2016, the government announced that health contribution payments would be eliminated in 2017. The budget takes this one step further and has made the policy retroactive for 2016 as well for taxpayers whose income is less than $134,095.
Taxpayers whose income in 2016 was greater than $134,095 (other than exempt individuals), will still have to pay a health contribution for that year, either via a straightforward payment of $1,000 or 4% of the amount that their income exceeds $134,095 – whichever is the lower fee.
We’ve put together a chart that shows the health contribution amounts residents expected to pay before and after the budget announcement. It’s filled with lots of zeros – which in this case is nice to see!
|Refund of 2016 Health Contribution|
|Net Income||2016 Health Contribution (before budget)||2016 Health Contribution (after budget)|
|Less than $18,570||$0.00||$0.00|
|$18,570 to $41,265||$0.01 to $50.00||$0.00|
|$41,625 to $134,095||$50.01 to $175.00||$0.00|
|More than $134,05||$175.01 to $1,000||$0.01 to $1,000|
Revenu Québec will correct the tax returns of individuals filed after budget day, and adjust the refund or balance due. For taxpayers whose returns have already been assessed, Revenu Québec will issue new notices of assessment – so in other words you don’t have to do a thing to get your money back.
The Non-Refundable Tax Credit rate is being reduced
Québec is following the lead of the federal government (and other provinces) in reducing the non-refundable tax credit to 16%. This change begins in 2017, down from the previous rate of 20%. Personal amounts will be increased by 1.25%, so the effective tax savings is basically unchanged. We’ve outlined these adjustments in the chart below, but there are a few exceptions to be aware of:
• The basic amount, which is increasing to $14,890 (up from $14,544.) This change results in an additional tax savings of $55.
• Medical expenses, medical travel, interest paid on student loans and the first $200 of charitable donations will continue to be converted at the rate of 20%.
|Change in Amounts Resulting from the Reduction in the Conversion Rate|
|Pre-budget Amount||Tax reduction (x 20%)||Post-budget Amount||Tax Reduction (x 16%)|
|Amount for persons living alone
Basic amountSupplement for single-parent families
|Amount with respect to age||$2,505||$501||$3,132||$501|
|Amount for retirement income||$2,225||$445||$2,782||$445|
|Amount for severe and prolonged impairment in mental or physical functions||$2,645||$529||$3,307||$529|
|Amount for minor children engaged in vocational training or post-secondary studies – per term||$2,145||$429||$2,682||$429|
|Amount for other dependants||$3,125||$625||$3,907||$625|
|Amount for the recognized parental contribution
Maximum amountReduction when a single term of study has been completed
Good news for retirees
Two important tax credit changes are taking place for those enjoying retirement. Effective for 2017, eligible retirement income must be raised by 25% before being converted into a non-refundable tax credit, and the reduction rate (based on household income) is increasing from 15% to 18.75%.
Deductions for dependent children
Parents with children under age 18, or who are currently in post-secondary school or vocational training, will see a drop in the applicable tax credit rate from 20% to 16% in 2017, and the correction factor (which pertains to any income dependent children might have) is being removed.
Refundable Tax Credit for childcare expenses – who qualifies?
There is a wordy legal description of who qualifies as an eligible child in the new budget, in relation to refundable tax credits for childcare. In a nutshell, to be eligible, the child (or children) must be under 16 years of age at some point during the tax year, must be a child of the taxpayer or the taxpayer’s spouse, must be dependent on the taxpayer or the taxpayer’s spouse, and have an annual income that does not exceed $9,582 (a figure that will be indexed in future years.) Exceptions are made for children over age 16 who are dependent for mental or physical reasons.
Rules for Replacement Income are set to change
Changes are being made to the basic tax credit for individuals who receive income replacement benefits under a public compensation plan. These changes are a direct result of the increase to the basic tax credit and the reduction in the conversion rate for non-refundable tax credits. We’ll outline the changes to income replacement indemnity when the details are made available.
If you live and work in Québec, you’re a resident – and so are your dependent children
Dependent children of individuals who are deemed to be Québec residents because of their work or other duties, are also considered to be residents – provided they don’t have an annual income that exceeds $9,582. This threshold limit will be indexed in future years.
Renovate and save
If you’re looking to make some eco-friendly upgrades to your home, you’ll be happy to hear that the eligibility period for RénoVert Tax Credits has been extended. Any resident who has uses of a qualified contractor for the purpose of RénoVert tax credits may claim the associated amount up until March 31, 2018. The cap on qualified expenditures remains at $52,500 under this new timeframe.
Renovation agreements signed after March 31, 2017 and before April 1, 2018 must relate to the types of renovation work currently recognized for the credit, with the exception of work relating to the discharge, collection and disposal of waste water, toilet effluents, or grey water. This is because a new refundable tax credit, discussed below, will be introduced for these types of expenditures effective April 1, 2017.
New tax credit for upgrading water treatment systems
The province is expanding home upgrade tax credits to include qualified expenditures for wastewater treatment systems in the taxpayer’s principal residence or cottage. You’ll receive a credit equal to 20% of the portion of the cost for the work that exceeds $2,500 when you use a qualified contractor. A maximum credit of $5,500 is applied for each eligible dwelling. The credit can be applied for contracts that are signed after March 31, 2017 and before April 1, 2022.