2021 Federal Income Tax and Benefit Guide – Completing your return (Step 5 continued)

Part C – Net federal tax

Line 40424 – Federal tax on split income

Tax on split income (TOSI) applies to certain types of income for children born in 2004 or later, as well as to certain amounts received by adult individuals from a related business. For more information, see Form T1206, Tax on Split Income.

Recapture of investment tax credit

If you have to repay all or part of an investment tax credit that you previously received for scientific research and experimental development or for child care spaces, complete Form T2038-IND, Investment Tax Credit (Individuals), to calculate the amount you have to repay. 

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 you had a logging operation in:

  • 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

Enter the total of the credits for the year for all provinces, up to 6.6667% of your taxable income from line 26000 of your return, not including any amounts on lines 20800, 21000, 21400, 21500, 21900, and 22000 of your return. 

Line 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, 2021, to March 1, 2022.

If you became the first registered holder of an approved share from January 1, 2021, to March 2, 2021, and did not claim the whole credit for it on your 2020 return, you can claim the unused part on your 2021 return.

If you became the first registered holder of an approved share from January 1, 2022, to March 1, 2022, you can claim any part of the credit for that share on your 2021 return and the unused part on your 2022 return.

Enter the net cost of your acquisition of provincially registered shares of a LSVCC 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 equal to 15% of the net cost reported on line 41300 of your return, up to a maximum of $750.

Note

If the first registered holder of the share is a registered retirement savings plan (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

Additional tax on 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 from box 040 of your T4A slips. 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

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, the total of the amounts from boxes F and L1, plus 60% of box L2 and 75% of box L3 of your Relevé 10 information slips (official slip for the Province of Quebec). 

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