Canadians will ring in the new year with a number of tax changes that will affect their bottom line.
Here’s a look at some of them.
Education and textbook tax credit
The federal government is ending four child tax credits this year: arts, fitness, education and textbooks.
The education and textbook tax credits are disappearing, but there’s no need to rush out and buy your textbooks before 2017 – unused tax credits from 2016 can be used in future returns. (Under the credit, full-time students can claim $400 per month of enrollment, and $65 a month for textbooks.)
The Liberals increased Canada Student Grants, which are higher for students from low-income families, in the 2016 budget.
Tuition will continue to be a tax credit.
Children’s Fitness and Arts Tax Credit
Justin Trudeau’s Liberal government halved the Children’s Fitness and Arts Tax Credit in the 2016 budget, from $1,000 to $500. It was introduced in 2006 by Stephen Harper’s Conservative government, and originally applied only to sports.
The Liberals’ budget is also cancelling income splitting for families, a tax measure that allowed someone to transfer up to $50,000 of income to a spouse with lower income if they had a child under 18 years of age. The tax credit for income splitting was capped at $2,000.
WATCH: Prime Minister Justin Trudeau spoke about the Canada Child Benefit and said that the credit is expected to help remove 300,000 Canadian children out of poverty.
Offsetting those changes are the Canada Child Benefit and changes to Employment Insurance benefits introduced in 2016.
“High income earners in most provinces will pay more but for the majority of Canadians, these two changes will mean more money in their pockets,” Canadian Taxpayers Federation federal director Aaron Wudrick said Wednesday in a news release.
Several other changes at the federal level will affect life insurance, business owners selling their companies and some mutual funds.
READ: Canada Child Benefit not enough to change major decisions: economists
Insurance
Under changes enacted by the previous Canadian government, the tax treatment of universal life insurance policies will be less favourable starting Jan. 1. New policy holders will see a decrease in their ability to build up investment gains above death benefit premiums on a tax-free basis.
The new formula for calculating insurance will make policies a little more expensive or reduce death benefits, says Jason Safar, a PricewaterhouseCoopers partner specializing in personal taxes.
READ: Liberals facing backlash over loss of ‘Harper-era’ tax credits
WATCH: Financial expert Preet Banerjee looks at what families got in the 2016 federal budget.
The federal government and provinces have already mostly implemented tax changes announced in their 2016 budgets.
“There are a few changes that are unique for 2017 but the average Canadian is not going to see much difference between 2016 and 2017,” said Jamie Golombek, managing director of tax and estate planning for CIBC Wealth Advisory Services.
Jason Safar, of PricewaterhouseCoopers, said more changes are possible in 2017. He said the federal government could eliminate more tax credits and could feel pressure from possible personal and corporate tax cuts in the United States.
“I do find it interesting to consider that given (Donald) Trump’s election in the U.S. and the promise of lower tax rates in the U.S., what is going to happen with Canadian tax rates?” Safar said.
Finally, various tax amounts – including maximum RRSP contributions, tax brackets and maximum amounts of various credits – will increase in 2017 to reflect inflation but the tax-free savings account limit remains at $5,500.
Provincially:
Ontarians will get an eight-per-cent rebate on rising hydro bills and see the maximum total cost of borrowing for a payday loan lowered to $18 per $100 borrowed from $21 per $100.
The province is also doubling the first-time homebuyers’ maximum land transfer tax refund to $4,000 and is introducing its carbon cap and trade system.
READ: Rising energy costs and poverty collide in rural Ontario
British Columbia is scrapping medical services plan premiums for children and young adults attending school.
READ: B.C. government to reverse MSP premium hike
Alberta is reducing its small business corporate income tax rate from three per cent to two per cent. It is also introducing a carbon tax on the purchase of fossil fuels, offset with a rebate for low- and middle-income earners.
READ: Wildrose votes to fight to repeal Alberta’s carbon tax
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