When you open your 2007 tax return package, you will notice several new tax savings opportunities. Following is a line-by-line guide to what's new on the T1 Return and Federal Tax Schedule 1:
T1 RETURN
Line 116 & Line 210: Pension income splitting The ability to split pension income is the most significant change for affected individuals on the 2007 return. It could save a couple a substantial amount of income tax. Line 116, titled "Elected split-pension amount," is for reporting the split-pension income allocated from a partner. This corresponds with a new Line 210 titled "Deduction for elected split-pension amount." This is where the amount transferred to the lower-income partner is deducted.
Note that new Form T1032, "Joint Election to Split Pension Income," which is available in the tax package as well as on the CRA Web site (www.cra-arc.gc.ca), must also be completed and signed by each spouse or partner. Lines 117 & 213: Universal Child Care Benefit Although not new this year, 2007 will be the first full calendar year that the Universal Child Care Benefit (UCCB) has been in place. If you have children under the age of six in 2007, you should have been receiving, and reporting, $1,200 per child ($100 monthly) of UCCB income.
If you had to repay UCCB income in 2006, a deduction for the repaid amount can be claimed on line 213. The amount of any UCCB repaid can be found in Box 12 on your RC62 slip.
Note that the UCCB must be reported on the lower-income partner's return, regardless of which spouse or partner actually received the payments.
Line 254: Capital gains deduction
If you sold qualified farm or fishing property or small business corporation shares during 2007, you may be entitled to claim the newly enhanced lifetime capital gains exemption (LCGE). The previous limit of $500,000 was increased to $750,000 last year, but the extra $250,000 of exemption will only apply to dispositions of qualifying property on or after March 19, 2007.
SCHEDULE 1: CALCULATION OF FEDERAL TAX
Federal tax rate The lowest personal income tax rate has been reduced from 15.5% to 15%.
Line 300: Basic personal amount
The basic personal amount has been increased (beyond inflation indexing) to $9,600.
Line 303: Spouse or common-law partner amount The amount that can be claimed for a spouse or partner has been increased to match the basic personal amount and has also been upped to $9,600 for 2007. (It is still reduced, however, based your partner's income.)
Line 365: Children's fitness amount
If you had a child who was under 16 at the beginning of 2007, and enrolled in a prescribed program of physical activity, you can claim up to $500 of registration fees paid. Line 367: Amount for children born in 1990 or later This line represents the new child tax credit, which is equal to $2,000 per child under the age of 18 at the end of the year. The amount may be claimed by either parent. Note that the full $2,000 amount may be claimed regardless of when a child was born or adopted in 2007.