Federal tax credits reduce the amount of basic federal tax payable. In addition,
each of Canada’s provinces and territories has its own independent tax structure,
with rates that apply to these credits and help further reduce the overall tax payable.
The federal credit is determined by multiplying a gross dollar amount by the lowest
federal tax rate, currently 15 per cent for 2007. The gross amount of some tax credits,
such as the basic personal, age and spousal credits, are indexed annually by a formula
that takes into account increases in the consumer price index (CPI). Other items,
including charitable donations and education amounts, are not indexed.
Ontario also indexes selected non-refundable tax credits based on its own CPI formula.
For a summary of federal and Ontario tax credits, please see
Appendix I.
Unused federal and provincial tax credits are non-refundable.
Federally, taxpayers are entitled to claim the basic personal credit of 15 per cent
on $9,600, for a credit of $1,440 (up from
$8,839, or $1,348 based on an average
credit of 15.25 per cent in 2006).
Provincially, Ontario taxpayers are entitled to claim a basic personal credit of
6.05 per cent on $8,553, or $517 (up from $8,377, or $507 in 2006).
Canada Employment Credit
The federal budget of 2006 introduced the Canada Employment Credit. This became available on employment income of up to $500 beginning on a pro-rated basis for
one half of 2006, starting July 1, 2006. The value doubled to $1,000 (for a credit
of $150 at a rate of 15 per cent) as of January 1, 2007,
and is scheduled to be indexed in future years.
Individuals supporting a spouse or common-law partner whose net income is less than
$9,600 (compared to $8,256 in 2006) may claim the federal spousal credit. They may
claim the maximum credit of 15 per cent on $9,600, for a credit of $1,440, if the
spouse or common-law partner’s income is nil (as a result of changes announced in
the 2007 federal budget, and compared to $751 in 2006). That credit is reduced if
the spouse or common-law partner’s net income is more than nil but less than $9,600,
where the credit is eliminated.
Provincially, Ontario taxpayers supporting a spouse or common-law partner whose
net income is less than $7,988 (compared to $7,824 in 2006) may claim the spousal
credit. They may claim the maximum credit of 6.05 per cent on $7,262, or $439, if
the spouse or common-law partner’s income was $726 or less (compared to $711 in
2006). That credit is reduced if the spouse or common-law partner’s net income is
more than $726 but less than $7,988, where the credit is eliminated.
Special rules may apply to individuals’ claims if their status changed during
the year.
Taxpayers may claim the equivalent-to-spouse credit if at any time during the year
they were single, divorced or separated and supported a qualified relative, including a child, who lived with and was dependent on them.
The equivalent-to-spouse credit is calculated in
the same manner as the spousal credit.
The following restrictions apply:
- the dependant, other than a child, must be a Canadian resident
- a dependent child must be either under 18 at any time in the year, or any age if
dependent by reason of mental or physical infirmity
- the claim may only be made in respect of one eligible dependant at a time
- where two or more individuals are otherwise entitled to a credit in respect of the
same person, only one is able to claim the credit
- the credit cannot be claimed for an individual on behalf of whom the taxpayer is
required to pay a support amount
To qualify, the dependant need not have lived with or been supported by the taxpayer
throughout the entire year.
Individuals 65 or older in the year are entitled to a federal credit of 15 per cent
on $5,177, or $777. The gross amount is reduced by 15 per cent of net income over
$30,936, thereby eliminating the entire credit when income of $65,449 is attained.
Provincially, Ontario taxpayers 65 or older are entitled to a credit of 6.05 per
cent on $4,176, or $253. The gross amount is reduced by 15 per cent of net income
over $31,088, thereby eliminating the entire credit when income of $58,928 is attained.
A 15 per cent federal credit on $6,890 or $1,034, is available to any individual
whom a Canadian medical doctor certifies on Form T2201 is suffering from severe
and prolonged mental or physical impairment. The Ontario provincial portion of this
credit is 6.05 per cent on $6,910 or $418.
Once Form T2201 is on file with the CRA, it doesn’t need to be resubmitted annually.
Other professionals may also certify specific disabilities. For instance, an optometrist
can certify sight impairment or an audiologist can certify an individual’s hearing
disability. Occupational therapists and psychologists can also certify a taxpayer’s
physical or mental disability, respectively.
The impairment is considered severe if the disability markedly restricts the individual
in physical daily-living activities, such as walking, speaking, feeding or dressing, or mental activities, such as perceiving, thinking and remembering, among others;
and prolonged if the disability lasts, or is expected to last, for a continuous
period of at least 12 months. The courts, however, have often taken a compassionate,
common-sense
approach toward defining whether a person is restricted in the activities of daily
living and in so doing, have considered the overall impact that a disability has
had on that person’s life.
In 2002, for instance, the Tax Court of Canada ruled that although an individual
suffering from chronic fatigue syndrome was not markedly restricted from performing
any one of the CRA’s specified basic activities of daily living, she nevertheless
qualified for the credit because of the cumulative restrictive effects the illness
had on her ability to function.
The disability tax credit (DTC) also extends to individuals who have been certified
by a medical doctor to require therapy at least three times a week, averaging a
total of at least 14 hours, to deal with a marked restriction in their ability to
perform a basic activity of daily living.
A federal DTC supplement of up to $603 (15 per cent of $4,019) is also available
for caregivers of children under 18 who have severe disabilities that require full-time
home care. Annual child-care and attendant-care expenses in excess of $2,354 claimed
on behalf of that child will reduce this supplement, eliminating it completely once
such expenses reach $6,373.
For Ontario taxpayers, the maximum DTC supplement is $244 (6.05 per cent of $4,031).
Annual child-care and attendant-care expenses in excess of $2,362 claimed on behalf
of that child will reduce this supplement, eliminating it completely once such expenses
reach $6,393.
A federal Child-Disability Benefit (CDB) was introduced in the 2003 federal budget
for the benefit of parents whose children qualify for the disability tax credit.
For additional details about the
child disability benefit.
The federal budget of 2007 introduced an annual non-refundable child tax credit,
effective January 1, 2007, that will pay parents $2,000 for each child under 18
at the end of a taxation year. In 2007, this federal credit is 15 per cent of $2,000,
or $300 per child.
When the child resides with both parents throughout the year, either parent may
claim the credit, with any unused portion being transferable between spouses or
common-law partners. In instances where a child does not reside with both parents,
the parent eligible to make that claim will be the one who is also eligible to claim
the wholly dependent person credit in respect of that child.
This credit, which also applies for the full year even if a birth, adoption or death
occurs during that year, will be indexed for inflation in future years.
Infirm Dependent Credit
Where a relative over 17 is dependent on the taxpayer by reason of mental or physical
infirmity, the taxpayer may claim, as the federal portion of this credit, 15 per
cent of $4,019, less the dependant’s income in excess of $5,702, for a maximum credit
of $603. The maximum available credit is eliminated entirely when the dependant’s
income reaches $9,721.
The Ontario portion of this credit is 6.05 per cent of up to $4,031, less the dependant’s
income in excess of $5,731, for a maximum credit of $244. The maximum available
credit is eliminated entirely when the dependant’s income reaches $9,762.
The caregiver tax credit reduces federal tax by up to $603 (15 per cent of $4,019)
for individuals 18 and over who are responsible for the in-home care
of an infirm, dependent relative or parent/grandparent (including in-laws) who are
at least 65.
The maximum available credit is reduced by the dependant’s net income in excess
of $13,726 and eliminated entirely when their income reaches $17,745.
The Ontario provincial tax credit
involves a maximum of $244 (6.05 per cent of $4,031),
which is reduced by 6.05 per cent of net income in excess of $13,792 and eliminated
entirely when their income reaches $17,823). The 2003 provincial budget expanded eligibility
for this credit (as well as for the disability tax credit and supplement, and infirm-dependant
credits) to include spouses or common-law partners of individuals who
are dependent because of mental or physical infirmity as well as to extend support
to certain caregivers living apart from their dependent relatives.
This credit is not available on behalf of individuals for whom the equivalent-to-spouse
credit or infirm-dependant credit has already been claimed.
The 2005 federal budget introduced an adoption tax credit to cover up
to $10,000 worth of eligible adoption expenses for a child of the taxpayer, including
non-reimbursed items such as fees paid to an adoption agency that is licensed in
a province or territory; court costs; legal and administrative expenses; and reasonable
travel and living expenses required to secure an adoption, among others.
With indexing, that federal amount is worth $10,445 in 2007, for a credit of $1,567.
The Ontario government also announced, in the 2005 provincial budget, that it had
introduced a corresponding provincial adoption tax credit. This is worth $10,435
in 2007, for a provincial credit of $631.
An individual may claim a credit for any non-reimbursed medical expenses. The federal
portion of this credit for the 2007 taxation year consists of 15 per cent of expenses
in excess of the lesser of: $1,926; or three per cent of the individual’s
net income for the year.
Such expenses may be incurred on the
taxpayer’s own behalf or that of his or her spouse or common-law partner, or child of the taxpayer under 18.
Medical and disability-related expenses may also be claimed by caregivers who are
looking after an adult child 18 or over or somebody other than a spouse or common-law
partner or dependent child; the amount they can claim is the lesser of: $10,000;
or the amount by which expenses paid exceed $1,926; or three per cent of net income.
The Ontario portion of the medical-expense credit consists of 6.05 per cent of expenses
in excess of the lesser of: $1,937; or three per cent of the individual’s net income
for the year.
In most cases, medication must be
prescribed by a registered physician or dentist
and dispensed and recorded by a
qualified pharmacist, if such expenses are eligible
to be claimed for the medical-expense tax credit.Remedies
prescribed by an individual who is not licensed in the medical field are not deductible.
Receipts must support expenses claimed. Normally, these expenses can be claimed
for any 12-month period ending in the year but should the return be prepared for
a deceased taxpayer, that period is expanded to encompass claims for any 24-month
period, including the individual’s date of death.
Eligible Medical Expenses
The list of expenses eligible for the medical-expense
tax credit includes, but is
certainly not limited, to:
- full-time attendant care for individuals with severe and prolonged mental or physical
impairments, including all expenses with no maximum
- supervision of an individual eligible for the disability tax credit who is residing
in a Canadian group home devoted to the care of people with a severe and prolonged impairment
- part-time attendant care—up to $10,000 federally (indexed at $11,827 for the Ontario
portion of this credit), increasing to $20,000 (indexed at $23,654 in Ontario) if the
individual died during the year
- 50 per cent of the cost of an air conditioner needed for a severe chronic ailment,
to a maximum of $1,000
- 20 per cent of the cost of a van that is, or will be, adapted for the transportation
of an individual using a wheelchair, to a maximum of $5,000 (indexed at $5,915 in
Ontario)
- expenses incurred for moving to accessible housing, to a maximum of $2,000 (indexed
at $2,368 in Ontario)
- a device such as a wheelchair to assist an individual with a mobility problem
- sign-language interpreter fees
- voice-recognition software necessary to assist a person with a disability
- various medical devices required to assist with impaired seeing or hearing
- tutoring services from a non-related person for individuals with a certified learning
disability or mental impairment
- certain costs related to attending an educational facility with specialized personnel,
equipment or facilities to address a physical or mental handicap
- a portion of reasonable expenses relating to construction or renovation costs incurred to assist an individual with a severe disability gain access to, or be mobile or functional within, their
principal residence
- reasonable expenses for driveway alterations made to enable a mobility-impaired
individual to access a bus
- reasonable travel expenses incurred to
obtain medical services not available in the vicinity of the patient’s home, to the
extent these have not been reimbursed by a provincial health plan, or other source.
See also
Travel Expense Claims.
The list of expenses eligible for the medical-expense credit is lengthy. For a review
of eligible medical expenses, refer to CRA publication
IT519R2 or other related documents.
A refundable tax credit of up to $500 is available to individuals with high medical
expenses and low annual income. That feature was announced in the 1997 federal budget,
which also broadened the rules governing income earned by a trust established for
the benefit of a person with a disability and introduced duty-free goods for individuals
who have disabilities.
Some taxpayers may also qualify for a federal refundable medical-expense supplement
of up to $1,022 (up from $1,000 in 2006). The actual supplement amount is the lesser
of: $1,022; or 25 per cent of attendant-care expenses claimed under the disability-supports
deduction (see below), plus 25 per cent of allowable expenses
claimed under the medical-expense tax credit.
To qualify for this supplement, taxpayers must be 18 or older and have total business and employment
income of at least $2,984 for the year. This supplement is reduced
by five per cent of family net income in excess of $22,627.
The 2004 federal budget introduced a new disability-supports deduction.
It includes attendant-care expenses, plus other disability-support expenses that
have not otherwise been reimbursed and have been incurred to enable eligible individuals
to work, or
attend secondary school or a designated educational institution. Under
this provision the maximum deduction is the lesser of: eligible non-reimbursed expenses;
and earned income for the year. If attending school, it is the lesser of: eligible
non-reimbursed expenses; and the least of three amounts—the amount by which total
income exceeds earned income; $15,000; and $375 times the number of weeks they are
in attendance at that school.
Expenses claimed under the disability-supports deduction, which include various
devices and services to deal with vision, hearing, speaking and mobility restrictions,
among others, cannot also be claimed under the medical-expense tax credit.
Other Points Related to Disability and
Medical Expenses
Use of the disability tax credit on the tax return of a deceased individual may
still be applicable in the year of death if a medical doctor certified before death
that the individual had a “severe and prolonged mental or physical impairment,”
which
was reasonably expected to last for at least 12 months.
The CRA ruled in April 2003 that for the 2002 and subsequent taxation years, seniors
who are living in a retirement home, and who also qualify for the DTC, may claim
attendant-care expenses of up to $10,000 per year (their estate may claim $20,000 for the
year of death).
The attendant-care component of fees paid to a retirement home includes the salary
and wages paid to employees with respect to the following services provided to a
senior, including:
- health care
- meal preparation
- housekeeping in the resident’s personal living space
- laundry for the resident’s personal items
- a transportation driver
- security, where applicable
The retirement home must provide the taxpayer or caregivers with a receipt showing
the applicable amounts paid for attendant care. Eligible seniors who wish to request
an adjustment for the 2002 taxation year may do so either through a letter to the
CRA, which includes the senior’s social insurance number (SIN), address, daytime
phone number, and supporting documentation by completing form T1-ADJ –T1 Adjustment
Request; or online via www.cra-arc.gc.ca/myaccount.
The attendant-care change may also apply to taxation years prior to 2002 if a Notice
of Objection ruling is still outstanding or can still be filed.
Generally, expenses paid to a nursing home qualify as tax-deductible medical expenses,
while those paid to a personal-care institution do not, because the care provided
to patients in a nursing home tends to be more extensive. However, there may be
exceptions to that rule. All or part of the remuneration paid to a personal-care
facility might, for instance, be deductible in situations where an individual with
a severe and prolonged impairment requires specialized equipment, facilities or
personnel.
Caregivers are also able to deduct reasonable expenses associated with the cost
of training required to care for dependent relatives with mental or physical infirmities.
Patients who are incapable of travelling without the assistance of an attendant
may be able to deduct a full range of reasonable travel expenses on behalf of the
person required to assist them travel to a facility at least 80 kilometres away from
home to seek proper medical treatment.
Certain expenses incurred for the purpose of providing care to a person with a disability
are
exempt from the goods and services tax (GST) and harmonized sales tax (HST). These
include a government-funded homemaker service provided to individuals in their
place of residence, various medical devices and some recreational programs. For
a complete list, consult CRA’s guide RC4064, Information Concerning People with Disabilities.
Post-secondary students who are not otherwise reimbursed for the cost of their courses,
or who have received financial assistance such as a grant, benefit, or other allowance,
are generally entitled to a credit for the cost of the courses and certain related
school fees that they or their families must pay.
Full-time students must generally be taking courses
of at least three consecutive weeks duration involving at least 10 hours of study
per week for the duration of the course at a designated educational institution. Typically, this is at a university,
college, or other school in Canada that offers
courses at a post-secondary level,
or internationally at a designated university in a course that leads to a degree.
These students may claim a federal credit of 15 per cent of eligible tuition fees, plus an education credit of 15 per
cent of $400 per month, or $60, with the education
credit allowable only if they are attending a designated educational institution
as defined by the federal government.
In Ontario, this education credit is indexed; students may claim a
monthly provincial credit of up to 6.05 per cent of $461 (indexed), or $28 in 2007.
To qualify for these credits, students need
not be in full-time attendance, but only enrolled as full-time students. Students with disabilities may also be enrolled
part-time to qualify for a full-time credit.
Students who are engaged in part-time studies—defined as a minimum of three consecutive
weeks involving at least 12 hours of course work a month at a designated
educational institution in Canada only (although exceptions might apply for part-time students
who live in Canada and commute to a listed school in the U.S.) may also claim
the tuition fee credit of 15 per cent of eligible fees. They may also deduct $120 a month toward eligibility for
the 15 per cent federal education-tax credit, which
in 2007 is $18; and 6.05 per cent of $138 per month (indexed) toward eligibility for the Ontario provincial education
tax credit, worth $8 in 2007. The same transfer and carry-forward provisions
applicable to full-time students also apply to part-time students.
People with disabilities who
are enrolled in Human Resources and Skills Development Canada (HRSDC) or equivalent provincial/territorial-approved
training programs can deduct those related expenses. Under this adult basic-education (ABE) deduction, such courses may, for instance,
allow taxpayers to finish secondary school, improve their literary skills or upgrade
existing educational credentials, in order to improve their employment chances. (Note: the ABE deduction is retroactive and might
apply to financial assistance received during taxation years after 1996 and before
this announcement in 2001).
The 2004 federal budget expanded provisions of the
education tax credit to include students
who are pursuing career-related post-secondary education at their own expense.
Note, however, that courses taken outside of a university, which are designed to
improve personal skills, such as training to learn a second language, would not
likely qualify for the tuition tax credit. The Income Tax Act states that to qualify
for this credit, such courses must be designed to improve occupational skills and
be held at a certified place of instruction.
Students who are enrolled in two designated-educational institutions in order to achieve a combined course load equivalent to
that of a full-time student may be entitled to the full-time education tax credit
provided at least one of the designated institutions issues the appropriate T2202
or T2202A form if a Canadian institution,
or TL11A, TL11C, or TL11D form if outside the country, to indicate that the courses taken at both schools qualify them for
that status.
There are some mandatory ancillary charges, such as fees for computer services,
labs, health and athletics that are also eligible for the tuition credit. Tuition
fees at a qualified Canadian educational facility must exceed $100 per institution
(this requirement is waived for foreign universities provided the full-time student
is attending a course of at least 13 weeks duration leading to a degree) and be claimed on a calendar-year basis. Courses
must be taken at a post-secondary level or be for occupational skills provided by
a qualified educational institution for students 16 or older.
The 2006 federal budget introduced a textbook tax credit, at $65 per month for each month the student is eligible for the full-time education
tax credit and $20 for each month they are eligible for the part-time education
tax credit.
In 2007, the federal textbook credit is 15 per cent of $65, or $10 per month for
full-time students, and 15 per cent of $20, or $3 for part-time students.
The budget also fully exempted all scholarship, fellowship
or bursary income with respect to post-secondary education or occupational training
from taxation, provided it applies to enrolment in a program that entitles the student
to claim the education tax credit. Previously, only the first $3,000 of such income
was exempt.
Those with access to the education tax credit include
taxpayers who are receiving financial
assistance for their post-secondary education through the EI or a similar provincial
program.
Furthermore, students need not necessarily be in physical attendance at a qualified
institution in Canada to claim either the tuition or education tax credits. Recent
court rulings have interpreted the Income Tax Act differently with respect to whether students must physically attend a designated institution outside Canada in order
to claim the tuition tax credit. However, there now appears to be a general acceptance
that they do not. Therefore, online course participation through, for
example, the Internet website of a recognized post-secondary institution, either in Canada or
internationally, may also qualify the taxpayer for both tax credits.
Unused tuition, education and textbook credits
may be carried forward indefinitely to offset the student’s income taxes in future
years. Alternatively, students may transfer unused federal credits of up to $5,000 (an indexed $5,915 for the Ontario
portion of this credit), reduced by their income in excess of personal credits,
to a supporting person such as a parent or grandparent, but the transferred credits
must be claimed in the year incurred.
Students who are attending an accredited institution outside Canada—generally in
a university level course of at least 13 consecutive weeks duration leading to a
degree—are eligible
to transfer their unused credits provided they owe Canadian income tax. All, or
at least a substantial portion of their income, must be considered taxable income
earned in Canada during the year the tuition fees were incurred.
Consult your certified general accountant if you attend a higher education facility
outside Canada.
A 15 per cent federal tax credit and a 6.05 per cent Ontario provincial tax credit
are available on the repayment of interest on federally or provincially approved
student loans.
To be eligible, however, students must consolidate their loans with an authorized
lender after graduating and assume responsibility for paying interest by the first
day of the seventh month following completion of their studies.
Students have the option of applying that non-transferable credit to either the
current year or up to five subsequent taxation years.
The federal government allows a 15 per cent federal tax credit on up to $2,000 of
eligible pension income (non-indexed). In 2007, this amounts to a maximum of $300.
Provincially, a 6.05 per cent Ontario tax credit on up to $1,183
of eligible pension income (indexed from a base of $1,000), is available for the 2007 taxation year,
which amounts to a maximum credit of $72. Taxpayers may also transfer to their return any unused pension-income
credit belonging to spouses or common-law partners.
Eligible pension income includes:
- life annuity receipts from a superannuation or pension fund, regardless of the recipient’s
age
- annuity receipts under an RRSP or DPSP, amounts received from an RRIF and certain
other non-government annuities, provided the recipient is at least 65 by the end of
the year or the amounts are received as a consequence of a spouse or common-law
partner’s death
- foreign-source pensions, such as United States social
security and United Kingdom pension income, to the extent such income cannot be excluded
as a result of an existing tax convention between Canada and a foreign country
Payments to an LRIF may also qualify for a pension income deduction.
Ineligible pension income includes:
- Canada Pension Plan (CPP), Quebec Pension Plan (QPP) and Old-Age Security (OAS)
- lump-sum payments from a pension or superannuation plan
- death benefits
- retiring allowances
- amounts received under a salary-deferral arrangement
- payments received out of a retirement-compensation arrangement
- any other qualifying income that has been rolled over to an RPP or an RRSP
Beginning in 2007, the federal government allows taxpayers to split pension income
with their spouses or common-law partners, by allocating up to one-half of their
qualified income. When pension income has been allocated in such fashion, both partners
must make a joint election on new Form T1032–Joint Election to Split Pension Income,
which is expected to become available in early 2008.
Amounts transferred to spouses under 65 might not be eligible for the pension deduction.
The federal charitable-donation tax credit is calculated as 15 per cent on the first
$200 of eligible donations, plus 29 per cent of any amount in excess of $200. The
corresponding provincial tax credit for Ontario residents is 6.05 per cent of the
first $200 and 11.16 per cent of any amount over $200.
A credit can be claimed for donations made in the current and/or the preceding five
years (if not already claimed), based on an annual limit—generally 75 per cent
of net income. That increases to 100 per cent in the taxpayer’s year of death and for
the preceding year.
Donations of appreciated capital property
giving rise to capital gains also benefit from higher limits of up to 100 per cent
of net income. Note, however, that the
federal govern-ment introduced a rule,
effective December 5, 2003, which limits the value of a gift of property for charitable-donation purposes to the donor’s cost of the property, where such property has been
donated within three years of acquisition. Check with your certified general accountant
for more details.
Where a donation other than cash has been made to a registered charity, the charity
must issue a receipt for the fair market value of the property at the time the gift
was made.
A taxpayer may claim a credit, with respect to charitable donations made outside
of Canada, provided it is made to an organization that the federal government, or representatives
thereof, have made a gift to during either the current year or the preceding 12
months.
The income inclusion rate on capital gains arising from donations of publicly traded
securities made to recipients other than private foundations used to be 25 per cent.
The 2006 federal budget entirely eliminated the income-inclusion rate for such donations,
effective May 2, 2006. It also eliminated any tax inclusion for qualifying charitable
donations of listed publicly traded securities acquired with employee stock options
as well as, in certain instances, where taxpayers donate ecologically sensitive
land, also effective May 2, 2006.
Consult your certified general accountant if you have questions about the proper
tax treatment of charitable donations you make, particularly if these involve donations
of property.
A federal non-refundable tax credit is available
for taxpayers who purchase eligible
weekly (involving at least four consecutive weekly passes per month), monthly, or
longer transit passes. Public
transit could include transit of various modes, such as local bus, streetcar, subway,
commuter train or bus, or local ferry. This credit took effect July 1, 2006, and
will apply at the rate of 15 per cent for 2007.
This credit is transferable to a spouse or common-law partner, as well as to parents
of dependent children under 19.
To encourage greater involvement in physical-fitness programs, the 2006 federal
budget introduced a fitness tax credit of up to $500 against eligible
fees paid for children under 16 who are enrolled in certain sports and physical-fitness
program activities.
This credit, which took effect January 1, 2007, requires that “substantially all
of the activities (undertaken) must include a significant amount of physical activity
that contributes to cardio-respiratory endurance plus one or more of: muscular strength,
muscular endurance, flexibility, or balance.”
The CRA lists several supervised children’s programs as examples of recreational
activities eligible for this tax credit, including hockey, soccer, karate, football,
basketball, folk dancing, swimming, hiking, horseback riding and sailing.
The programs must be ongoing, which is defined as being either a minimum of eight
weeks duration with at least one eligible physical activity session per week; or,
if a children’s camp, five consecutive days, provided more than 50 per cent of that
time is devoted to physical activity.
A pro-rated credit is available to cover membership and registration fees for programs
in which 50 per cent or fewer of the activities are eligible.
Similarly, membership in a club, association or other organization for two months
or longer may also qualify provided more than 50 per cent of the activities or time
spent on them are devoted to programs deemed eligible for this credit.
For children that are eligible for the disability tax credit, the fitness tax credit
applies if they are under 18; plus a separate $500 credit, for a total of $1,000,
is available to them provided at least $100 is spent on registration fees for an
eligible program.
The taxable benefit for a $500 credit in 2007, at 15 per cent, is $75. For a $1,000
credit, the benefit is $150.
Individuals who are paying Canada pension plan (CPP) and/or employment-insurance
(EI) premiums may claim a 15 per cent federal tax credit and 6.05 per cent provincial
tax credit on the amount paid.
Self-employed individuals who are paying both the employee and employer portion
of CPP premiums may claim a non-refundable credit, for one-half the full 9.9 per
cent contribution amount—in
effect, the employee portion of the CPP (which amounts
to 4.95 per cent)—and a deduction from income for the employer’s half (also 4.95
per cent). However, self-employed taxpayers do not pay EI premiums related to self-employment
income.
For 2007, the maximum federal tax credit available for CPP premiums paid is 15 per
cent of $1,990, or $299. For EI premiums paid it is 15 per cent of $720, or $108.
For Ontario, the corresponding rates are 6.05 per cent of CPP premiums of $1,990,
or $120; and 6.05 per cent of EI premiums of $720, or $44.
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