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The following are important changes to the Income Tax Act for 2016:

 1) The Canada Revenue Agency now provides more information about your tax account, the status of your return and the ability file your tax return through their website www.cra.gc.ca. Tax refunds can be deposited directly to your bank account and if you owe money on filing, your payment taken from your bank and sent to the CRA on the date of your choosing. All this can be done by registering at “My Account” at the website shown above. Details about Ontario Trillium Benefit or the GST Credit can also be found on the same website.
2) The rate of tax for middle-income earners (taxable incomes from $45,282 to $90,563) has been reduced by 1.5%. That means more money in your pockets!
3) On the flip side, however, individuals earning more than $200,000 per year will pay a 4% higher tax rate, meaning that those who earn more will be paying more in tax.
4) Starting in 2016, Home Accessibility expenses such as the costs of wheelchair ramps, walk-in bathtubs, wheel-in showers, grab bars, etc. will be subject to a 15% non-refundable tax credit. You can spend up to $10,000 on these expenses and receive a credit off your taxes of up to $1,500 (15% of up to $10,000). In order to receive the credit, you must be over 65 years old and be the recipient of the Disability Tax Credit. (See next section for description of the Disability Tax Credit)
5) The Disability Tax Credit is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of tax they may have to pay. To be eligible, the Canada Revenue Agency must approve your application. A medical practitioner must indicate and certify that you have a severe and prolonged impairment and must describe its effects. The following areas must be tested:

  •  Vision
  • Speaking
  • Hearing
  • Walking
  • Eliminating (bowel or bladder functions)
  • Feeding
  • Dressing
  • Mental functions necessary for everyday life
  • Life-sustaining therapy

Two of these areas must be restricted to be able to qualify for the DTC. The amount of the credit for 2016 is $8,001 which means that your Federal taxes could be reduced by 15% of that amount, or $1,200. Your Ontario taxes would be reduced by 5.05% of $8,088 or $408.

6) When you sell your principal residence, the excess of the selling price over its cost, is not taxable as a capital gain. While this exemption has always been in place, the difference is that for 2016 and subsequent years, if you sell your principal residence, you must advise the Canada Revenue Agency of this sale, and indicate when the home was purchased and the amount of the selling price.
7) If you are caring for a relative at your home, you may be able to claim a non-refundable tax credit. The amount of the tax credit is 15% of $4,667 but could be reduced by any income earned by the relative.

8)   If, after the death of a spouse or father, mother, grandfather or grandmother, the deceased’s Will specifies that an Estate be created to hold all or part of the assets of the deceased (called an Testamentary Trust), it is treated as a separate person and taxed accordingly. Prior to 2016, the tax rates for these Testamentary Trusts were graduated, i.e., the lower the income of the Trust, the lower the tax rate would be. After 2016, these trusts now pay tax at the highest tax rate which is approximately 56%. The government has mitigated this change by allowing the Trust to exist as a Graduated Rate Estate for only 3 years past death. After that date, the highest tax rate would apply.

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