If you file income tax returns for residents of the Yukon, you may want to talk to your clients about this territory’s generous programs and tax credits for individuals. Here’s what you need to know.
The Child Benefit Program
As of 2018, your clients can receive $820 per child annually if their net family income is less than $35,000. If your client’s income is over that threshold, the benefit is reduced by 2.5% of the excess for families with one child or 5% of the excess for families with multiple children.
To explain, say your client has two children and the family’s net income is $40,000. They receive a base benefit of $1,640. That’s the annual benefit times two. But their income is $5,000 over the threshold. When you multiply $5,000 by 5%, the result is $250, and when you subtract that amount from their benefit, that reduces their payment to $1,390.
Small Business Investment Tax Credit
To entice people to invest in small local corporations, the Yukon offers a credit worth 25% of qualifying investments. For instance, if your client invests $20,000, they can earn a $5,000 tax credit. As of 2018, the maximum claim is $25,000.
To qualify as a small business, the corporation must have less than $25 million in assets. It also has to register with the Department of Economic Development, be permanently based in the Yukon, and have at least half of its assets and payroll in the Yukon.
If you give your clients consultancy advice in addition to handling their accounting or tax prep needs, you may want to talk with them about this program. Essentially, it gives them a 25% return on their investment almost immediately.
First Nations Income Tax Credit
As of 2018, this credit is not available to all people who live on First Nation Settlement Lands in the Yukon. Instead, it’s only available to the following 11 First Nations:
- Champagne and Aishihik
- Little Salmon/Carmacks
- Nacho Nyak Dun
- Teslin Tlingit
- Tr’ondek Hwech’in
- Vuntut Gwitchin
- Ta’an Kwach’an
- Kwanlin Dun
Other First Nations are likely to be added as they complete negotiations with the territory. The credit covers 95% of territorial tax. For example, if someone owes $1,000 in income tax to the Yukon but qualifies for this credit, the territorial tax liability drops to $50. To calculate that, simply take the tax liability times 0.95 and subtract that value from the tax owed. To claim this credit for your clients, you need to complete the Yukon First Nations Tax Form YT432.
Political Contributions Tax Credit
If your clients donate to political campaigns, they can claim an annual credit worth up to $650. If they donate up to $400, they receive a 75% credit. Then, they receive a credit for half of the next $350 in contributions, and finally, they can receive a 33.33% credit for the next $525 of contributions. To illustrate, imagine a client contributes $850. They receive 75% of the first $400, which is $300. Then, they receive 50% of the next $350, which is $175. Finally, they receive a third of the final $100, which is $33. That gives them a total credit of $508.
Your personal clients can also apply for the Yukon’s research and development tax credit. In addition to these personal credits, there are a lot of territorial credits designed just for corporations. If you work for both individuals and businesses, it’s important to stay knowledgeable of all these programs.