Here is an overview of income tax changes for the 2006 tax year, including proposed changes that may not have become law yet. See the tax guides for more details.
Since July 2006, if you are an eligible individual responsible for the care of a child under 6 years of age, you are eligible to receive $100 per month for each qualified dependant. For more information, see Universal Child Care Benefit (UCCB) or Information Sheet S06-103, Universal Child Care Benefit.
This is a new income replacement plan for residents of Quebec. See your guide from Revenu Québec for details.
The federal dividend tax credit will be calculated using two different rates depending on the source of the dividends. Certain dividends received from qualified corporations will be considered eligible dividends. Such dividends will qualify for the dividend tax credit at a higher rate. Dividends that qualify for the lower rate are referred to as dividends other than eligible dividends. In this guide, we call these high-rate and low-rate dividends. This new measure has resulted in changes to the T3 return, the T3 slip and summary, as well as T3 Schedules 4, 8, 9, and 11.
The capital gains inclusion rate for donations made after May 1, 2006 of publicly listed securities and ecologically sensitive land to qualified donees is zero. This includes securities acquired under an option agreement. For more information, see Gifts and Income Tax.
A capital gain resulting from the disposition after May 1, 2006 of qualified fishing property is eligible for this deduction. For more information, see Capital Gains.
The sale or transfer after May 1, 2006, of property used in a family fishing business is eligible for the $500,000 capital gains exemption. For more information, see Capital Gains.
The 10-year reserve period includes transfers of fishing property by an individual to the individual's child. For more information, see Capital Gains.
Certain scholarships, fellowships, and bursaries are excluded from income if you are entitled to claim the education amount.
As was the case last year a CAIS program participant whose farming operation is in Newfoundland and Labrador, Nova Scotia, New Brunswick, Manitoba, Saskatchewan, British Columbia, or Yukon is able to file the CAIS Program Supplementary Information form with their T1 return. In consultation with Agriculture and Agri-Food Canada, a new form was created for this purpose and is referred to as Form T1273, Statement A – Harmonized CAIS Program Information and Statement of Farming Activities for Individuals. Taxpayers will continue to be able to send their returns with this new form on paper, or using EFILE On-Line, EFILE On-Line Plus, and NETFILE. CAIS program participants whose farming operations are in Ontario, Alberta, or Prince Edward Island will continue to file Form T1163. CAIS program participants whose farming operations are in Quebec will file with “La Financière agricole du Québec,” as they did previously.
If you receive patronage dividends, issued by an agricultural co-operative corporation in the form of tax-deferred co–operative shares, you can delay reporting them as income until their disposition (or deemed disposition).
All employees are eligible to claim this credit. For more information, see Canada employment amount.
You can claim the cost of public transit passes starting June 30, 2006. For more information, see Public transit passes amount.
The maximum amount of eligible pension income that can be used to calculate the credit has been increased to $2,000.
You can now claim an amount for textbooks if you are entitled to claim the education amount. For more information, visit our Web site at www.cra.gc.ca.
The deadline to claim a tax credit for renounced Canadian exploration expenses has been extended. For investment tax credits earned in a year that ends after 2005, the carry-forward period has been extended to 20 years.
This tax credit is available if you are a self-employed individual who employs an eligible apprentice in your business. For more information, see Line 412 - Investment tax credit.
The maximum amount of the refundable medical expense supplement has been increased to $1,000.
The maximum CDB has been increased to $2,300 per year for each child. The entitlement for the CDB has been extended to most middle- and higher-income families. For more information, see www.cra.gc.ca/disability
If you were employed as a tradesperson (including an apprentice mechanic) in 2006, you may be able to deduct a part of the cost of eligible tools you purchased after May 1, 2006, to earn employment income as a tradesperson. For more information, see Tradesperson's tool expenses.
Non-capital losses, farm losses, and restricted farm losses arising in taxation years ending after 2005 can be carried forward 20 years instead of 10. This extension to the carry forward period does not apply to a non-capital loss arising from an allowable business investment loss (ABIL) however. For more information, see Capital Gains.
A number of new groups have entered into tax-sharing arrangements with the federal government. To account for this change, we use the phrase “designated Aboriginal settlement lands” to identify the groups participating in this arrangement.
Under proposed legislation, a testamentary trust that becomes an inter vivos trust will change its reporting period to a calendar year the day it becomes an inter vivos trust.
A new form is available for trusts with business income in more than one province or territory. If this applies to you, get Form T3MJ, T3 Provincial and Territorial Taxes for 2006 – Multiple Jurisdictions.
Effective July 1, 2006, the GST rate was reduced from 7% to 6% and the HST rate from 15% to 14%.
Starting in April 2007, if you are the owner of a rental property and a GST/HST registrant, you will receive a monthly statement about your GST/HST account to help you stay up-to-date. These new statements will be sent to you only if there is activity on your GST/HST account.