The Basic Personal Amount, Age Amount, Spousal Amount, and Dependant Amount
The Basic Personal Amount (BPA) is a non-refundable credit that can be claimed by all tax filers. The purpose of the basic personal amount is to provide full relief from provincial income tax to all tax filers with taxable income below the BPA. It also provides partial relief to tax filers with taxable income above the BPA.
A tax filer cohabitating with their spouse or common law partner can claim a Spousal Amount equal to the BPA. This amount is reduced by the income of the spouse or common law partner on a dollar-for-dollar basis. The purpose of this non-refundable credit is to provide tax relief to families with secondary incomes at or below the BPA. If the Spousal Amount is claimed, the tax filer cannot use the Eligible Dependant Amount.
The Eligible Dependant Amount is a non-refundable credit for individuals who do not have a spouse or common law partner and are caring for children who have not reached the age of 18 in the taxation year. The amount can only be claimed if the dependant resides in a home maintained by the tax filer through any part of the year. Claiming the Dependant Amount precludes the individual from claiming the Spousal Amount, and only one person can claim the child as a dependant. The purpose of this credit is to reduce taxes for individuals without a secondary source of income supporting the household and who are incurring expenses associated with raising children. The value of the Dependant Amount is equal to the BPA and is reduced for each dollar of the dependant’s net income.
The Age Amount is a non-refundable credit provided to individuals over the age of 65 in the taxation year. The Age Amount available to a tax filer is reduced for net income above $30,828 at a rate of $0.15 per $1 over the income threshold.
Enhancement of the Basic Personal Amount, Age Amount, Spousal Amount, and Dependant Amount
The province will increase the Basic Personal Amount (BPA), the Spousal Amount, and the Amount for an Eligible Dependant by $3,000 from $8,481 to $11,481 for the 2018 taxation year and subsequent taxation years. These credit amounts have been unchanged since 2011 and the increase represents a 35.4 per cent enhancement.
The $3,000 increase will be available to all tax filers who have taxable income of less than $25,000.
For tax filers who have taxable income between $25,000 and $75,000, the enhanced benefit will roll-off at the rate of 6 cents for every dollar of taxable income and will be fully phased out at $75,000 of taxable income.
Tax filers who have more than $75,000 in taxable income will not receive any benefit from the enhanced BPA.
The value of the tax credit is determined by multiplying the amount of the credit by the lowest bracket rate. Currently, the maximum benefit a tax filer can receive under the credits is $745.48 ($8,481 * 8.79 per cent). The maximum benefit will rise to $1,009.18 ($11,481 * 8.79 per cent) — an increase of $263.70.
The maximum Age Amount is currently $4,141 and it will be increased by 35.4 per cent to $5,606 for 2018 and subsequent taxation years. The increase is proportional to the increase in the BPA. Similarly, the maximum benefit will be available for tax filers with taxable income of less than $25,000 and will be phased out between taxable incomes of $25,000 and $75,000.
Impacts
The enhancement of these non-refundable tax credits will cost $21.7 million in 2017–2018 and will increase to over $85 million upon full implementation in 2018–2019.
Approximately 223,000 tax filers do not pay any provincial income tax. These enhancements will add almost 63,000 tax filers to that number.
In total, 501,648 tax filers will benefit from the enhancement.
On average, Nova Scotia tax filers receiving the enhancement will save an additional $159.22 in provincial income tax for the 2018 taxation year. The average varies by income range.
In some cases, tax filers will no longer have to use the Low Income Tax Reduction or Age Amount Tax Credit to reduce or eliminate their tax liability. In addition, some seniors who are in receipt of the federal Guaranteed Income Supplement (GIS) will see their tax liability reduced or eliminated. This will mean paying less in advance of receiving their refund of provincial income tax.