Keeping up with all the changes that come with every new taxation year can be difficult, especially if a client is in a complex situation such as being a caregiver or trying to determine the provisions between provincial and federal governments.
With more than three weeks to go before the tax-filing deadline, advisors have the opportunity to check in with such clients to make sure they’re on track to apply for the right claims or exemptions – depending on their situations.
Evelyn Jacks, tax expert and president of the Knowledge Bureau Inc., spoke with Globe Advisor editor Pablo Fuchs about the key tax changes for educators, students and those with disabilities.
What changes to tax credits should taxpayers be aware of this season?
If you’re an eligible educator, certified teacher, or a child care educator, then we have an educator tax credit and it has increased to 25 per cent from 15 per cent of $1,000. That’s $250 in real terms on the federal government’s side. Now, we have one in Manitoba, and it’s sort of an equivalent or a mirrored amount as it’s at 15 per cent. [But] federal and provincial taxes don’t necessarily mirror each other with all of the provisions, [which is] another thing for people to keep in mind.
We have had some changes to the disability tax credit as well. That’s a very lucrative credit. If you’re taking care of someone who has dementia, Alzheimer’s, or some kind of emotional behavioral [impairment] … that markedly restricts their daily living activities, then you will be able to perhaps qualify this year if you have the right form you’re filing… which is T2201. You have to get it over to your doctor.
Can you explain the changes affecting registered retirement savings plan (RRSP) contribution room?
First of all, you have to look to your [clients’] notice of assessment to make sure they understand what their contribution room is. Second, the government is starting to play with that contribution room with other provisions.
For example, currently, we have a new change that if you have a postdoctoral student and they had earnings granted to them to do those studies, the government is now going to allow you to go back to 2001 – over a 10-year period – to create unused RRSP contribution room. That’s fantastic news, but [eligible clients] have to apply for that by 2026. So, a professor or someone who is working on postdoctoral studies at this time, that’s really good news for them.
STORY CONTINUES BELOW ADVERTISEMENTabout:blank
Likewise, we have another provision whereby people who have contributed to a defined-contribution [pension] plan are going to be able to correct over or under contributions to those plans with the result that their pension adjustment could change. That could result in a negative RRSP contribution room in some cases. So, we want to watch for that because it’s going to become a new [financial] planning scenario.
Leave a Reply
You must be logged in to post a comment.