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Tax Shelter Training Program. Part 2 Non-Refundable Credits - PDF Free Download
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1 Tax Shelter Training Program Part 2 Non-Refundable Credits
2 The Tax Shelter Training 1 Part 2 NON REFUNDABLE TAX CREDITS Every taxpayer may be able to make certain personal claims for his or her self or spouse or common-law partner and other dependants on the Federal Schedule 1 and the NL Provincial Schedule 428 to reduce income taxes. These include the following: Basic personal amount Line 300 Age amount - Line 301 Spouse or common-law partner amount - Line 303 Amounts for Eligible Dependant - Line 305 Amounts for Infirm dependants age 18 or older - Line 306 Canada Pension and Employment Insurance Premiums - Lines 308, 310, 312 and 317 Adoption Expenses - Line 313 Pension income amount - Line 314 Caregiver Amount - Line 315 Disability amount - Line 316 and 318 Disability Amount Transferred from a Dependant - Line 318 Interest paid on student loans - Line 319 Tuition and Education amounts - Line 323 and 324 Amounts transferred from spouse or common-law partner - Line 326 Volunteer firefighters' amount Line 362 Canada Employment Amount - Line 363 Public Transit Passes - Line 364 Children's Fitness Amount - Line 365 Amount for Children under 18 - Line 367 Home buyer' amount CanTax will make many of the claims automatically when the INFO screen is completed and the information from the slips is entered. Others require action on the part of the preparer.
3 The Tax Shelter Training 2 Basic Personal Amount - Line 300 A federal credit of $10, (2011) is available to all residents of Canada and is calculated automatically by CANTAX. A provincial credit is also available. If a taxpayer immigrated to Canada or emigrated from Canada during the tax year, the basic credit will be prorated according to the number of days in Canada. The date of entry to or exit from Canada must be entered on the INFO screen. Age Amount - Line 301 Taxpayers 65 or older on December 31 of the tax year can claim a maximum $6,537 (2011) on line 301 of Schedule 1. This credit is calculated automatically by CANTAX. The amount is gradually reduced after the taxpayer's Net Income exceeds $32, (2011) and is reduced by 15% of the Net Income over that. Also, if a taxpayer immigrated to Canada or emigrated from Canada during tax year, the Age Amount will be prorated according to the number of days in Canada. The date of entry to or exit from Canada must be entered on the INFO screen. Claiming a Spouse - Line 303 If a taxpayer had a spouse (including a common-law partner) in the tax year, he/she may be able to claim part or all of the $10, (2011) spousal amount. This claim is also prorated if the taxpayer immigrated to or emigrated from Canada. The Net Income of the spouse (Line 236 on the spousal return) will affect the claim for the spousal amount by the taxpayer. If a spousal return is coupled and fully completed, CanTax will automatically make the appropriate claim for a spouse. To make a claim for a spouse when the returns are not coupled, enter the spouses Name, Sin, Net Income and Date of Birth on the INFO screen of the taxpayer wishing to make the claim. In addition, select YES to the question Did taxpayer support a spouse at all in the year? It is strongly suggested that spousal returns be coupled and prepared together. Married or Began a Common Law Relationship in the Year If the taxpayer got married or began a common law relationship in the year, the spouse s or partner s net income for the whole year must be used when calculating the spousal or common law partner amount. If a taxpayer was separated during the year and then reconciled before December 31, the spouse's net income for the whole year must be used to calculate the spousal or common law partner amount. Common Law Partner A common-law partner is a person who is living with the taxpayer in a conjugal relationship for at least 12 continuous months or is the natural or adoptive parent, legal or in fact, of the taxpayer s child. Once a cohabitation relationship achieves the status of a common-law marriage under either the 12-month or child rule, that marriage is considered to continue until there is a marital breakdown marked by a separation of at least 90 days. If the couple reconciles after 90 days, (and there are no children) they will not be considered common-law until they are living together for 12 consecutive months from the date of reconciliation.
4 The Tax Shelter Training 3 Separation During The Year In order for a couple to be separated for tax purposes, the separation must be due to a breakdown of the relationship. Spouses or common-law partners living in separate locations are not separated for tax purposes unless there is a breakdown of the relationship and neither spouse nor partner is supporting the other. For this purpose, support payments required under a separation agreement do not constitute support. Claim for Spouse or Common Law Partner in the Year of Separation If there is a separation as explained above, and the separation includes December 31, only the spouse or common-law partner s net income prior to separation is used in calculating the spouse or common-law partner amount. In the year of separation, either support payments (under a written agreement) or the spouse or common-law partner amount may be claimed, but not both. In the case of a common-law partner, the separation must have lasted 90 days to be recognized for tax purposes. If the couple reconciles before December 31, the spouse or common-law partner s net income for the whole year is used in calculating the spouse or common-law partner amount. The taxpayer has a choice of claiming either support payments (under a written agreement) or the spouse or common-law partner amount, but not both. A spouse or common-law partner amount may NOT be claimed if an Amount for an Eligible Dependant is claimed. Spouses cannot make a claim for each other for the same year. Other claims that may be affected by a separation include: GST/HST, Childcare and Child Tax Benefits. GST/HST Credit If the separation lasts for 90 days or more and includes December 31, the income of the separated spouse or common-law partner does not have to be included in the calculation of the GST/HST Credit. Child Care Expenses If the taxpayer is separated and the couple reconciles during the first 60 days of the following year, the separated spouse or common-law partner is still considered to be a supporting person. In this case, the higher income spouse or common-law partner may still claim child care expenses for the period of the separation, so long as the separation lasted at least 90 days and included December 31. Child Tax Benefit If the taxpayer is separated for a period of 90 days or more, and the couple is not living together on December 31, the income of the separated spouse or common-law partner does not have to be included in the calculation of the CTB.
5 The Tax Shelter Training 4 The Dependant Information Screen (T1-DEP) To make a claim for any dependant other than a spouse or common-law partner, the information about the dependant must be entered on the Dependant Information Screen (DEP). To go to that screen press <F4>, type DEP and press <Enter>. If the dependant has income and is filing a tax return, his/her return should be attached to the taxpayer's return. (See next page). In that case do not enter income information on the DEP screen but rather on the attached dependant's return. All necessary information will then be posted to the T1-Dep screen on the taxpayer's return.
6 The Tax Shelter Training 5 How to Attach a Dependant's Return To attach a dependant's return to the taxpayer, simply go to the Dependant (DEP) screen and click on the NO after the question "Process dependant's return together". A box will appear with three possible selections Select Current year return if the dependant's return for the current year is already on file because his or her return for the current year was prepared earlier in the year. Select Previous year return if you wish to carry forward a dependant's return from the previous year that has not already been carried forward. This would happen if the returns were prepared separately in the previous year and not coupled Select New return if the return for the dependant is not on file for the previous or current year. This is usually the case with new clients. Select the appropriate option and click OK. A new return will be created. The return for any dependant will be yellow. To access the dependant's return at any time click on the pull down arrow on the top right hand corner. The names of all attached returns will be displayed. Click on the name to select the return. Note that if the dependant's return was attached to the taxpayer's return in the previous year, it would be carried forward to the current year with the taxpayer's return and remain attached.
7 The Tax Shelter Training 6 Amount For Eligible Dependant - Line 305 A Taxpayer may be able to claim all or part of the $10,527 (2011) amount for an eligible dependant if, at any time in the year, the taxpayer was single, divorced, separated or widowed, and at the same time supported a relative. The relative must meet ALL of the following requirements. The relative must have been: a resident of Canada (unless the relative is the taxpayer's child); living with the taxpayer in a dwelling that was maintained by the taxpayer; related to the taxpayer by blood, marriage or adoption; and under 18 when the support was provided. If the relative meets the first three conditions, the taxpayer can claim this amount for: a parent or grandparent; or a relative who was aged 18 or over and was mentally or physically infirm. This claim cannot be split. Each household is allowed only one claim for the amount for an eligible dependant. Once a claim for the amount for an eligible dependant for a person is made, no one else may claim the amount for an eligible dependant for that person. Dep Screen No claim can be made for a child for whom the taxpayer was required to make support payments. To make this claim go to the DEP screen and enter the information about the dependant (including Net Income) and then select Yes at the field "Claim amount for an eligible dependant" in the Schedule 5 - Details of dependant section. This information will then be posted to the Schedule 5 and Line 305 of the Schedule 1. Select "Yes" here to make the claim.
8 The Tax Shelter Training 7 Amount for an Eligible Dependant - in the Year of Separation If a taxpayer, who supports an eligible dependant, is separated for any time during the year and the taxpayer maintains and lives in the dwelling where the dependant lives, an Amount for an Eligible Dependant may be claimed on line 305 for a child under 18 at the time of the separation. This is so even if the taxpayer is reconciled with the spouse or partner before December 31. However, this claim cannot be made if a spousal or common-law partner amount is claimed. Amount for children born in 1994 or later Line 367 Parents* can claim $2,131 (2011) for each child under 18 years of age at the end of the year. The full amount can be claimed in the year of the child s birth, death, or adoption. If the child resides with both parents throughout the year, either parent can make the claim. If there is more than one child, one parent must make the claim for all children. Any unused amount may be transferred to the other parent using Schedule 2. (Schedule 2 will be discussed later in this Part) If the child does not reside with both parents throughout the year, the parent who claims the amount for an eligible dependant (line 305) for that child can make the claim. Any additional children who could have been claimed on line 305 if another had not been claimed, can also be claimed on line 367. If the parents have shared custody of a child throughout the year but cannot agree who will claim the amount, neither parent can make the claim. *For this claim, parent means parent, spouse or common law partner. This claim is automatically made by Cantax for a couple living together for the full year. In that case, Condition A will be selected. Condition B will be selected for a single, separated or divorced parent not making a claim for a spouse on line 303.
9 The Tax Shelter Training 8 Amount for an Infirm Dependant Age 18 or Older - Lin 306 A taxpayer can claim an amount for his or her own or the spouse's dependent child or grandchild if the dependant child is 18 years or older on Dec 31 of the year and is mentally or physically infirm. A claim can also be made for a person living in Canada at any time in the year who meets all of the following conditions. The person must have been: dependent on the taxpayer, or the taxpayer and others; the taxpayer s or spouse's parent, grandparent, brother, sister, aunt, uncle, niece or nephew; 18 or older on Dec 31; and mentally or physically infirm. If any other person is making a claim on line 305 for that dependant, or anyone (including the taxpayer) is making a claim on line 315, then the taxpayer cannot make a claim on line 306 for that dependant. This claim can be split if more than one person supports the dependant. To make the claim, select Yes in the field Claim amount for eligible dependant and enter the nature of the infirmity in the Nature of Infirmity field on the DEP screen in the column for that dependant. The information will be posted the Schedule 5. Dependant Screen Middle of Schedule 5 This is completed automatically by Cantax
10 The Tax Shelter Training 9 Splitting a Claim for Disability, Caregiver and Infirm Dependant Amounts More that one person can claim a transfer of the Disability Amount, Caregiver Amount and Infirm Dependant Amount. In all cases, however, the total claim cannot exceed the total maximum allowed for that dependant. To claim a percentage of the total claim, enter the percentage in the "Percentage of claim" field on the Dependant Information screen. Dependant Information Screen Override to enter Percentage of claim. Caution - If the returns are coupled and a Percentage field is overridden, CanTax will apply the balance of the percentage to the spouse. If the person with whom the claim is being split is not the spouse, go to the spousal return and override the percentage field to 0%. Canada Pension and Employment Insurance Premiums Lines 308, 310 and 312. CanTax calculates these amounts automatically when the amounts from the information slips or self-employed earnings are entered.
11 The Tax Shelter Training 10 Volunteer Firefighters' Amount - Line 362 A volunteer firefighter can claim an amount of $3,000 if he/she: was a volunteer firefighter during the year; and completed at least 200 hours of eligible volunteer firefighting services with one or more fire departments in the year. Eligible services include: responding to and being on call for firefighting and related emergency calls as a firefighter; attending meetings held by the fire department; and participating in required training related to the prevention or suppression of fire. Supporting documents CRA may request certification from a fire chief or delegated official within the fire department to verify the number of hours of eligible volunteer firefighting services you performed for the department. This amount can also be claimed as a provincial credit in NL. If eligible, the claim will be posted automatically to the provincial schedule. The claim can is made on the NL-428 on Line Income received as a Volunteer firefighters If a taxpayer received income as a volunteer firefighter, part of the income received may be exempt. The exempt part of the income is shown in Box(87) of the T4 slips. This amount is not included in Box(14) and does not have to be included in income unless the Volunteer Firefighter's Amount is claimed. The taxpayer cannot claim both this exemption and the Volunteer Firefighter's Amount. If the exemption is being claimed, report only the amount shown in Box(14) of the T4 slip. If the $3,000 volunteer firefighters' amount is claimed, add the amounts shown in Box(87) and Box(14) of the T4 slips and enter the result on line 101. Canada Employment Amount - Line 363 Employees can claim a non-refundable credit for work related expenses. Claim the lesser of: $1,065 (2011); and the total of the employment income reported on lines 101 and 104 of the T1. This claim is calculated automatically by Cantax.
12 The Tax Shelter Training 11 Public Transit Passes - Line 364 Taxpayers can claim the cost of monthly public transit passes or passes of longer duration such as an annual pass for travel within Canada on public transit during the year. These passes must permit unlimited travel on local public transportation systems (busses, trains and ferries) Taxpayers can also claim the cost of shorter duration passes if each pass entitles him/her to unlimited travel for an uninterrupted period of at least 5 days and he/she purchased enough of these passes to be entitled to unlimited travel for at least 20 days in any 28-day period. Taxpayers can claim the cost of electronic payment cards when used to make at least 32 one-way trips during an uninterrupted period not exceeding 31 days. A taxpayer can claim the cost of passes for self, spouse or common-law partner and children under 19 on Dec 31. The cost of a pass can only be claimed in the year for which the pass was used for travel. Children's fitness amount - Line 365 Taxpayer's can claim a maximum of $500 per child, for fees paid in the year for the cost of registering a child in an eligible program of physical activity. The child must have been under 16 years of age or under 18 years of age if eligible for the disability amount, at the beginning of the year in which an eligible fitness expense was paid. Children with disabilities - If the child qualifies for the disability amount and is under 18 years of age at the beginning of the year, an additional amount of $500 can be claimed provided that a minimum of $100 is paid on registration for a prescribed program of physical activity. Any amount paid that would qualify as child care expenses (line 214) and the children's fitness amount, must be claimed as child care expenses. Children's arts amount - Line 370 Taxpayer's can claim a maximum of $500 per child, for fees paid for the cost of registration or membership of his/her or his/her spouse's or common-law partner's child in a prescribed program of artistic, cultural, recreational or developmental activity. The child must have been under 16 years of age or under 18 years of age if eligible for the disability amount, at the beginning of the year in which an eligible expense was paid. Also, if at least $100 in eligible expenses has been paid for a child eligible for the disability tax credit, an additional amount of $500 can be claimed for that child. To be eligible, a program must be supervised and suitable for children.
13 The Tax Shelter Training 12 Home Buyer's Amount - Line 369 For 2009 and subsequent years, taxpayer`s who acquire a qualifying home after January 27, 2009 may be eligible for a new non-refundable tax credit of $750.00, based on an amount of $5,000 claimed on Line 369. To be eligible, the taxpayer must have acquired a qualifying home and neither the individual nor the individual s spouse or common-law partner owned and lived in another home in the year of purchase or any of the four preceding years. If the taxpayer is a person with a disability or is buying a house for a related person with a disability, he/she does not have to be a first time home buyer. Either spouse or common law partner can claim the credit or it can be shared between the two. However, the total of both claims cannot exceed $ Adoption Expenses - Line 313 A Taxpayer is allowed to claim a credit for certain adoption expenses. The maximum eligible amount related to the adoption of any child under the age of 18 years is $11,128 (2011). These expenses may be split between two adoptive parents, but the combined total expenses cannot exceed the maximum limit for each child. Parents can claim these incurred expenses in the tax year that includes the end of the adoption period in respect of the child. Eligible adoption expenses that can be claimed include: fees paid to a licensed adoption agency; court costs and legal and administrative expenses related to an adoption order; reasonable and necessary travel and living expenses of the child and the adoptive parents; document translation fees; mandatory fees paid to a foreign institution; mandatory expenses paid in respect of the immigration of that child; and any other reasonable expenses required by a provincial or territorial government or an adoption agency. Study says CRA gives bad advice
14 The Tax Shelter Training 13 Pension Income Amount - Line 314 A taxpayer is entitled to a non-refundable credit calculated on up to $ of eligible pension reported on Line 115 or Line 129. The type of income eligible for the Pension Income amount may differs depending on the taxpayer s age. Eligible Pension and Annuity Income (age 65 and older) Type of Income Slip Box Condition Line DPSP income T4A 24 (Footnote code 15 in box 38) Regular annuities & IAAC (T4A)- RPP lifetime retirement benefits RRIF income None 115 T4A 24 None 115 T5 19 None 115 T4A 16 None 115 T3 31 None 115 T4RIF 16 and 20 None Result of death of spouse or common law partner You are the beneficiary of deceased person's RRIF RRSP income T4RSP 16 None 129 Foreign pensions (incl. US Social Security) The amount of foreign pension that is not deductible at line 256 is still eligible for this amount. Any amount of a foreign pension that is not taxable in Canada because of a tax treaty and income from a United States individual retirement account are not eligible for the pension income amount Eligible Pension and Annuity Income (less than age 65) Type of Income Slip Box Condition Line DPSP income T4A 24 (Footnote code 15 in box 38) Regular annuities & IAAC (T4A)- RPP lifetime retirement benefits Result of death of spouse or common-law partner. T4A 24 Result of death of spouse or common-law partner. T5 19 Result of death of spouse or common-law partner. T4A 16 None 115 T3 31 None RRIF income T4RIF 16 and 20 Result of death of spouse or common-law partner. 22 Result of death of spouse or common-law partner. RRSP income T4RSP 16 Result of death of spouse or common-law partner Foreign pensions (incl. US Social Security) The amount of foreign pension that is not deductible at line 256 is still eligible for this amount. Any amount of a foreign pension that is not taxable in Canada because of a tax treaty and income from a United States individual retirement account are not eligible for the pension income amount. 115
15 The Tax Shelter Training 14 CanTax will automatically make this claim when the amounts from the information slips are entered. Note that many of the claims for a taxpayer under 65 require that the income is a result of the death of a spouse or common law partner. For such a claim, the question Received due to spouse's death? must have been answered YES on the screen for that slip. The T4RSP screen is shown below. Select Yes or No Amounts such as Old Age Security benefits, Canada Pension Plan benefits, Quebec Pension Plan benefits, Saskatchewan Pension Plan payments, death benefits, retiring allowances, and amounts in boxes 18, 20, 22, 26, 28, and 34 of a T4RSP slip do not qualify for the Pension Income Amount. Eligible pension income does not include the following income amounts: income from a United States individual retirement account (IRA); excess amounts from a RRIF included on line 115 and transferred to an RRSP, another RRIF, or an annuity; or any foreign source pension that is exempt from income tax in Canada because of a Tax Treaty that entitles the taxpayer to claim a deduction at line 256. Pension Income Amount
16 The Tax Shelter Training 15 Claim for Caregiver - Line 315 The caregiver amount is available to taxpayers who (alone or jointly) provide home care for a parent or grandparent (65 or older), or a mentally or physically infirm dependant age 18 or over. The dependant must live with the taxpayer. This claim cannot be made for a spouse. If more than one person supports the same dependant, the claim for the dependant can be split. However, the total of both claims cannot be more than the maximum amount allowed for that dependant. It should be noted that a taxpayer is eligible to claim the caregiver amount and the amount for an eligible dependant (line 305) for the same dependant. If the taxpayer has claimed an amount on Line 305, the caregiver credit must be reduced by this claim. However the taxpayer cannot claim the caregiver amount and the amount for infirm dependants over 18 (line 306) for the same dependant. In addition, if someone other than the taxpayer claims the amount for an eligible dependant (line 305) for a dependant, then the taxpayer cannot claim the caregiver amount for that dependant. Dependant Information Screen Select YES for Caregiver Amount Net Income Schedule 5 The caregiver claim will be posted to Line 315 on the Schedule 1
17 The Tax Shelter Training 16 Disability Amount - Line 316 A taxpayer may be eligible for the disability amount if a qualified practitioner certifies on Form T2201, Disability Tax Credit Certificate, that he/she is either blind, has a prolonged impairment that markedly restricts activities of daily living or that he/she requires life sustaining therapy. This form must be sent to CRA and, if approved, the taxpayer may make the claim. The first time this claim is made a paper return must be filed with the T2201 attached. To make the claim, select Yes in the Disability amount field on the Info screen. Info Screen If a taxpayer can claim the Disability Amount, he/she can also claim Disability Support Payments paid to allow him/her to attend school or earn certain income. This will be discussed in more detail in Part 3. Disability Amount Transferred from a Dependant - Line 318 If a dependant qualifies for a disability claim but does not need the full claim, it may be transferred to the taxpayer's spouse or other supporting person. It is strongly recommended that spousal returns be coupled and that any dependants returns be attached to the taxpayer's return and fully completed. Any transferable claims will then be transferred automatically. In the case of a child with no income, the preparer need only complete the DEP screen. If a taxpayer is required to make support payments for that dependant, he/she cannot claim a disability amount for that dependant except in the year of separation. If more than one person supports the dependant with the disability, the claim can be split. However, the total claim cannot be more than the maximum amount allowed for that dependant. A supplement for disabled children under age 18 will be added to the disability claim in cases where families provide unpaid care to the child. Childcare expenses and attendant care expenses claimed for that child will reduce this supplement. If the dependant s return is not attached to the supporting person s return the transfer can be made using the Dependant Information Screen by entering information about the dependant.
18 The Tax Shelter Training 17 Dependant's Return is NOT attached to Taxpayer's Return (Not Recommended) If the dependant's return is not attached to the taxpayers return, the income and other information for the dependant must be entered on the DEP screen. Note that when "Yes" is the answer to the question "Eligible for disability amount?", a Diability transfer screen drops down. This screen must be completed to calculate the amount of the transfer. If the dependant has no income and there are no amounts to enter, the full amount will be transferred to the taxpayer. Enter information from Lines 5808 to 5840 of the Schedule NL428 from the Dependant's return. Transfer Amount Enter information from Lines 301 to 315 of the Schedule 1 from the Dependant's return. Interest Paid on Student Loans - Line 319 To claim the interest paid on student loans, expand on Line 319 and enter the amount of the interest paid. The amount that may be claimed includes the interest for the current year plus any amount from the previous 5 years that was not previously claimed. To enter interest from any of the previous 5 years that was not claimed, expand at line 2 and enter the interest for the appropriate year. Only the student can make this claim. No amount can
19 The Tax Shelter Training 18 be transferred to a relative. Students should receive a statement, from their financial institution or the federal or provincial government indicating the interest that is eligible for the credit. Tuition, Education and Textbook Amount - Line 323 To claim tuition, Education and Textbook amounts, the taxpayer must have a form T2202A or T2202 from a Canadian institution or a form TL11A from a foreign institution. Enter a claim for Tuition fees, Education and Textbook amounts by going to the Schedule 11 and expanding on Line 320. T2202
20 The Tax Shelter Training 19 Tuition Fees A taxpayer may claim tuition fees paid for courses taken during the year at a Designated Educational Institution. A designated educational institution is a: Canadian university, college, or any other educational institution in Canada that has been designated by a province or territory for purposes of financial assistance to students or Canada Student Loans; Canadian educational institution certified by Human Resources and Skills Development Canada providing courses that develop or improve skills in an occupation, other than designed for university credit (student must be age 16 or over); university outside Canada, where the Canadian student is enrolled in a course that lasts at least three consecutive weeks and leads at least to a bachelor degree or equivalent or higher; university, college, or other educational institution in the United States that offers courses at the post-secondary school level if the student is living in Canada (near the border) throughout the year and commutes to that institution. To qualify, the total tuition fees for the year to any one educational institution must be more than $100. Education and Textbook Amount Full-Time: A taxpayer may claim a $400 Education and a $65 Textbook amount for each whole or part month in the year that he or she was enrolled as a full-time student in a Qualifying Educational Program at a Designated Educational Institution. Part-Time: He or she may claim $120 Education and $20 Textbook amount for each month he or she was enrolled as a part-time student in a Specified Educational Program. A student cannot claim an amount as a part-time student and a full-time student for the same month. A Qualifying Educational Program (full-time program) is a program that lasts at least three consecutive weeks and requires a minimum of 10 hours of instruction or work in the program each week. A Specified Educational Program (part-time program) is a program that lasts at least three consecutive weeks and requires at lease 12 hours of instruction per month. A taxpayer cannot usually claim the Education or Textbook amounts for a program of study if he/she received Employment Insurance (An exception is assistance shown in box 20 of the T4E), received a grant for that program; was a nurse in training and received free board and lodging; was reimbursed for the cost of the courses, other than by award money; or was receiving salary or wages while taking a job-related course.
21 The Tax Shelter Training 20 Adult Basic Education (ABE) The ABC program is not a post secondary program and thus is not eligible for the Tuition and Education amount. However, if a taxpayer received EI assistance to cover all or part of the tuition fees for the ABE program, he/she can claim a deduction for the amount of qualifying assistance shown in Box (21) on the T4E slip. The claim will be made automatically on Line 256 on page 3 when the information from the T4E slip is entered on the T4E screen. Tuition, Education and Textbook Amounts Transferred from a Child - Line 324 Students who do not need to claim all their tuition, education and textbook amount to reduce their federal income tax to zero may be able to transfer the unused part to a spouse, parent or grandparent (including in-laws). The maximum amount that can be transferred is $ of the current year's Tuition and Education Amount, less the amount claimed by the student in the current year. If any amount is transferred to a spouse, then no amount can be transferred to a parent. The unused Tuition, education and textbook amount can be transferred to one person only. The balance can be carried forward and claimed by the student in future years. If the dependant s return is attached to the parents or grandparent s return, switch to the dependants return and go to Schedule 11. After the child s return has been fully completed, he/she may elect to transfer some of the eligible Tuition and Education Amounts to a parent or grandparent. This is done by selecting YES to the question Does the student wish to transfer his unused fees to a parent?. See next page. If the parent s returns are coupled, CanTax will automatically make the claim on the parent s return that will receive the greatest benefit. If the parent s returns are not coupled, CanTax will make the claim on the parent s return to which the child s return is attached. It is strongly suggested that the dependant's return be attached to the parent's return even if the child has no income. If a student has tuition and education amounts that are not fully transferred to a supporting person, he/she should file a return (even if he/she has no income) in order to claim these amounts in a future year. The amounts must be reported for the year in which the student attended the university or college. These amounts will then automatically be carried forward by CRA. Dependant s Return NOT attached - If the dependant s return has been prepared elsewhere and thus is not attached to the parent or grandparent s return, the transfer of the Tuition and Education Amount can be made by overriding Lines 324 on the Federal Schedule 1 and Line 5860 on the provincial Schedule 428 page 1. The preparer should use the dependant's T1 and Schedule 11 to obtain the proper figures for the transfer. Note that in many cases the amount of the federal transfer may be different than the provincial transfer. This is because the monthly amounts for the provincial claim are less than the federal.
22 The Tax Shelter Training 21 Dependant s Schedule 11 To transfer any unused current year Tuition and Education Amounts to a parent or grandparent, select YES. CanTax will automatically transfer the maximum allowable Tuition and Education Amount. If, however, the student would like to transfer only a partial amount, override line 327 and enter the lesser amount.
23 The Tax Shelter Training 22 Amounts Transferred from Spouse or Common Law Spouse Line 326 In addition to the claim for a spouse or a common-law spouse on line 303, a taxpayer may be able to claim all or part of certain other credits that the spouse does not require to reduce his or her taxes to nil. These amounts are: Age Amount Pension Income Amount Disability Amount Tuition and Education Amounts Amounts for Children under 18 on Dec 31 To make the transfers, a Schedule 2 must be completed. If the two returns are coupled and fully completed, CanTax will complete the Schedule 2 automatically and make the transfers. The preparer does not have to enter any figures on the Schedule 2. It is strongly recommended that spouses returns be coupled. If the returns are not coupled, the preparer must complete the Schedule 2 using information from the spouses return.
24 The Tax Shelter Training 23 Claims For Dependants Chart Claims Who Can Be Claimed Conditions Effect on Other Claims Line 305 Amount For Eligible Dependants * Child Under 18, or * Parent or Grandparent, or * 18 or over and Infirm * Taxpayer must be unmarried at the time support was provided * Dependant must have resided in dwelling maintained by taxpayer at time support was given Can also claim Caregiver (Line 315) or, Amount for Infirm Dependant 18 or over (Line 306), if eligible. Line 306 Amount for Infirm Dependant 18 or Over * 18 or over and Infirm Cannot Claim Caregiver (Line 315) if this amount is claimed. Line 315 Caregiver Amount * 18 or over and Infirm, or * Parent or Grandparent 65 or older * Must be residing in Dwelling maintained by taxpayer Cannot claim Amount for Infirm Dependant 18 or over (Line 306) if this amount is claimed. Line 318 Disability Amount Transferred from a Dependant Line 318 Disability Supplement Dependant child, grandchild, parent or grandparent, sibling, aunt, uncle, nephew or niece who is disabled. For dependant children under 18 when the family provided unpaid care. Reduced by amount of childcare and attendant care claimed over a base amount. Taxpayer can claim amount unused by dependant. If full time care in a nursing home is claimed, no one can claim the disability. Can also make claim on lines 305 and 306 for the dependant, if eligible. Cannot claim disability if attendant care claimed is more than $10, Attendant Care as a Medical Expense Spouse or any other dependant including child, sibling, parent or grandparent. Cannot be claimed as a medical expense by the supporting person if the person receiving the care has claimed it on line 215 of the T1 Cannot claim disability if Attendant Care over $10, is claimed as a medical expense or on Line 215 Line 324 Transfer of Tuition and Education Amount from Dependant Spouse, Child or Grandchild * Max $ per student * Student must use maximum necessary on his/her return first If any amount is transferred to a spouse then no amount can be transferred to a parent or grandparent. The transferred amount cannot be split among parents or grandparents.
25 The Tax Shelter Training 24 Part 2 Exercise Complete this exercise and compare it to the solution on our website. 2 Exercise 2011.pdf Fred White (SIN ) was born on Jan 12, He is married to and lives with Rita (SIN ) who was born on June 23, They live together at 543 East Avenue, Deer Lake, NL. Postal Code T5R 4C6. Tel Number (707) Both Fred and Rita received the full Old Age Security for the whole year but did not receive any supplement. Rita also received a US Social Security Pension of $2, US. (Exchange rate ). She has been receiving that pension continuously since The T5 slip from the Bank of Montreal shows the income from investments owned 25% by Rita and 75% by Fred. The T5 from the Royal Bank shows income from a savings account owned 50% by Fred and 50% by Rita. The Whites support a son, Simon (SIN ) who was born on Sept 23, Simon lives with his parents. He is disabled and is eligible to claim the Disability deduction. The T2201 is already on file with CRA. Simon s only income was from Social Services (See T5007 enclosed). The White s daughter, Susan (SIN ) who was born on October 17, 1978 is attending university and works part time at Waymart. (See T2202A and T4 Attached). She wishes to transfer any excess Tuition and Education amount to the parent who will benefit the most and has signed the back of the T2202A slip. Rita s mother, Jean Hart (SIN ), lives with the Whites. She was born on Feb 18, Her only income was from OAS and CPP. A friend completed Jean s return. Her Net Income line 236 is $11, Jean is a widow. Fred and Rita s returns should be coupled and Susan and Simon's returns should be attached. Information slips for Fred, Rita, Simon and Susan are shown. Please note that the Whites are able to take advantage of Pension Income Splitting and save taxes. However, since we have not yet covered that claim in the course, we have not elected to split the pension income for this example. This topic will be covered in Part 3.
26 The Tax Shelter Training Part 2 Exercise Continued 25
27 The Tax Shelter Training Part 2 Exercise Continued 26 6, White Simon Department of Social Services Mun 3, White, Rita ,452.98
28 The Tax Shelter Training Part 2 Exercise Continued , , White, Fred 27, White, Fred 3,658.91