Finance- Tax Exam

2018 Rates, Credits And Other Data

Information Applicable To Individuals Federal Tax Rates For Individuals

Taxable Income Marginal Rate In Excess Of Federal Tax On Excess

$ -0- $ -0- 15.0% 46,605 6,991 20.5% 93,208 16,544 26.0%

144,489 29,877 29.0% 205,842 47,670 33.0%

Federal Tax Credits For Individuals - Personal Credits (ITA 118) Reference

118(1)(a) Married Persons 15% of $11,809 ($1,771).

118(1)(a) Spousal 15% of $11,809 ($1,771), less 15% of the spouse’s Net Income For Tax Purposes. Base amount increased by $2,182 (to $13,991) if the spouse is mentally or physically infirm. Not available when the spouse’s income is more than $11,809 (or $13,991).

118(1)(b) Eligible Dependant 15% of $11,809 ($1,771), less 15% of the eligible dependant’s Net Income For Tax Purposes. Base amount increased by $2,182 (to $13,991) if the eligible dependant is mentally or physically infirm. Not available when the eligible dependant’s income is more than $11,809 (or $13,991).

118(1)(b.1) Canada Caregiver For Child Under 18 15% of $2,182 ($327).

118(1)(c) Single Persons 15% of $11,809 ($1,771).

118(1)(d) Canada Caregiver 15% of $6,986 ($1,048), reduced by 15% of the dependant's income in excess of $16,405.

118(1)(e) Canada Caregiver - Additional Amount If either the income adjusted infirm spousal credit base or the income adjusted infirm eligible dependant credit base is less than the spouse or eligible dependant's income adjusted credit base ($6,986 - less the spouse or dependant's income in excess of $16,405), an additional Canada caregiver credit is available based on 15% of the deficiency.

118(2) Age 15% of $7,333 ($1,100). The base for this credit is reduced by the lesser of $7,333 and 15% of the individual’s net income in excess of $36,976. Not available when income is more than $85,863. If the individual cannot use this credit, it can be transferred to a spouse or common-law partner.

118(3) Pension 15% of up to $2,000 of eligible pension income for a maximum credit of $300 [(15%)($2,000)]. If the individual cannot use this credit, it can be transferred to a spouse or common-law partner.

118(10) Canada Employment Credit 15% of up to $1,195. This produces a maximum credit of $179.

2018 Rates, Credits And Other Data i

Information Applicable To Individuals

For your convenience, this information, as well as the Chapter 5 Appendix of common CCA rates, is available online as a .PDF file.

Other Common Federal Personal Credits (Various ITA) 118.01 Adoption Expenses Credit 15% of eligible expenses (reduced by any reimbursements) up to

a maximum of $15,905 per adoption. This results in a maximum credit of $2,386.

118.02 Public Transit Passes Credit Repealed for 2018 and subsequent years.

118.031 Children’s Arts Credit Repealed for 2017 and subsequent years.

118.041 Home Accessibility Credit 15% of lesser of $10,000 and the amount of qualifying expendi- tures for the year.

118.05 First Time Home Buyer’s Credit 15% of $5,000 ($750) of the cost of an eligible home.

118.06 Volunteer Firefighters Credit 15% of $3,000 ($450) for qualifying volunteers.

118.07 Volunteer Search And Rescue Workers Credit 15% of $3,000 ($450) for qualifying volunteers.

118.1 Charitable Donations - Regular The general limit on amounts for this credit is 75% of Net Income. There is an addition to this general limit equal to 25% of any taxable capital gains and 25% of any recapture of CCA resulting from a gift of capital property. In addition, the income inclusion on capital gains arising from a gift of some publicly traded shares is reduced from one-half to nil. For individuals, the credit is equal to:

[(15%)(A)] + [(33%)(B)] + [(29%)(C)] where:

A = The first $200 of eligible gifts. B = The lesser of:

• Total gifts, less $200; and • Taxable Income, less $205,842.

C = The excess, if any, by which the individual's total gifts exceed the sum of $200 plus the amount determined in B.

118.1(3.1) Charitable Donations - First-Time Donor's Super Credit Not available after 2017.

118.2 Medical Expenses The medical expense tax credit is determined by the following formula:

[15%] [(B - C) + D], where:

B is the total of an individual’s medical expenses for himself, his spouse or common-law partner, and any of his children who have not reached 18 years of age at the end of the year.

C is the lesser of 3% of the individual’s Net Income For Tax Purposes and $2,302 (2018 figure).

D is the total of all amounts each of which is, in respect of a dependant of the indi- vidual (other than a child of the individual who has not attained the age of 18 years before the end of the taxation year), an amount determined by the formula:

E - F, where:

E is the total of the dependant’s medical expenses F is the lesser of 3% of the dependant’s Net Income For Tax Purposes and $2,302

(2018 figure).

118.3 Disability - All Ages 15% of $8,235 ($1,235). If not used by the disabled individual, it can be transferred to a person claiming that individual as a dependant.

ii 2018 Rates, Credits And Other Data

Information Applicable To Individuals

118.3 Disability Supplement - Under 18 And Qualifies For The Disability Tax Credit 15% of $4,804 ($721), reduced by the total of amounts paid for attendant care or supervision in excess of $2,814 that are deducted as child care costs, deducted as a disability support amount, or claimed as a medical expense in calculating the medical expense tax credit.

Education Related Credits 118.5 • Tuition Fees Which Includes Examination And Ancillary Fees

• 15% of qualifying tuition fees • 15% of examination fees for both post-secondary examinations and examinations

required in a professional program • 15% of ancillary fees that are imposed by a post-secondary educational institution

on all of their full or part-time students. Up to $250 in such ancillary fees can be claimed even if not required of all students.

118.6(2) • Education Repealed for 2017 and subsequent years.

118.6(2.1) • Textbook Repealed for 2017 and subsequent years.

118.62 • Interest On Student Loans 15% of interest paid on qualifying student loans.

118.9 • Transfer Of Tuition Credit If the individual cannot use the credit, is not claimed as a dependant by his spouse, and does not transfer the unused credit to a spouse or common-law partner, then a parent or grandparent of the individual can claim up to $750 [(15%)($5,000)] of any unused tuition credit. The amount that can be transferred is reduced by the amount of the credit claimed by the student for the year.

118.7 Employment Insurance 15% of amounts paid by employees up to the maximum Employ- ment Insurance premium of $858 (1.66% of $51,700). This produces a maximum tax credit of $129 [(15%)($858)].

118.7 Canada Pension Plan 15% of amounts paid by employees up to the maximum Canada Pension Plan contribution of $2,594 [4.95% of ($55,900 less $3,500)]. This produces a maximum tax credit of $389 [(15%)($2,594)]. For self-employed individuals, the payment is $5,188 ($2,594 times 2).

122.51 Refundable Medical Expense Supplement The individual claiming this amount must be over 17 and have earned income of at least $3,566. The amount is equal to the lesser of $1,222 and 25/15 of the medical expense tax credit. The refundable amount is then reduced by 5% of family Net Income in excess of $27,044. Not available when family income is more than $51,484.

122.8 Refundable Child Fitness Credit Repealed for 2017 and subsequent years.

122.9 Refundable Teacher And Early Childhood Educator School Supply Tax Credit A maximum of 15% of up to $1,000 ($150) of eligible expenditures that are made by eligible educators.

127(3) Political Donations Three-quarters of the first $400, one-half of the next $350, one-third of the next $525, to a maximum credit of $650 on donations of $1,275.

127.4 Labour Sponsored Venture Capital Corporations (LSVCC) Credit The federal credit is equal to 15 percent of acquisitions of provincially registered LSVCCs.

2018 Rates, Credits And Other Data iii

Information Applicable To Individuals

ITA 82 and Dividend Tax Credit ITA 121

• Eligible Dividends These dividends are grossed up by 38%. The federal dividend tax credit is equal to 6/11 of the gross up. The credit can also be calculated as 15.02% of the grossed up dividends, or 20.7272% of the actual dividends received.

• Non-Eligible Dividends These dividends are grossed up by 16%. The federal dividend tax credit is equal to 8/11 of the gross up. The credit can also be calculated as 10.0313% of the grossed up dividends, or 11.6363% of the actual dividends received.

Other Data For Individuals ITA 82 Dividend Gross Up

Eligible Dividends For these dividends, the gross up is 38% of dividends received.

Non-Eligible Dividends For these dividends, the gross up is 16% of dividends received.

Chapter 4 OAS Clawback Limits The tax (clawback) on Old Age Security (OAS) benefits is based on the lesser of 100% of OAS benefits received, and 15% of the amount by which "threshold income" (Net Income For Tax Purposes, calculated without the OAS clawback) exceeds $75,910.

Chapter 4 EI Clawback Limits The tax (clawback) on Employment Insurance (EI) benefits under the Employment Insurance Act is based on the lesser of 30% of the EI benefits received, and 30% of the amount by which "threshold income" exceeds $64,625 (1.25 times the maximum insur- able earnings of $51,700). For this purpose, "threshold income" is Net Income For Tax Purposes, calculated without the OAS or EI clawbacks.

Chapter 9 Child Care Expenses The least of three amounts:

1. The amount actually paid for child care services. If the child is at a camp or boarding school, this amount is limited to a weekly amount $275 (any age if eligible for disability tax credit), $200 (under 7 year of age), or $125 (age 7 through 16 or over 16 with a mental or physical impairment).

2. The sum of the Annual Child Care Expense Amounts for the taxpayer’s eligible children. The per child amounts are $11,000 (any age if eligible for disability tax credit), $8,000 (under 7 year of age), or $5,000 (age 7 through 16 or over 16 with a mental or physical impairment).

3. 2/3 of the taxpayer’s Earned Income (for child care expenses purposes).

Chapter 10 RRSP Deduction Room For 2018, the addition to RRSP deduction room is equal to:

• the lesser of $26,230 and 18% of 2017 Earned Income, • reduced by the 2017 Pension Adjustment and any 2018 Past Service Pension Adjustment, • and increased by any 2018 Pension Adjustment Reversal.

Chapter 11 Lifetime Capital Gains Deduction For 2018, the deduction limit for dispositions of shares of qualified small business corporations is $848,252. There is an additional amount for farm or fishing properties of $151,748, providing a total of $1,000,000 for such properties.

Provincial Tax Rates And Provincial Credits For Individuals Provincial taxes are based on Taxable Income, with most provinces adopting multiple rates. The number of brackets range from three to five. Provincial tax credits are generally based on the minimum provincial rate applied to a credit base that is similar to that used for federal credits. In addition to regular rates, two provinces use surtaxes.

iv 2018 Rates, Credits And Other Data

Information Applicable To Individuals

Information Applicable To Individuals And Corporations ITR 4301 Prescribed Rate The following figures show the base rate that would be used in calculations

such as imputed interest on loans. It also shows the rates applicable on amounts owing to and from the CRA. For recent quarters, the interest rates were as follows:

Year Quarter Base Rate Owing From* Owing To

2016 All 1% 3% 5%

2017 All 1% 3% 5%

2018 I 1% 3% 5%

2018 II 2% 4% 6%

*The rate on refunds to corporations is limited to the base rate, without the additional 2%.

Automobile Deduction Limits

• CCA is limited to the first $30,000 of the automobiles cost, plus applicable GST/HST/PST (not including amounts that will be refunded through input tax credits).

• Interest on financing of automobiles is limited to $10 per day. • Deductible leasing costs are limited to $800 per month (other constraints apply). • Operating Cost Benefit = $0.26 per kilometre. • Deductible Rates = $0.55 for first 5,000 kilometres, $0.49 for additional kilometres.

CCA Rates See Appendix to Chapter 5.

Quick Method Rates (GST Only) Percentage On GST Included Sales

First $30,000 On Excess

Retailers And Wholesalers 0.8% 1.8% Service Providers And Manufacturers 2.6% 3.6%

Note Different rates apply in the provinces that have adopted an HST system.

Information Applicable To Corporations Federal Corporate Tax Rates are as follows (federal tax abatement removed):

General Business (Before General Rate Reduction) 28% General Business (After General Rate Reduction Of 13%) 15% Income Eligible For M&P Deduction 15% Income Eligible For Small Business Deduction 10%

Part IV Refundable Tax 38-1/3%

Part I Refundable Tax On Investment Income Of CCPC (ART) 10-2/3% Reference

125(1) Small Business Deduction is equal to 18% of the least of:

A. Net Canadian active business income.

B. Taxable Income, less:

1. 100/28 times the ITA 126(1) credit for taxes paid on foreign non-business income, calculated without consideration of the additional refundable tax under ITA 123.3 or the general rate reduction under ITA 123.4; and

2. 4 times the ITA 126(2) credit for taxes paid on foreign business income, calculated without consideration of the general rate reduction under ITA 123.4.

C. The annual business limit of $500,000, less any portion allocated to associated corpo- rations, less the reduction for large corporations.

2018 Rates, Credits And Other Data v

Information Applicable To Corporations

125.1 Manufacturing And Processing Deduction is equal to 13% of the lesser of:

A. Manufacturing and processing profits, less amounts eligible for the small business deduction; and

B. Taxable Income, less the sum of:

1. the amount eligible for the small business deduction; 2. 4 times the foreign tax credit for business income calculated without consider-

ation of the ITA 123.4 general rate reduction; and 3. "aggregate investment income" (of CCPCs) as defined in ITA 129(4).

123.4(2) General Rate Reduction is equal to 13% of Full Rate Taxable Income. This is Taxable Income, reduced by; income eligible for the small business deduction, income eligible for the M&P deduction and the corporation’s "aggregate investment income" for the year.

126(1) Foreign Tax Credits For Corporations The Foreign Non-Business Income Tax Credit is the lesser of:

• The tax paid to the foreign government (for corporations, there is no 15% limit on the foreign non-business taxes paid); and

• An amount determined by the following formula:

Foreign Non usiness Income

Adjusted Division B Inc

� B

ome Tax Otherwise Payable

�

� �

�

� � [ ]

126(2) The Foreign Business Income Tax Credit is equal to the least of:

• The tax paid to the foreign government;

• An amount determined by the following formula:

Foreign Business Income

Adjusted Division B Income

�

� �

�

� � [ ]Tax Otherwise Payable ; and

• Tax Otherwise Payable for the year, less any foreign tax credit taken on non-business income under ITA 126(1).

129(4) Aggregate Investment Income is the sum of:

• net taxable capital gains for the year, reduced by any net capital loss carry overs deducted during the year; and

• income from property including interest, rents, and royalties, but excluding divi- dends that are deductible in computing Taxable Income. Since foreign dividends are generally not deductible, they would be included in aggregate investment income.

123.3 Additional Refundable Tax On Investment Income (ART) is equal to 10-2/3% of the lesser of:

• the corporation’s “aggregate investment income” for the year [as defined in ITA 129(4)]; and

• the amount, if any, by which the corporation’s Taxable Income for the year exceeds the amount that is eligible for the small business deduction.

186(1) Part IV Tax is assessed at a rate of 38-1/3% of portfolio dividends, plus dividends received from a connected company that gave rise to a dividend refund for the connected company as a result of the payment.

vi 2018 Rates, Credits And Other Data

Information Applicable To Corporations

129(3)(a) Refundable Portion Of Part I Tax Payable is defined as the least of three items:

1. the amount determined by the formula

A - B, where

A is 30-2/3% of the corporation’s aggregate investment income for the year, and

B is the amount, if any, by which the foreign non-business income tax credit exceeds 8% of its foreign investment income for the year.

2. 30-2/3% of the amount, if any, by which the corporation’s taxable income for the year exceeds the total of:

• the amount eligible for the small business deduction; • 100 ÷ 38-2/3 of the tax credit for foreign non-business income; and • 4 times the tax credit for foreign business income.

3. the corporation’s tax for the year payable under Part I.

129(3) Refundable Dividend Tax On Hand (RDTOH) is defined as follows:

• The corporation’s RDTOH at the end of the preceding year; less • The corporation’s dividend refund for its preceding taxation year; plus • The Refundable Portion Of Part I tax for the year; plus • The total of the taxes under Part IV for the year.

89(1) General Rate Income Pool A CCPC’s General Rate Income Pool (GRIP) is defined as follows:

• The GRIP balance at the end of the preceding year; plus • 72% of the CCPC’s Taxable Income after it has been reduced by amounts eligible for the

small business deduction and aggregate investment income; plus • 100% of eligible dividends received during the year; plus • adjustments related to amalgamations and wind-ups; less • eligible dividends paid during the preceding year.

Tax Related Web Sites

GOVERNMENT Canada Revenue Agency www.cra.gc.ca

Department of Finance Canada www.fin.gc.ca

CPA FIRMS BDO www.bdo.ca/en-ca/services/tax/domestic-tax-services/overview/

Deloitte. www2.deloitte.com/ca/en/pages/tax/topics/tax.html

Ernst & Young www.ey.com/CA/en/Services/Tax

KPMG www.kpmg .com/ca/en/services/tax

PricewaterhouseCoopers www.pwc.com/ca/en/tax/publications.jhtml

OTHER CPA Canada www.CPAcanada.ca

Canadian Tax Foundation www.ctf.ca

ProFile Tax Suite www.intuit.ca/professional-tax-software/index.jsp

2018 Rates, Credits And Other Data vii

Tax Related Web Sites

Appendix - CCA Rates For Selected Assets

This Appendix lists the CCA Class and rate for assets commonly used in business. Restrictions and transitional rules may apply in certain situations. ITR Part XI contains detailed descrip- tions of the CCA Classes.

Asset Class Rate

Aircraft (including components) 9 25% Airplane runways 17 8% Automobiles, passenger

• Cost < or = Prescribed amount ($30,000 in 2018) 10 30% • Cost > Prescribed amount 10.1 30%

Automotive equipment 10 30%

Bar code scanners 8 20% Billboards 8 20% Boats, canoes and other vessels 7 15% Bridges, canals, culverts and dams 1 4% Buildings Acquired Before 1988 3 5% Buildings Acquired After 1987 - No Separate Class 1 4% Buildings (New Only) Acquired After March 18, 2007:

• Manufacturing and Processing In Separate Class 1 1 10% • Non-Residential In Separate Class 1 1 6%

Buses 10 30%

Calculators 8 20% Cash registers 8 20% China, cutlery and tableware 12 100% Communications equipment

(including cellphones too dumb to be smartphones) 8 20% Computer hardware and systems software,

(including smartphones and tablets) acquired after March 18, 2007 50 55%

Computer software (applications) 12 100% Copyrights 14 Straight-line

Data network infrastructure equipment acquired after March 22, 2004 46 30%

Dies, jigs, patterns, and molds 12 100% Docks, breakwaters and trestles 3 5%

Electrical advertising billboards 8 20% Electronic point-of-sale equipment 8 20% Equipment (not specifically listed elsewhere) 8 20%

Fences 6 10% Films 10 30% Franchises (limited life) 14 Straight-line Franchises (unlimited life) 14.1 5% Furniture and fixtures

(not specifically listed elsewhere) 8 20%

Goodwill 14.1 5%

Instruments, dental or medical (See Tools)

Kitchen utensils (See Tools)

viii 2018 Rates, Credits And Other Data

Tax Related Web Sites

Asset Class Rate

Land N/A N/A Landscaping N/A Deductible Leasehold improvements 13 Straight-line Licences (limited life) 14 Straight-line Licences (unlimited life) 14.1 5% Linen 12 100%

Machinery and equipment (not specifically listed elsewhere) 8 20%

Manufacturing and processing equipment • acquired before March 19, 2007 43 30% • acquired after March 18, 2007 and before 2016 29 50%

Straight-Line • acquired after 2015 53 50%

Office equipment (not specifically listed elsewhere) 8 20% Outdoor advertising billboards 8 20%

Parking area and similar surfaces 17 8% Patents (limited life) 44 25% Patents (unlimited life) 14.1 5% Photocopy machines 8 20% Portable buildings and equipment

used in a construction business 10 30% Power operated movable equipment 38 30%

Radio communication equipment 8 20% Railway cars

• acquired after February 27, 2000 7 15% • acquired before February 28, 2000 35 7%

Roads 17 8%

Sidewalks 17 8% Software (applications) 12 100% Software (systems) 10 30% Storage area 17 8% Storage tanks, oil or water 6 10%

Tangible Capital Assets (not specifically listed elsewhere) 8 20%

Taxicabs 16 40% Telephone systems 8 20% Television commercials 12 100% Tools

• acquired after May 1, 2006 (under $500) 12 100% • acquired after May 1, 2006 ($500 or over) 8 20%

Trailers 10 30% Trucks and tractors for hauling freight 16 40% Trucks (automotive), tractors and vans 10 30%

Uniforms 12 100%

Video games (coin operated) 16 40% Video tapes 10 30% Video tapes for renting 12 100%

Wagons 10 30%

2018 Rates, Credits And Other Data ix

Tax Related Web Sites