Another federal Budget has come and gone. Unlike Budget 2016, which contained several tax breaks (among other tax increases), Budget 2017 mostly consists of tightening rules and closing loopholes—there are few tax breaks to be found. Below are some of the more note-worthy budget measures that generated quite a buzz among those who attended the Budget lock-up in Ottawa.
Generally, taxpayers are required to include the value of their work in progress (“WIP”) in their income whether or not they have actually received payment for performing the work. However, certain professionals such as lawyers, doctors, veterinarians, and chiropractors are not required to include the WIP in their income until the work is billed to the client. Budget 2017 proposes to eliminate billed basis accounting effective in taxation years that begin on or after March 22, 2017, with a transitional period. So going forward, professionals must include WIP in their taxable income even though they have yet to bill the client for that work.
Taxi and Ride-Sharing Services
Effective July 1, 2017, Budget 2017 proposes to extend the GST/HST on taxi operators to ride-sharing services. Tax operators are required to collect and remit GST/HST on their fares with no dollar exemption limit. In order to ensure GST/HST is consistently applied, ride-sharing service providers will be required to register for GST/HST and charge the tax on their fares.
Review of Tax Planning Using Private Corporations
The Budget 2017 documents revealed that the government has been undergoing further reviews of various planning strategies relating to the use of private corporations that reduce personal income taxes of high income earners. The government will be releasing a paper in the next few months which will contain proposed policy responses to various tax planning strategies involving private corporations—no specifics were provided with respect to which kinds of strategies will be targeted.
Disability Tax Credit
Budget 2017 proposes to amend the eligibility criteria for the disability tax credit. One of the conditions required for the credit is that a medical practitioner certifies on CRA Form T2201 that the taxpayer has a physical or mental impairment that markedly restricts the taxpayer’s ability to perform a basic life activity. Generally, medical practitioners include medical doctors, optometrists, psychologist, etc. Applicable to certifications made on or after March 22, 2017, nurse practitioners are granted the power to certify a taxpayer’s eligibility for the credit.
Public Transit Tax Credit
Budget 2017 announced that the public transit tax credit will be repealed as of July 1, 2017. The non-refundable credit provided a 15% tax reduction with respect to eligible public transit passes such as monthly passes and electronic fare cards.
Medical Expense Tax Credit
Budget 2017 proposes to expand the medical tax credit to include costs paid for the purpose of conceiving a child regardless of whether the medical procedures involved are not medically indicated due to infertility. This change clarifies that such reproductive technologies are eligible for the credit in cases of medical intervention—prior to this change, such expenses were only eligible in cases of medical infertility.
Home Relocation Loans Deduction
If a taxpayer receives a loan by virtue of their employment with an interest rate below a prescribed rate, he or she is deemed to have received a taxable benefit. However, taxpayers can claim an offsetting deduction to the extent that the loan (not exceeding $25,000) was for the purpose of acquiring a new home when moving to a new work location. Budget 2017 proposes to eliminate this offsetting deduction, effective 2018 and subsequent years.