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Time again to think of tax strategies

With federal and provincial governments spending money like drunken sailors, this tax season people are advised to take advantage of all the deductions and credits they can before many start disappearing.

With federal and provincial governments spending money like drunken sailors, this tax season people are advised to take advantage of all the deductions and credits they can before many start disappearing. “I believe we're going to be in the lowest tax environment we'll see for a long time,” said Evelyn Jacks of The Knowledge Bureau, at an annual tax education workshop in Leduc.

While the federal government has combined a number of children's programs under the Canada Child Benefit, it has eliminated the Family Tax Cut as of 2016, and credits for arts and fitness programs plus education and text book amounts will be gone as of 2017. It's also expected there will be a tax increase on capital gains of investments. Albertans filing their 2016 returns by the April 30 deadline face 10 federal and provincial tax brackets, compared to six in 2015. The number expands to 11 for 2017, when a 43 per cent bracket will cover only a $200 range, for taxable income between $202,600 and $202,800.

The big relief is that there was no elimination of pension income splitting last year, as had been feared. Spouses or common-law partners can still split up to one-half of a person's eligible pension income to the other, where eligible pension income includes corporate pensions, plus Registered Retirement Income Fund and Life Income Fund and life annuity payments. Canada Pension Plan and Old Age Security benefits, as well as irregular Registered Retirement Savings Plan withdrawals, are not eligible pension income.

Pension income splitting has four major benefits: the transfer of money from a higher tax bracket to a lower bracket, preservation of most or all of the age amount tax credit for the higher income person, allowing a person without their own pension income to also claim the pension income tax credit, plus avoiding claw back of some or all OAS benefits for the higher income partner. You start losing the federal age amount tax credit for being 65 or older if 2016 net income is greater than $35,927 and lose it totally if income exceeds $83,427. There are similar thresholds for Alberta credits. You begin paying back OAS benefits if 2016 net income is more than $73,756 and lose them altogether at $119,590.

People who will have significant income after age 65, due to sizeable company pensions or RRSP holdings, may consider an RRSP meltdown, namely taking money out of their RRSP while working part-time or taking early retirement before 65. Thus they may reduce taxation and claw backs after age 65.

Being married or living common-law allows combining charitable donations and medical expenses on one person's return. Donation credits are less on the first $200, so combining donations means only one person claims the lower credit instead of both, and the higher income person often needs those credits more. Conversely, a person can claim a federal tax credit on allowable medical expenses greater than $2,237 or three per cent of their net income, whichever threshold is lower, so you are usually best off having expenses for both people claimed by the lower income person with a lower threshold. You can claim the disability tax credit if you have a registered medical practitioner fill out form T2201 indicating significant medical or mental problems and CRA approves your application. Claiming the disability amount may affect whether you can also claim expenses for attendant care at home or some expenses in a care facility. While some home renovations have been claimable as medical expenses, some home accessibility expenses may now also be claimed by certain people if they are eligible expenses for a qualifying renovation of an eligible dwelling.

Some or all of the disability amount may be transferred to a supporting person. Similarly, a person caring for a dependant with a severe medical or mental impairment might be able to claim the caregiver amount, depending on the dependant's income. You can claim credits for your own medical expenses and certain public transit passes, as well as both of those for your children under age 19.

Just filing a tax return lets low income people receive quarterly GST benefits and low income seniors get the guaranteed income supplement.

Ray Turchansky is an income tax consultant.