Taxable Benefits, Tax Credits, and Deductions
The Income Taxes page within Snap allows you to add taxable benefits, indicate if a client is eligible for additional federal and provincial non-refundable tax credits, and enter applicable tax deductions for the client.
Select Scenario Setup -> Settings -> Income Taxes.
Certain tax credits and deductions are applied by default. These credits and deductions are listed under the section Apply the following tax credits and deductions. If you do not wish to apply these default credits and deductions you can uncheck the checkbox.
Note that the federal personal amount is scheduled to provide an additional amount for 2020 and later years, gradually increasing the basic personal amount to $15,000 for 2023. However, this additional amount is gradually reduced for individuals whose net income is greater than the amount at which the 29% tax bracket begins and is reduced to zero when net income reaches the bottom of the 5th tax bracket. Snap applies the reduction of this additional amount for the federal personal amount when applicable.
Additional Non-Refundable Tax Credits:
To add additional non-refundable tax credits, (such as a disability tax credit) you can enter the amount in the fields as shown in the following screenshot. The amount entered in the additional non-refundable tax credits field is:
- automatically multiplied by the lowest tax rate to calculate the amount to reduce the federal and provincial tax
- applied for all years of the projection (unless you enter a From Age or To Age to reflect that the credit will begin some year in the future, or that it's expected to stop in a future year) and indexed with the inflation rate that you have entered
This example shows a disability tax credit being entered for a resident of Ontario in 2021. If the non-refundable tax credit is transferrable, you may wish to enter the credit under the Income Taxes settings for the spouse.
To see the impact of the additional tax credits on the federal and provincial taxes, view the Tax Breakdown table. From the Planning page, click the blue icon at the top of the Total Tax column.
A good resource for the federal and provincial non-refundable tax credit base amounts for 2022 is taxtips.ca.
Additional Tax Deductions and Taxable Benefits:
The amount entered for additional tax deductions will decrease the taxable income by that amount for all years of the plan (unless you enter a From Age or To Age to reflect that the deduction will begin some year in the future, or that it's expected to stop in a future year). Both federal and provincial tax calculations will be impacted.
The amount entered for additional tax benefits increases taxable income by the specified amount each year of the projections (unless you enter a From Age or To Age to reflect that the benefit will begin some year in the future, or that it's expected to stop in a future year, for instance when the client retires). This will increase the amount of tax your client pays and therefore decrease the available cash flow.
Both of these values are indexed with inflation over the period they are applied to the plan.
The Taxable Income Details table shows the application of the tax deduction or taxable benefit. Click the blue icon at the top of the Taxable Income column to see the details.
In the Taxable Income Details table, the Benefits column displays the Additional tax benefits entered. See the above screenshot. This amount corresponds to Line 119 - Employment insurance and other benefits in the T1 Income Tax and Benefit Return.