Accountants can provide a valuable service to their clients who are residents of Newfoundland or Labrador by explaining and determining if they qualify for a couple of tax credits when preparing their income tax returns. As part of the Income Tax Act of 2000, Parliament amended the credits in 2016 to minimize the impact of the 2016 budget reductions. Both the place of residence and total family income determine your clients’ eligibility for these credits.

The Newfoundland and Labrador Income Supplement helps out low-income individuals, seniors, families, and people with disabilities who are residents of either province on the last day of the tax year. Your clients who are individuals and families with $15,000 total family income qualify for an annual basic credit of $220. There is an additional $230 phased in at a rate of 4.6% up to an annual income limit of $20,000. Qualifying taxpayers earning between $20,000 and $40,000 get an annual credit of $450. After $40,000 of reported income, the credit gets phased out at a rate of 9%. The 2016 budget provides for an additional credit of $60 per spouse and $200 for each child and for anyone claiming the disability tax credit.

Your clients may also qualify for the Newfoundland and Labrador Seniors’ Benefit. Seniors who qualify must reside in either Newfoundland or Labrador and turn 65 by the end of the tax year. They may have income up to $29,402 to qualify for the maximum credit of $1,313. The credit gets phased out at a rate of 11.66% for family incomes between $29,402 and $40,663.

There are a couple of good things about these tax credits that should make your clients happy:

• They’re refundable, meaning taxpayers who owe no taxes may get a check back.
• The credits are funded by the provinces of Newfoundland and Labrador but are administered by the Canada Revenue Agency, which mails out the checks.
• Taxpayers receive the credit in quarterly instalment checks.

Perhaps best of all, your clients don’t need to apply for these credits. The CRA automatically mails checks to taxpayers who qualify as long as they filed their tax returns, so once you prepare their return and explain the credit, you’ve done them a service.