Tax changes coming in 2017

MONTREAL — Canadians will ring in the new year with a number of tax changes that will affect the bottom line of the federal government. Here’s a look at some of them:

The federal government is ending four child tax credits this year: arts, fitness, education and textbooks in 2017. Parents of children under the age of 16 can pre-pay 2017 arts and fitness programs to claim them on 2016 tax returns as long as total spending for 2016 does not exceed $250 and $500 limits, respectively.

It is also cancelling income splitting for families, a tax-reduction measure that allowed someone to transfer up to $50,000 of income to a spouse with lower income if they had a child under 18 years of age. The tax credit for income splitting was capped at $2,000.

Offsetting those changes are the Canada Child Benefit and changes to employment insurance benefits introduced in 2016.

“High-income earners in most provinces will pay more, but for the majority of Canadians these two changes will mean more money in their pockets,” Canadian Taxpayers Federation federal director Aaron Wudrick said Wednesday in a news release.

Several other changes at the federal level will affect life insurance and business owners selling their companies.

Under changes enacted by the previous government, the tax treatment of universal life insurance policies will be less favourable starting Jan. 1. New policy holders will see a decrease in their ability to build up investment gains above death benefit premiums on a tax-free basis.

The new formula for calculating insurance will make policies a little more expensive or reduce death benefits, says Jason Safar, a PricewaterhouseCoopers partner specializing in personal taxes.

Business owners, large and small, will gain less from the sale of their operations as assets such as goodwill and trademarks will become fully taxable as investment income. Currently, half of the proceeds can be distributed tax-free as a dividend.