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ACCT-226 2010 Income Tax Credits Summary

Basic Personal Amount  [ITA 118(1) (c)]

• 15%*[10382-spouse Div B Income]
• If marriage broke down mid-year, only count spouse income for the period together
• If married during the year, count spouse's entire Div. B income
• Common law partners: must have co-habited for 1yr+/ be parents of a child

Equivalent to Married (Eligible Dependent)  [ITA 118(1) (b)]
• Choose 1 credit between married and ETM
• Can claim ETM if at any time in the year: single, divorced, separated, widowed, supported relative
• Must live together at some point in year; wholly dependent; rented place counts as shared dwelling
• Dependent related to taxpayer by blood, marriage, adoption
• Exclude: nephew, uncle, aunt, etc.
• Unless child/grandchild of taxpayer, must reside in Canada
• Unless parent/grandparent, must be under 18 for the year or physically/mentally infirm
• 1 ETM credit/taxpayer
• Dependent can't be claimed for ETM if claimed for married credit by another taxpayer
• If 2 taxpayers eligible for ETM with respect to 1 person, only 1 can claim. If both claim, neither gets credit
• 1 ETM credit per domestic establishment
• If dependent claimed for ETM, can't be claimed for 18yr+ infirm credit/caregiver credit by anyone
• If court order requires taxpayer to provide support, can't claim any credits related to child
• If child claimed for ETM, can still claim child amount

Child amount  [ITA 118(1) (b.1)]
• 15%* $2101
• For every child under 18 at end of year
• Live together with parents, either parent can claim
• In another case, claimable by parent who is eligible for wholly dependent credit in respect to the child

Caregiver Credit: In home care of adult relative
• 15%*[$4223 - dependent's income in excess of $14,422]
• Child, grandchild, individual/spouse's parent, grandparent, brother/sister, aunt/uncle, nephew/niece
• Parent can be 65+/grandparent can be 65+
• All other who are 18+ must be dependent due to physical/mental disability
• Same dependent can't be claimed for eligible dependent & caregiver & 18+ infirm (choose one only)
• 1 taxpayer can claim ONLY 1 caregiver credit/yr

Infirm Dependent: Mental/Physical  [ITA 118(1) (d)]
• 15%*[$4223-(dependent's Div. B income - $5992)]
• Dependent must become 18 before year end
• Need not live with taxpayer
• Can claim unlimited # of infirm dependent credits
• Infirmity can't be temporary
• If more than 1 taxpayer eligible for 1 dependent, all taxpayers share the credit
• Additional Amount: if caregiver/infirm dependent credit is higher than ETM credit, can claim difference

Age Credit  [ITA 118(2)]
• 15%*[$6446 - 15%(Div.B income- $32,506)]
• Taxpayer must be 65 or older before year end

Pension Income Amount
• If 65+ pension income includes: RRIF, RPP | Not CPP, OAS, lump sum RRSP
• 15%*(lesser of $2000/Pension Income)
• If under 65 qualified pension income includes:
• annuity paymentsconsequence of death of spouse, life annuity from superannuation pension fund
• 15%*(lesser of $2000/qualified pension income)

Canada Employment Credit
• 15%* (lesser of $1051/ year's employment income)

Credit for EI Premium & CPP Contributions
• 15%*Income up to maximum amount allowed
• Maximum EI: 1.73% of income, up to $747, CPP: 4.95% up to $2163
• For self-employed individual: Maximum CPP: $4326

Charitable Gifts  [ITA 118.1]
• 15%*first $200+29% donation in excess of $200
• Limited to 75% of Div.B income, 5yrs carry-forward
• Can claim donations of spouse
• Must donate to registered charities/Crown
• Can claim up to 100% of Div. B income if donations made in year of death

Medical Expense
Separate expenses into pools:
1. Spouse & Children under 18
2. Relative dependent 18+

• A*[(B-C)+D]
• A= 15%
• B=medical expense for taxpayer, spouse, children under 18 (can claim for family)
• C=lesser of $2024, 3% taxpayer's net income
• D=lesser of $10,000, E-F
• E=total medical expense incurred buy taxpayer on dependent's behalf
• F=lesser of $2024, 3% of dependent's net income

• If dependent's 18+, calculate D; if not, skip
• If claim attendant care expense over $10,000, can't claim impairment credit
• Medical expense include: Medical prescription drugs, medical devices, private health insurance premiums, payment to medical practitioners, cost of attendant

Credit for Mental/Physical Impairment
• 15%*$7239
• Taxpayer with 1 or more severe & prolonged impairments in physical/mental functions
• Certified by health professional, approved by CRA
• Can be retroactive ex: impairment started 2 years ago
• Impairment expected to last more than 12 months
• Restrict individuals in daily activities most/all the time
• Can't claim if more than $10,000 claimed as attendant care in medical expense credit
• Supplement: 15%* $4223 for each disabled child under 18 reduced by excess of total child care attendant expenses paid in year in respect to child, over $2473

Tuition Credit  [ITA 118.5]
• 15%*Tuition paid
• If fees over $100
• If paid by employer, count as scholarship, can still file for credit
• For post secondary courses at university/college/HRDC approved occupational skill courses
• Can be for university outside of Canada
• Must be 16 by year end with skills for occupation
• Include library/lab fees, all mandatory fees, except student association
• If fee is eligible, but not mandatory for all students, can claim up to $250
• Foreign university: must be full-time, leading to degree, at least 13 weeks consecutively
• Allowed for Canadian residents commuting to U.S. university

Education Credit  [ITA 118.6 (1)]
• 15%*($400*full-time months+ $120*part-time months)
Comes with tuition credit

Textbook Credit
• 15%*($65*full-time months+ $20*part-time months)

• Those impaired count as full-time students
• Online courses count if standards met
• Unlimited carry-forward if unused credits
• Can transfer up to $750 (15%*$5000) to a parent/spouse/grandparent after student's tax zero out
• If more than $750 credits can be transferred, can transfer up to $750 and carry-forward the rest

Dividend Tax Credit & 82 (3) Election
• Public corporations: 1.44* Dividend44% gross up
• Dividend credit= 10/17 of grossed up dividend
• CCPC: 1.25*Dividend 25% gross up
• Dividend tax credit=2/3 of grossed up dividend
• 82 (3) election allows transfer of dividend credit from one spouse to another, if it increases the marital credit

Political Contribution  [ITA 180.2]
• For contributions to federal parties
• If contributions made is:
o $400 or less: credit= 75% of contribution
o $400+ to $750: credit= 50% of contribution
o $750+ to $1275: credit=$475+ 1/3 of contribution over $750
o $1275+: credit= $650

Foreign Tax Credit
• For Canadian residents who earn income in foreign country
• Which country taxes the income?
• Usually, country in which income is earned will tax income first, country of residence also taxes income but gives foreign tax credit
• Non-business foreign tax credit is lesser of:
o Foreign tax paid
o (Gross foreign income/Div. B income)*federal tax after all non-refundable credits except dividend & political tax credits

Transfer of Unused Credits to Spouse
• After tax zeroed out, can transfer to spouse: Tuition, education, textbook credit up to $750+age credit + pension credit+ impairment credit
• CPP & EI can't be transferred

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