Carlos Leitão, the Minister of Finance of Québec, tabled his government's 2018-2019 budget this afternoon. The budget contains many tax measures intended primarily to ease the tax burden of individuals
New tax credit for first-home purchases
The budget creates a new non-refundable tax credit for the purchase of a first home beginning in 2018. This credit, valued at $750 ($5,000 X 15%) may be shared between the home's co-owners. The conditions for applying this credit will be much the same as the ones for the federal tax credit.
RénoVert refundable tax credit is extended to March 31, 2019
The budget extends the RénoVert tax credit to March 31, 2019, under the same conditions for households whose eligible expenses have not yet reached $52,500.
Increase in the refundable tax credit for childcare expenses
Effective in 2018, the budget proposes raising the limit for childcare expenses paid for a child with an impairment from $11,000 to $13,000, and the limit for a child under the age of 7 without an impairment from $9,000 to $9,500. The $5,000 limit in other cases remains unchanged. These limits will be annually indexed starting in 2019.
Improvement in the tax credit for experienced workers
Beginning in 2018, the eligibility age for the experienced workers tax credit will be lowered to 61. This credit is equal to 15% of the eligible employment income above the first $5,000. The credit is reduced by 5% of net income above the $34,030 threshold for 2018. The table below shows the amounts that apply beginning in 2018.
|Experienced worker's age||Maximum eligible employment income|
|65 and over||11 000|
Changes with regard to Capital régional et coopératif Desjardins (CRCD)
The non-refundable tax credit will be reduced to 35%
The tax credit for all CRCD shares acquired after February 28, 2018, will drop from 40% to 35%. In compliance with the fiscal rules, the annual maximum subscription amount by a shareholder will be determined by CRCD at a later date.
Creation of a new share class that gives rise to a non-refundable tax credit of 10%For each of the years 2018, 2019 and 2020, a non-refundable tax credit of 10% will be granted for the conversion of CRCD shares of the current class that have been held for at least seven years. In compliance with the fiscal rules, the annual maximum conversion amount by a shareholder will be determined by CRCD at a later date.CRCD will be authorized to convert up to $100 million per period. The conversion will only be available for shareholders who have never asked to have their shares redeemed or sold their shares by mutual agreement.
Shareholders will still be able to take advantage of the 35% tax credit for the acquisition of shares in the current class. However, neither the 10% credit nor the 35% credit will be available to individuals who have asked for redemption or sold by mutual agreement any shares of either the new class or the current class.
The shares of the new class will be governed by the same rules as the current class of shares (purchase by mutual agreement, special recovery tax, investments not eligible for RRSP, RRIF or TFSA purchases).
Measures designed to limit income splitting
The budget proposes to harmonize with the measures announced by the federal government, designed to widen the application of the rules regarding tax on split income (kiddie tax) to certain private company revenue, and to extend its application to individuals 18 and older.
These measures will come into effect on the same dates as those of the federal tax, i.e. starting in 2018.
The measures announced provide that family members of the business owner who fall into one or more of the following categories are not subject to the rules regarding income splitting:
- individuals 18 and older who have made a significant labour contribution to the business during the current year or the previous five years;
- individuals 25 and older who hold at least 10% of the voting shares of a company that derives less than 90% of its revenue from service delivery, and is not a professional corporation;
- the spouse of the business owner who is 65 or older and has made a significant contribution to the business;
- the individuals who derive capital gains from eligible shares of a small business or from agricultural or fishery assets, if they are not subject to the highest marginal tax rate on said gains.
Modification of tax credit rates for dividends
In order to take into account the gradual decline in the general tax rate, which will reach 11.5% in 2020, and the increase in the Small Business Deduction (SBD) rate that applies to companies as announced in the budget, the tax credit rates for dividends will be reduced gradually as follows:
Dividends received or deemed to have been received
|From January 1 to March 27, 2018||From March 28 to December 31, 2018|
The budget proposes, in particular, other measures for individuals as follows:
- extending the 20% tax credit for acquiring Fondaction shares by May 31, 2021;
- beginning in 2018, increasing the maximum raise in employment income eligible for the tax shield;
- beginning in 2018, increasing the refundable tax credit for a volunteer respite of a caregiver;
- beginning in 2018, increasing the refundable tax credit for the purchase or rental of equipment to help seniors continue living independently at home;
- beginning in 2018, expanding the tax credit for a person living alone to encourage intergenerational cohabitation;
- extending the tax credit for a first major cultural gift to 2022;
- increasing, for 2017 and 2018, the refundable tax credit for taxi driver permit holders.
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The purpose of this document is to provide general information, which is not to be construed as tax advice. While reasonable steps have been taken to ensure the accuracy of this information, Desjardins offers no guarantee whatsoever as to this.