Federal Income Tax and Benefit Guide - 2019 - Federal tax and credits

Part B – Federal tax on taxable income

Complete the appropriate column depending on the amount of your taxable income using the instructions provided in Part B of your return.

Part C – Net federal tax

Claim the tax credits and calculate other tax amounts that apply to you using your information slips along with the instructions provided in Part C of your return, and on any applicable worksheet and form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

This section does not provide supplementary information for lines 40500, 40900, 41000, 41200, and 41500, as the instructions on the return provide the information you need.

There are no lines on the return for the recapture of the investment tax credit or for the federal logging tax credit. If these amounts apply, use them to calculate your net federal tax on your return. If the result of these adjustments is negative and you do not have to pay minimum tax (see Line 40427), enter “0” on line 41700 of your return.

Recapture of investment tax credit

If you have to repay all or part of an investment tax credit you received previously for scientific research and experimental development or for child care spaces, calculate on Form T2038(IND), Investment Tax Credit (Individuals), the amount you have to repay. Write “recapture of investment tax credit” and the amount below line 40600 on your return. Add it to the amount on line 40600 of your return.

Federal logging tax credit

If you paid logging tax to a province for logging operations you performed in the province, you may be able to claim a logging tax credit. To calculate your credit, use the lesser of the following two amounts for each province in which you had a logging operation:

  • 66.6667% of the logging tax paid for the year to the province
  • 6.6667% of your net logging income for the year in the province

Your allowable credit is the total of the credits for the year for all provinces, up to 6.6667% of your taxable income (line 26000 of your return), not including any amounts on lines 20800, 21400, 21500, 21900, and 22000 of your return. Write “federal logging tax credit” and enter the allowable amount below line 40600 on your return. Subtract it from the total of the amount on line 40600 of your return and the amount of any applicable recapture of investment tax credits.

Line 40424 – Federal tax on split income

Tax on split income (TOSI) applies to certain types of income of a child born in 2002 or later, as well as to amounts received by adult individuals from a related business. Where TOSI applies, the disability tax credit, dividend tax credit and foreign tax credit can be used to reduce the individual’s tax payable for the year.  For more information, see Form T1206, Tax on Split Income.

Line 40425 – Federal dividend tax credit

If you reported dividends on line 12000 of your return, claim on line 40425 of your return the total of the dividend tax credits from taxable Canadian corporations shown on your information slips.

If you did not receive an information slip

Calculate the federal dividend tax credit as follows:

Amount of dividends (eligible) Amount of dividends (other than eligible)
Multiply the taxable amount of eligible dividends you reported on line 12000 of your return by 15.0198%. Multiply the taxable amount you reported on line 12010 of your return by 9.0301%.

Note

Foreign dividends do not qualify for this credit.

Line 40427 – Minimum tax carryover

If you paid minimum tax on any of your 2012 to 2018 returns, but do not have to pay minimum tax for 2019, you may be able to claim credits against your taxes for 2019 for all or part of the minimum tax you paid in those years.

Minimum tax (line 41700 of your return)

Minimum tax limits the tax advantage you can receive in a year from certain incentives. You have to pay minimum tax if it is more than the federal tax you calculate in the usual manner.

To find out if you have to pay this tax, add the amounts shown in B below and 60% of the amount on line 12700 of your return. If the total is $40,000 or less, you probably do not have to pay minimum tax. If the total is more than $40,000, you may have to pay minimum tax. Therefore, get and complete Form T691, Alternative Minimum Tax. You also may have to complete Form 428 or Form T2203, Provincial and Territorial Taxes – Multiple Jurisdictions, to calculate additional provincial or territorial tax for minimum tax purposes.

Here is a list of the most common situations where you may have to pay minimum tax:

A. You reported a taxable capital gain on line 12700 of your return.

B. You claimed any of the following on your return:

  • a loss (including your share of a partnership loss) resulting from or increased by claiming capital cost allowance on rental properties
  • a loss from a limited partnership that is a tax shelter
  • most carrying charges (line 22100) on certain investments
  • a loss from resource properties resulting from, or increased by, claiming a depletion allowance, exploration expenses, development expenses, or Canadian oil and gas property expenses
  • a deduction on line 24900 for security options

C. You claimed any of the following tax credits on your return:

  • a federal political contribution tax credit on line 41000
  • an investment tax credit on line 41200
  • a labour-sponsored funds tax credit on line 41400
  • a federal dividend tax credit on line 40425

Lines 41300 and 41400 – Labour-sponsored funds tax credit

You may be able to claim this credit if you became the first registered holder to acquire or irrevocably subscribe to and pay for an approved share of the capital stock of a provincially registered labour-sponsored venture capital corporation (LSVCC) from January 1, 2019, to March 2, 2020.

If you became the first registered holder of an approved share from January 1, 2019, to March 1, 2019, and did not claim the whole credit for it on your 2018 return, you can claim the unused part on your 2019 return.

If you became the first registered holder of an approved share from January 1, 2020, to March 2, 2020, you can claim any part of the credit for that share on your return for 2019 and the unused part on your return for 2020.

Enter the net cost of your acquisition of provincially registered shares of a labour-sponsored venture capital corporation on line 41300 of your return. Net cost is the amount you paid for your shares, minus any government assistance (other than federal or provincial tax credits) on the shares.

Claim the amount of your allowable credit on line 41400 of your return to a maximum of $750.

The allowable credit is 15% of the lesser of:

  • $5,000
  • the net cost reported on line 41300 of your return

Note

If the first registered holder of the share is an RRSP for a spouse or common-law partner, the RRSP contributor or the annuitant (recipient) can claim this credit for that share.

Line 41800 – Special taxes

RESP accumulated income payments

If you received an accumulated income payment from a registered education savings plan (RESP) in the year, you may have to pay an additional tax on all or part of the amount shown in box 040 of your T4A slips. Get and complete Form T1172, Additional Tax on Accumulated Income Payments from RESPs. For more information, see Guide RC4092, Registered Education Savings Plans (RESPs).

Tax on excess employees profit-sharing plan (EPSP) amounts

You may have to pay a tax if both of the following apply:

  • you are a specified employee (an employee dealing with an employer in a non-arm’s length relationship or with a significant (10% or more) equity interest in their employer or in any other corporation that is related to their employer)
  • your employer made contributions to your EPSP for the year that are more than a threshold equal to 20% of your employment income from that employer for the year

Get and complete Form RC359, Tax on Excess Employees Profit Sharing Plan Amounts.

Tax related to not purchasing replacement shares in a Quebec labour-sponsored fund

You must pay a special tax if you redeemed your shares in a Quebec labour-sponsored fund to participate in the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP), but did not buy replacement shares within the prescribed time.

The special tax is the portion of the federal tax credit that you received for the acquisition of the shares that were redeemed to participate in the HBP or LLP and were not replaced within the prescribed time.

Report on line 41800 of your return for 2019 the total of the following amounts:

  • for credits claimed in all years other than 2015, include on this line the total of the amounts shown in boxes F and L1, plus 60 % of box L2 of your Relevé 10 information slips (official slip for the Province of Quebec)
  • for credits claimed in 2015, enter on this line the tax credit you received (line 414 of your 2015 Schedule 1) on that portion of shares not reacquired within the prescribed time
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