Article written by Jennifer Black and Dedicated Financial Solutions.
2013 Federal Budget
2013 Federal Budget Summary
Here are highlights of some of the key budget measures for 2013.
The 2013 Federal Budget has a focus on jobs and the economy. It also took aim at what the federal government considers to be tax “loopholes”.
First-time donor’s super credit (Charitable Donations)
The Budget proposes to introduce a temporary credit that will supplement the current charitable donation tax credit with an additional 25% tax credit for first-time donors. As a result, a first-time donor will be entitled to a 40% federal credit for donations of $200 or less, and a 54% federal credit for the portion of donations over $200 but not exceeding $1,000. This new credit will only apply to donations of cash.
An individual will be considered a first-time donor if neither the individual nor the individual’s spouse or common-law partner has claimed the charitable donation tax credit in any taxation year after 2007. The new credit will apply to donations made on or after March 21, 2013 and can only be claimed once in the 2013 or a subsequent taxation year before 2018.
Safety Deposit Box Deduction
The Budget proposes to make the cost of renting a safety deposit box non-deductible for taxation years that begin after March 21, 2013.
Adoption Expense Tax Credit
The Budget proposes to extend the adoption period in which eligible adoption expenses can be claimed. For adoptions finalized after 2012, the period will begin: at the time that an adoptive parent makes an application to register with a provincial ministry responsible for adoption or with an adoption agency licensed by a provincial government; or if an adoption-related application is made to a Canadian court at an earlier time; that earlier time.
For 2013, the Adoption Expense Tax Credit is a non-refundable tax credit equal to 15% of eligible adoption expenses (up to $11,669) relating to an adoption of a child under 18.
Lifetime Capital Gains Exemption
The Budget proposes to increase the lifetime capital gains exemption from $750,000 to $800,000 on gains realized on the disposition of qualified small business shares, qualified farm properties and qualified fishing properties for the 2014 taxation year.
The new limit will apply to all individuals, even those who previously used the lifetime capital gains exemption and will be indexed to inflation for taxation years after 2014.
The Budget proposes to tighten up the rules associated with Non-resident trusts. A non-resident trust will be deemed to be resident in Canada if a trust holds property that grants effective ownership of the property. For example, the property can revert to the taxpayer or the taxpayer can exercise influence over that property. This will apply to all tax years that end after March 21, 2013.
Mineral Exploration Tax Credit for flow-through shares
The Budget proposes to extend the eligibility of the Mineral Exploration Tax Credit, which is equal to 15% of specified mineral exploration expense incurred in Canada, for one year for flow-through agreements entered into on or before March 31, 2014.
Stop international tax evasion program
In order to reduce international tax evasion, the Budget has introduced a program where individuals will be paid up to 15% of any federal tax collected, where they have reported knowledge of international tax non-compliance. This 15% will be paid on federal tax collected in excess of $100,000.
Foreign Property Reporting – Form T1135
The Budget proposes to extend the reassessment period for a taxation year of a taxpayer by three years if: the taxpayer has not reported income from a specified foreign property on their annual income tax return; and Form T1135 was not filed correctly or on time.
For 2013 and subsequent years, Form T1135 will be modified to request more detailed information about each specified foreign property. Additionally, CRA’s filing process will be updated to include a filing reminder on the Notice of Assessment, to clarify filing instructions on Form T1135 and, eventually, to allow the form to be filed electronically.
** The information in this article was extracted from the “Federal Budget 2013” by Dynamic Funds.