2017 Tax changes and how you may be affected

It has been said that there are two certainties in life – death and taxes. This adage may be true, but taxes are a certainty we all must face every year!  As we head into the tax season, let’s look at some of the significant changes you can expect to see on your tax returns this April.

Personal Taxes

  • Caregiver credits: For 2017 and future tax years this credit is not available for non-infirm seniors that don’t live with their adult children. In prior years you were permitted to claim a credit for seniors if they lived with you, even if they were not infirm.
  • Public transit and arts and fitness credits: For 2017 and future years, you can no longer claim tax credits for your monthly bus or train passes, nor can you claim credits for your children’s arts or fitness classes.

Business and Corporate Taxes

  • Income splitting for small business and professionals: Income splitting or “sprinkling” among family members has been significantly curtailed. Click HERE for the latest update and discussion on the most current proposed changes.
  • Corporate tax rate: The tax rate on active business income in Ontario will fall to 13.5% in 2018 from the current 15% rate for the first $500,000 of income. The federal government intends to lower the small business tax rate to 10 per cent effective January 1, 2018, and to 9 per cent, effective January 1, 2019. The Ontario government has committed to reducing the Ontario rate to 3.5% effective January 1, 2018. Click HERE for more information on the reduction of the small business corporate income tax rate and watch out for the upcoming Ontario provincial elections that could result in changes to the Ontario finance minister’s proposal.

Real estate

  • Reporting the sale of your principal residence: In case you missed it last year, beginning in 2016 the CRA changed their administrative policy and now requires reporting on your tax return the sale (or change in use) of your principal residence. Failure to report the sale of your home results in a penalty of $100/month up to $8,000 (yes, you read that right!). While in 2016 the CRA said they would not impose penalties “except in the most excessive of cases,” starting 2017, if you forget to report, it will cost you. Furthermore, penalties are never deductible for tax purposes.
  • Unreported real estate sales: Home and condo flipping in hot real estate markets prompted CRA to remove the statute of limitation on sale or dispositions of real estate. The normal reassessment period is three (or four) years. When the CRA catches unreported sales, it assesses these sales on account of business sales (not capital gains) resulting double the tax, in addition there are interest and penalties which could be up to 50% of unreported taxes.
  • Serious Business: From April 2015 to September 2017, the CRA audited 21,280 files in Ontario alone, recovered $331.2 million and applied 1,143 penalties totaling $32.8 million. The highest penalty was almost $2.5 million. CRA examines information obtained from third-party data to obtain information from sales of properties. For more information on how the Canada Revenue Agency is addressing non-compliance in the real estate sector, click HERE.
  • Changes to voluntary disclosure program and what to do about unreported sales. Under certain circumstances, voluntary disclosure is available to provide penalty (but not tax) relief on unreported transactions. As of January 1, 2018, the voluntary disclosure program has also changed if there is indication of intentional conduct on the part of the taxpayer. So, think twice before not reporting sales of real estate!

Roman Belenky, CPA, CGA, BAS, is a supervisor at Sloan Partners focusing on tax planning and compliance.  Feel free to email or call 416-665-7735 (ext. 227) for all of your tax planning needs.

Disclaimer: This article is intended for educational and informational purposes only. It is not intended in any way whatsoever to provide tax advice. The reader should be aware that certain legislative changes and government announcements have been proposed and are subject to change. None of the persons involved in the preparation of this article accepts any responsibility for its contents or the consequences that arise from its use.

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