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1 Provincial Supplement Alberta 2017

2 H&R Block Canada, Inc All Rights Reserved Copyright is not claimed for any material secured from official government sources. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any storage or retrieval system, without permission in writing from H&R Block Canada, Inc.

3 Provincial Supplement Alberta i Table of Contents Alberta Tax System... 1 Tax Rates... 1 Non-refundable Tax Credits... 1 Interprovincial Transfer of Unused Amounts... 5 Carryover of Unused Tuition and Education Amounts... 6 Adjustments to Tax... 6 Political Contribution Tax Credit... 6 Senatorial Selection Campaign Contribution Tax Credit... 7 Family Employment Tax Credit... 7 Eligibility... 7 Payment of the benefit... 8 Child Benefit... 9 Seniors Benefit... 9 Cash Benefit Component Working Income Tax Benefit Climate Leadership Adjustment Rebate Efficiency Rebates for Home Improvements Pension Income-Splitting Part-year Residents Death Bankruptcy Corporate Tax Rates... 16

4 Provincial Supplement Alberta Alberta Tax System Alberta tax is initially calculated as a percentage of federal taxable income from Line 260 of the T1. This amount is then reduced by the following items: Taxpayer s provincial non-refundable tax credits, which are similar to the federal non-refundable tax credits; Income-specific tax credits, such as the provincial dividend tax credit and foreign tax credit; and Where applicable, the Political Contribution Tax Credit. Provincial tax may also be increased by the following amounts: Tax on split income (which will only apply if the taxpayer is subject to the federal tax on split income); and Additional tax for minimum tax purposes (which will only apply if the taxpayer is subject to federal minimum tax). Alberta tax is calculated on Form AB428 Alberta Tax and Credits, shown in Illustrations 1 and 2, and entered at Line 428 of the T1. Tax Rates On October 1, 2015, Alberta income tax changed from a flat rate of 10 percent to a graduated rate schedule. For 2015, the annual percentage rates were adjusted to account for the change in the middle of the tax year. For 2016, the graduated rates apply for the entire year. The thresholds remain unchanged from The Alberta tax rates for 2016 are as follows: 10 percent of taxable income of $125,000 or less; 12 percent of taxable income more than $125,000 but not more than $150,000; 13 percent of taxable income more than $150,000 but not more than $200,000; 14 percent of taxable income more than $200,000 but not more than $300,000; 15 percent of taxable income more than $300,000. Non-refundable Tax Credits For 2016, the personal amounts increased by the provincial indexation factor of 1.01 percent. The taxpayer s provincial non-refundable tax credits for 2016 are calculated as 10 percent of the following: A basic personal amount of $18,451. An age amount of $5,141, which is reduced by 15 percent of net income in excess of $38,275. A spouse/common-law partner amount of $18,451, which is reduced by the dependant s net income.

5 Provincial Supplement Alberta An amount for an eligible dependant of $18,451, which is reduced by the dependant s net income. An amount for infirm dependants age 18 or older of $10,680, which is reduced by the dependant s net income in excess of $7,056. An amount for the taxpayer s allowable CPP/QPP contributions (as calculated for federal tax purposes). An amount for the taxpayer s allowable EI premiums (as calculated for federal tax purposes). Adoption expenses to a maximum of $12,619. A pension income amount equal to a maximum of $1,421 of qualifying pension income (as determined for the purpose of the federal pension income amount). A caregiver amount of $10,681, which is reduced by the dependant s net income in excess of $16,981. A disability amount of $14,232, plus a supplement of $10,680 for taxpayers under 18 at the end of the year. Note that the supplement is reduced by child care and attendant care expenses in excess of $2,912 claimed by anyone in respect of the taxpayer. Disability amounts transferred from a dependant. An amount for interest paid on student loans. Tuition fees, plus a full-time education amount of $717 per month and a part-time education amount of $215 per month, calculated on AB(S11). Tuition and education amounts transferred from a child. Amounts transferred from a spouse/common-law partner, calculated on AB(S2). Medical expenses, reduced by 3 percent of the taxpayer s net income to a maximum of $2,384. Medical expenses for other dependants, reduced by 3 percent of the dependant s net income to a maximum of $2,384. Charitable donations of $200 or less. Donations in excess of $200 receive a credit of 21 percent. The eligibility requirements for the provincial non-refundable tax credits are the same as those governing the federal non-refundable tax credits. Thus, a taxpayer who is eligible for the federal amount for an eligible dependant will also be eligible for the provincial amount; if an amount qualifies as a medical expense or charitable donation for federal purposes, it will also qualify for provincial purposes. There is no Alberta equivalent to the federal volunteer firefighters amount, search and rescue volunteers amount, Canada employment amount, public transit amount, children s arts amount, home buyers amount or textbook amount.

6 Provincial Supplement Alberta Illustration 1

7 Provincial Supplement Alberta Illustration 2

8 Provincial Supplement Alberta Interprovincial Transfer of Unused Amounts Some provinces have a more generous system of non-refundable tax credits than others. Complications may therefore arise when a dependant with unused tuition, education or disability amounts resides in a different province than the person to whom the amounts are being transferred. If a taxpayer residing in a different province transfers unused amounts to a resident of Alberta, the amount that can be transferred is calculated as if he/she were a resident of Alberta at the end of the year. See Illustration 3. If the student is a resident of Alberta and he/she is transferring tuition and education amounts to an individual in a different province, the amount entered at Field 5920 of his/her AB(S11) (for the purpose of determining the amount carried forward) is: If the designated individual is resident in Québec, the lesser of Line 19 on the student s AB(S11) and the federally designated amount; and If the designated individual is resident in one of the other provinces or territories, the lesser of Line 16 on the student s AB(S11) and the amount claimed by the designated individual on Line 5860 of his/her Form 428. Illustration 3 Jennifer was a resident of Newfoundland and Labrador on December 31. She was in full-time attendance at a qualifying educational institution for eight months and paid $2,000 tuition fees. She had RESP income of $10,000. She wishes to transfer her unused tuition and education amounts to her father, who is a resident of Alberta. The NL full-time education amount is $200 per month as opposed to $717 per month in Alberta. The NL basic personal amount is also lower ($8,802 as opposed to $18,451 in AB). The amount her father could claim if he were a resident of NL is therefore $2,402, calculated as follows: Tuition fees $2,000 Education amount ($200 x 8) $1,600 Total $3,600 Less used portion ($10,000 $8,802) $1,198 Amount available for transfer $2,402 However, because her father is a resident of Alberta, the amount he can claim is calculated as if Jennifer were a resident of Alberta at the end of the year. Jennifer s unused amount is $7,736, calculated as follows: Tuition fees $2,000 Education amount ($717 x 8) $5,736 Total $7,736 Less used portion ($10,000 $18,451) $ 0 Amount available for transfer (maximum $5,000) $5,000 As a resident of NL, Jennifer still claims a provincial tuition and education amount of $1,198 on her own return.

9 Provincial Supplement Alberta TPS Tips If preparing a return for a linked dependant who is not a resident of Alberta, the TPS does not take into account the fact that the student who is transferring the tuition/education amounts resides in a different province than his/her parent or grandparent. As a result, it is necessary to override Line 5860 on the parent or grandparent s AB428 to show the correct amount. If a linked dependant is for reference only, he/she can be treated as a resident of Alberta and no override is necessary. Carryover of Unused Tuition and Education Amounts Complications may also arise if a taxpayer has a carryover of unused tuition and education amounts earned while a resident of a different province. In the case of a taxpayer who was not a resident of Alberta in the previous year, the unused carryover from the previous year is the same as the federal amount. Adjustments to Tax After Alberta tax has been reduced by the provincial non-refundable tax credits, it may be subject to the following income-dependent tax adjustments: A dividend tax credit equal to 10.0 percent of the taxpayer s taxable eligible dividends and 3.08 percent of the taxpayer s other than eligible dividends. The total dividend tax credit is entered at Line 43 of the AB428. A credit for provincial minimum tax carried forward from previous years, calculated as 35 percent of the federal minimum tax carryforward and entered at Line 45 of the AB428. Additional provincial tax for minimum tax purposes, calculated as 35 percent of the difference between Lines 108 and 111 of the federal T691 Alternative Minimum Tax. This is entered at Line 47 of the AB428. A provincial foreign tax credit, which is claimed on Form T2036 Provincial Foreign Tax Credit and entered at Line 49 of the AB428. The overseas employment tax credit has been eliminated for If the taxpayer is subject to the federal tax on split income, the same income will be subject to the provincial tax on split income. This is calculated prior to the taxpayer s claim for non-refundable tax credits, on Form T1206 Tax on Split Income and entered at Line 40 of the AB428. Political Contribution Tax Credit The Political Contribution Tax Credit may be claimed by taxpayers who contributed to a registered Alberta political party, registered candidate or constituency association in an election held under the Election Act. It is claimed at Lines 51 and 52 of the AB428.

10 Provincial Supplement Alberta The maximum credit is $1,000, calculated as: 75 percent of the first $200 of contributions; plus 50 percent of the next $900 of contributions; plus 33 1 /3 percent of the next $1,200 of contributions. Claims for the Political Contribution Tax Credit must be substantiated by official receipts. If the taxpayer is paper-filing the return, the receipts must be filed with the return. Senatorial Selection Campaign Contribution Tax Credit Taxpayers who contributed to candidates in the Senatorial Selection Campaign may claim an additional tax credit, which is calculated in exactly the same way as the Political Contribution Tax Credit discussed above. It is claimed at Lines 53 and 54 of the AB428. In order to claim this credit, taxpayers must have an official Senatorial Selection Campaign Contribution receipt. TPS Tips If the political contribution is entered under Provincial tax and credits, the TPS will calculate the credit and enter it on either Line 52 or Line 54 of the AB428. The total allowable credit is entered on Line 56. Family Employment Tax Credit Eligibility The Family Employment Tax Credit (AFETC) is a benefit paid to working families with children under the age of 18. The taxpayer will automatically be considered for the AFETC if the individual has applied for the federal Canada Child Benefit and also meets the following eligibility criteria: Is the parent of one or more children under the age of 18; Has a family working income (defined below) of more than $2,760; Has been a resident of Alberta for at least one month prior to receiving the credit; and Has filed a tax return for the prior year.

11 Provincial Supplement Alberta Effective July 2017, the maximum annual credit is calculated as: $773 for the first child; $703 for the second child; $422 for the third child; and $140 for the fourth child. The maximum benefit is the lesser of the family entitlement or 11 percent of earned income in excess of $2,760. The maximum benefit is reached for families with four or more children when earned income exceeds $18,527. The credit is reduced by 4 percent of family net income in excess of $41,746. The benefit is reduced to zero when family net income reaches: $61,111 for families with one child; $78,676 for families with two children; $89,236 for families with three children; and $92,736 for families with four or more children. Family working income is the combined earned income (as reported on the prior year tax return) of the individual and his/her spouse/common-law partner (if the individual has one), including income from self-employment. It does not include income from sources such as alimony and child support. Family net income is the combined total of Line 236 income (as reported on the prior year tax returns) of both the individual and his/her spouse/common-law partner. Payment of the benefit The annual entitlement is paid in advance in July and January, either by cheque or direct deposit. If a household s status changes during the benefit period, eligibility for the benefit may change. If the household qualifies for a greater benefit than what was originally paid, CRA will issue payment for the difference. If the household qualifies for a smaller benefit (or no benefit), CRA will notify the taxpayer of the amount to be repaid. For households that receive a benefit for a child who has died, amounts owing will be forgiven. If taxpayers are enrolled for the Canada Child Benefit, it is not necessary to apply for the Family Employment Tax Credit. Taxpayers who move to Alberta will be eligible for the benefit after they have been resident in the province for one month. Taxpayers with working income whose net income falls within the required parameters will qualify for both the Family Employment Tax Credit and the new Child Benefit, discussed below.

12 Provincial Supplement Alberta Child Benefit Effective for 2016, there is a new Child Benefit for lower-income families. The maximum annual benefit is $1,114 for the first child and $557 for each of the next three children. Families with four children receive the maximum amount; larger families do not receive additional benefits. Benefits begin to be phased out when family net income exceeds $25,832, and are fully phased out once family net income reaches $41,746. The amounts and phaseout rates are summarized in Illustration 4. The benefit is paid in quarterly instalments in August, November, February and May. Payments are recalculated each August, based on income reported on the prior year s tax return. Illustration 4 Alberta Child Benefit Basic amounts 1 child $1, children $1, children $2, or more children $2, Family income phase-out threshold $25, Phase-out rates 1 child 7.0% 2 children 10.5% 3 children 14.0% 4 or more children 17.5% Seniors Benefit The Seniors Benefit (ASB) program provides a monthly benefit for low-income seniors and determines eligibility for Alberta Health Care premium exemptions. In order to be eligible for the ASB, the taxpayer must: Be 65 years of age or older; Have lived in Alberta for at least three months; Be a Canadian citizen or permanent resident; and Fall within the income parameters of the program. Taxpayers who have temporary absences from the province cease to be eligible for the ASB if they are absent from Alberta for more than six months.

13 Provincial Supplement Alberta Taxpayers must initially apply for the ASB when they turn 65 or have been resident in the province for three months. Thereafter, the information required to calculate their annual entitlement is taken from their tax return. However, taxpayers must inform Alberta Seniors and Housing of any changes to family circumstances that would affect their entitlement. Retroactive benefits and/or Alberta Health Care premium exemptions may be paid for up to eleven months prior to the date the taxpayer s completed application form is received by the ASB program. For more information, see Cash Benefit Component The annual cash benefit component is paid in monthly instalments beginning July 1 following the end of the taxation year. It is reported on Form T5007 Statement of Benefits and is included in income on Line 145. It qualifies for the offsetting deduction on Line 250. The calculation of the benefit is determined by the following factors: Type of accommodation the taxpayer lives in; Taxpayer s marital status; Taxpayer s non-deductible income (defined below); and Taxpayer s eligibility for Old Age Security. The first two factors determine the maximum benefit to which the taxpayer may be entitled. The last two factors determine how much of the maximum amount the taxpayer will receive. Type of Accommodation The maximum benefit is determined in part by which of the following categories of accommodation the taxpayer lives in: Rental Long-term care centre Lodge Own home, or Other (e.g., subsidized or free accommodation and status Indians living on a reserve). The maximum annual cash benefit for each type of accommodation is shown in the third column of the chart in Illustration 5.

14 Provincial Supplement Alberta Non-deductible Income The maximum benefit is reduced by a percentage of the taxpayer s and his/her spouse/common-law partner s non-deductible income in excess of zero. Nondeductible income, for this purpose, is defined as total income (from Line 150 of the T1) less the following: Old Age Security; Guaranteed Income Supplement; Support payments received; Social assistance; Canada Pension Plan disability benefits; Registered Pension Plan contributions; Registered Retirement Savings Plan contributions; Deduction for elected split-pension amount; and Greater of employment expenses (Line 229) and 5 percent of employment income (up to $3,600). The phase-out rate for non-deductible income in excess of zero is shown in the third column of the table in Illustration 5. Illustration 6 provides an example of the calculation for the benefit. If the taxpayer is not eligible for Old Age Security, the cash benefit is reduced.

15 Provincial Supplement Alberta Illustration 5 Illustration 6 Fred is a single senior living in rental accommodation. His income in 2016 consisted of the following: Old Age Security (OAS) $6, CPP retirement benefits 5, Alberta Seniors Benefit (ASB) 2, Total $13, His non-deductible income is therefore $5,000, calculated as: Line 150: $13, Less: OAS: 6, ASB: 2, , , $5, Fred s annual entitlement for the period beginning July 1, 2017 is therefore $2,529 [calculated as $3,360 ($5,000 x )].

16 Provincial Supplement Alberta Working Income Tax Benefit As noted in Income Tax I, the parameters used to calculate the Working Income Tax Benefit (WITB) are different in Alberta than the other provinces. The parameters for 2015 and 2016 are shown in Illustration 7. In all other respects, the eligibility and filing requirements for claiming the WITB in Alberta are the same as for the other provinces. Taxpayers who applied for advance payments of the WITB would have received a maximum of 50 percent of the amount they were expecting to receive on their 2016 tax return. Illustration 7 Alberta Working Income Tax Benefit Type of Claim No eligible spouse or eligible dependant Eligible spouse or eligible dependant 20% of working income in excess of $2,760 (maximum $1,109) less 15% of adjusted net income in excess of $12,074. Taxpayers with adjusted net income of $19,468 will therefore get nothing. 20% of family working income in excess of $2,760 (maximum $1,663) less 15% of adjusted family net income in excess of $16,464. Taxpayers with adjusted family net income of $27,551 will get nothing. Disability Supplement 20% of working income in excess of $2,760 (maximum $1,123) less 15% of adjusted net income in excess of $12,230. Taxpayers with adjusted net income of $19,717 will therefore get nothing. 20% of family working income in excess of $2,760 (maximum $1,684) less 15% of adjusted family net income in excess of $16,678. Taxpayers with adjusted family net income of $27,905 will get nothing. Disabled taxpayers without an eligible spouse or eligible dependant Disabled taxpayers with eligible spouse or (except in Québec) eligible dependant 25% of working income in excess of $910 (maximum $508) less 15% of adjusted net income in excess of $19,464. Taxpayers with adjusted net income of $22,851 will therefore get nothing. 25% of family working income in excess of $910 (maximum $508) less 15%* of adjusted family net income in excess of $27,550. Taxpayers with adjusted family net income of $30,937 will get nothing. 25% of working income in excess of $910 (maximum $514) less 15% of adjusted net income in excess of $19,717. Taxpayers with adjusted net income of $23,144 will therefore get nothing. 25% of family working income in excess of $910 (maximum $514) less 15%* of adjusted family net income in excess of $27,908. Taxpayers with adjusted family net income of $31,335 will get nothing. *If both spouses/common-law partners are disabled, the rate is 7.5%. In this case, the adjusted family net income threshold over which they will get nothing is $34,324 for 2015 and $34,762 for 2016.

17 Provincial Supplement Alberta Climate Leadership Adjustment Rebate The new Climate Leadership Adjustment Rebate came into effect January 2017 and is designed to soften the impact of the carbon levy on lower-income families. The benefit is calculated each July based on family income, as reported on the prior year tax return. For 2017, the maximum rebate will consist of $200 for one adult, $100 for a spouse/ common-law partner and $30 for each child under 18 in the household, to a maximum of four people in total. The first payments were made January The carbon levy is expected to increase by 50 percent in 2018; starting January 2018, rebate payments will be increased a corresponding amount. The rebate is reduced for singles without children when their net income reaches $47,500. For couples and families, it will be phased out when income exceeds $95,000. The phase-out rate is 2.67 percent for singles and 4 percent for families. Recipients eligible for an annual amount of $400 or more will receive quarterly payments. Those eligible for an annual amount between $200 and $399 will receive two payments. Those eligible for an annual amount between $100 and $199 will receive one payment. Families whose calculated entitlement is less than $100 receive nothing. The maximum amounts are summarized below. Illustration 8 Alberta Climate Leadership Rebate: Maximum Payments Period Basic adult Spouse or commonlaw partner January to June 2017 (based on 2015 tax return) July 2017 to June 2018 (based on 2016 tax return) July to December January to June Total: July 2018 to June 2019 (based on 2017 tax return) Single family first child Each additional child (max of 4) $100 $50 $50 $15 $100 $150 $250 $50 $75 $125 $50 $75 $125 $15.00 $22.50 $37.50 $300 $150 $150 $45 Efficiency Rebates for Home Improvements The Home Improvement Rebate is one component of Energy Efficiency Alberta s Residential Retail Products Program. The other two components are online rebates for qualifying appliances and programmable thermostats, and the Residential No- Charge Energy Savings Program, which allows residents to receive products such as LED bulbs, water-saving devices, smart power bars and timers.

18 Provincial Supplement Alberta Beginning April 28, 2017, Home Improvement Rebates will be paid for the purchase of: ENERGY STAR -approved tankless hot water heaters (maximum $1,000); ENERGY STAR triple-pane, low-e, argon windows (maximum $1,500); and Insulation for attics, basements and above-grade walls (maximum $3,500). The types of insulation that qualify include: Rolls or batts Blown-in Loose fill Rigid board and Spray foam. The following points should be noted: Installation must be performed by contractors registered with Energy Efficiency Alberta, the new government department that will administer the program. Individuals cannot buy the windows or insulation and do the work themselves. Contractors who wish to register for the program will be required to take a short training course and must meet the following criteria: Be a legally registered business in Alberta; Have current liability insurance; and Have Workers Compensation coverage. Contractors who are interested can register online at efficiencyalberta.ca The rebates are non-taxable as long as they are not paid with respect to a portion of the property the taxpayer is renting or using for business purposes (in which case the rebate would reduce the capital cost of the property). Pension Income-Splitting Senior couples in Alberta who want to take advantage of the pension incomesplitting provisions should be aware of the consequences this could have if one of them is receiving benefits from one of the following provincial programs: Seniors Self-contained Housing Program This is a program for senior citizens whose income is not sufficient to rent private sector accommodation. Rent is calculated as 30 percent of the combined gross income of the taxpayer and his/her spouse/common-law partner from Line 150 of their previous year s tax return, less certain eligible deductions. Seniors Lodge Program This program provides lower-income seniors with meals and housekeeping services in addition to accommodation. The accommodation rate is also based on gross income from Line 150 but varies among different areas of the province. The monthly rate is adjusted to ensure that each resident has at least $315 in disposable income. Benefits received under the Assured Income for the Severely Handicapped program are not affected by pension income-splitting.

19 Provincial Supplement Alberta Part-year Residents Part-year residents are entitled to the provincial non-refundable tax credits under the same rules as those governing the federal non-refundable tax credits. If any of the federal amounts are prorated, the same formula must be used to prorate their provincial counterparts. Taxpayers cease to be eligible for the Family Employment Tax Credit in the month after they cease to be resident in Alberta. Taxpayers cease to be eligible for the Seniors Benefit in the month after they have left Alberta to live permanently in another province or country. If they leave Alberta on a temporary basis, they cease to be eligible after six months absence. Death Death will not affect the deceased taxpayer s entitlement to any of the nonrefundable tax credits. Therefore, they may all be claimed on the final return. Taxpayers cease to be eligible for the Seniors Benefit in the month following the date of death. In the event that the recipient of the Family Employment Tax Credit dies, the person who is granted custody of a child will become eligible for any remaining payments based on his/her family income. If the spouse/common-law partner of the recipient dies, any remaining payments will be recalculated based on the survivor s individual income. Bankruptcy Taxpayers who became bankrupt during the taxation year must apportion their provincial non-refundable tax credits between the pre-bankruptcy and postbankruptcy returns under the same rules as those governing the federal nonrefundable tax credits. Corporate Tax Rates The small business income tax rate remains at 3 percent for 2016 and the small business income threshold remains at $500,000. The general corporate tax rate on income not eligible for the small business deduction was increased from 10 percent to 12 percent effective July 1, 2015 and remains at 12 percent for CRA 5009-PC Information for Residents of Alberta