ARCHIVED - Net federal tax

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• Step B of Schedule 1 – Federal tax on taxable income
• Step C of Schedule 1 – Net federal tax
  • Recapture of investment tax credit
  • Federal logging tax credit
  • Line 405 – Federal foreign tax credit
  • Lines 409 and 410 – Federal political contribution tax credit
  • Line 412 – Investment tax credit
  • Lines 413 and 414 – Labour-sponsored funds tax credit
  • Line 415 – Working income tax benefit (WITB) advance payments
  • Line 418 – Special taxes
    • RRSP accumulated income payments
    • Tax on excess employees profit-sharing plan (EPSP) amounts
    • Tax related to the non-purchase of replacement shares in a Quebec labour-sponsored fund
  • Line 424 – Federal tax on split income
  • Line 425 – Federal dividend tax credit
  • Line 427 – Minimum tax carryover
  • Line 445 – Section 217 tax adjustment
  • Line 54 – Surtax for non-residents of Canada and deemed residents of Canada

Step B of Schedule 1 – Federal tax on taxable income

Complete the appropriate column depending on the amount of your taxable income using the instructions provided in Step B of your Schedule 1.

Step C of Schedule 1 – Net federal tax

There are no lines on the return for the recapture of the investment tax credit or for the federal logging tax credit. If these amounts apply, use them to calculate your net federal tax on Schedule 1. If the result of these adjustments is negative, and you do not have to pay minimum tax, enter "0" on line 63 of Schedule 1.

⬤▲Recapture of investment tax credit

If you have to repay all or part of an investment tax credit you received previously for scientific research and experimental development or for child care spaces, calculate on Form T2038(IND), Investment Tax Credit (Individuals), the amount you have to repay. Write "recapture of investment tax credit" and the amount below line 57 on Schedule 1. Add it to the amount on line 57.

⬤▲Federal logging tax credit

If you paid logging tax to a province for logging operations you performed in the province, you may be able to claim a logging tax credit. To calculate your credit, use the lesser of the following two amounts for each province in which you had a logging operation:

• 66.6667% of the logging tax paid for the year to the province
• 6.6667% of your net logging income for the year in the province

Your allowable credit is the total of the credits for the year for all provinces, up to 6.6667% of your taxable income (line 260), not including any amounts on lines 208, 214, 215, 219, and 220. Write "federal logging tax credit" and enter the allowable amount below line 57 on Schedule 1. Subtract it from the total of the amount on line 57 and the amount of any applicable recapture of investment tax credits.

⬤▮▲Line 405 – Federal foreign tax credit

Deemed residents – You may be able to claim this credit if you paid foreign taxes on income you received from outside Canada and reported on your Canadian return. Complete Form T2209, Federal Foreign Tax Credits, to calculate your credit, and claim the amount from line 12 of this form on line 405 of Schedule 1.

Non-residents and non-residents electing under section 217 – Generally, a non-resident of Canada is not eligible for a foreign tax credit. However, if you were a former resident of Canada who disposed of certain taxable Canadian property in 2018, you may be able to claim a foreign tax credit. Contact the CRA for the special rules that may apply to you.

Supporting documents – Attach to your return your completed Form T2209 and documents that show the foreign taxes you paid. If you paid taxes to the United States, attach your W-2 information slip, U.S. 1040 return, U.S tax account transcript, and any other supporting documents that apply. If you are submitting documents in a foreign language, you will need to provide a copy of the original documents and a certified English or French translation.

⬤Lines 409 and 410 – Federal political contribution tax credit

You can claim contributions either you or your spouse or common-law partner made during 2018 to a registered federal political party or to a candidate for election to the House of Commons.

The eligible amount is the amount by which the fair market value of your monetary contribution exceeds any advantage you received or will receive for making it. Generally, an advantage includes the value of certain property, service, compensation, use, or any other benefit.

Complete the chart for line 410 on the Worksheet for Schedule 1 to calculate your credit. However, if your total political contributions are $1,275 or more, enter $650 on line 410.

Supporting documents – Attach to your return your official receipts. Do not attach official receipts for amounts shown in box 14 of your T5003 slips, in box 184 of your T5013 slips, or on financial statements showing an amount a partnership allocated to you. Keep copies of all your documents in case the CRA asks to see them later.

⬤▮▲Line 412 – Investment tax credit

You may be eligible for this credit if any of the following apply:

• You bought certain new buildings, machinery, or equipment and they were used in certain areas of Canada in qualifying activities such as farming, fishing, logging, manufacturing, or processing.
• You have unclaimed credits from the purchase of qualified property after 2007.
• You have an amount shown in box 41 of your T3 slips.
• You have an amount shown in box 186 or 194 of your T5013 slips.
• You have an amount shown in box 128 of your T101 slips.
• You have a partnership statement that allocates to you an amount that qualifies for this credit.
• You employ an eligible apprentice in your business.
• You have an investment in a mining operation that allocates certain exploration expenditures to you.

NewEligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 1, 2019.

You can claim an investment tax credit if you carry on a business and create one or more new child care spaces for children of your employees and other children. For more information, see Form T2038(IND), Investment Tax Credit (Individuals).

As of March 22, 2017, you can no longer claim an investment tax credit for the creation of child care spaces. However, the investment tax credit will still be available for eligible expenses incurred before 2020 under a written agreement entered into before March 22, 2017.

For investment tax credits earned in a year after 2005, the carry-forward period is 20 years.

How to claim this credit

Attach to your return a completed copy of Form T2038(IND). For more information about the investment tax credit, see the information sheet attached to Form T2038(IND).

You must send the form to the CRA no later than 12 months after the due date of your return for the year the qualified expenditure arises.

  ⬤▮▲Lines 413 and 414 – Labour-sponsored funds tax credit

You may be able to claim this credit if you became the first registered holder to acquire or irrevocably subscribe to and pay for an approved share of the capital stock of a provincially registered labour-sponsored venture capital corporation (LSVCC) from January 1, 2018, to March 1, 2019.

If you became the first registered holder of an approved share from January 1, 2018, to March 1, 2018, and did not claim the whole credit for it on your 2017 return, you can claim the unused part on your 2018 return.

If you became the first registered holder of an approved share from January 1, 2019, to March 1, 2019, you can claim any part of the credit for that share on your return for 2018 and the unused part on your return for 2019.

Enter the net cost of your acquisition of provincially registered shares of a labour-sponsored venture capital corporation on line 413 of your Schedule 1. Net cost is the amount you paid for your shares minus any government assistance (other than federal or provincial tax credits) on the shares.

Claim the amount of your allowable credit on line 414 to a maximum of $750.

The allowable credit is 15% of the lesser of:

• $5,000
• the net cost reported on line 413 of your Schedule 1

Supporting documents – Attach to your return your official provincial or territorial slips.

⬤Line 415 – Working income tax benefit (WITB) advance payments

If you received WITB advance payments in 2018, report the amount from box 10 of your RC210 slip.

For more information, go to Working Income Tax Benefit (WITB) or see Form RC201, Canada Workers Benefit Advance Payments Application for 2019 (WITB is renamed as Canada Workers Benefit for 2019 and later years). To view your RC210 slip or your WITB information online, go to My Account for Individuals.

⬤▮▲Line 418 – Special taxes

RESP accumulated income payments

If you received an accumulated income payment from a registered education savings plan (RESP) in 2018, you may have to pay an additional tax on all or part of the amount shown in box 040 of your T4A slips. Complete Form T1172, Additional Tax on Accumulated Income Payments from RESPs, to calculate your tax payable on this accumulated income and report the amount from line 10, 13, or 16 (whichever applies). For more information, see Guide RC4092, Registered Education Savings Plans (RESPs).

Tax on excess employees profit-sharing plan (EPSP) amounts

You may have to pay a tax if both of the following apply:

• you are a specified employee (an employee dealing with an employer in a non-arm's length relationship or with a significant equity interest in their employer)
• your employer made contributions to your EPSP for the year that are more than a threshold equal to 20% of your employment income from that employer for the year

Get and complete Form RC359, Tax on Excess Employees Profit-Sharing Plan Amounts. 

Tax related to the non-purchase of replacement shares in a Quebec labour-sponsored fund

You must pay a special tax if you redeemed your shares in a Quebec labour-sponsored fund to participate in the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP) but did not purchase replacement shares within the prescribed time.

The special tax is the part of the federal tax credit that you received for the acquisition of the shares that were redeemed to participate in the HBP or LLP and were not replaced within the prescribed time.

How to report the special tax:

• For credits claimed in all years other than 2015, include on line 418 of your Schedule 1, the total of the amounts shown in boxes F and L1, plus 60 % of box L2 of your Relevé 10 information slips (official slip for the Province of Quebec).
• For credits claimed in 2015, enter the actual tax credit you received (line 414 of your 2015 return) on that portion of shares not reacquired within the prescribed time.

Supporting documents – Attach your official provincial slips.

⬤Line 424 – Federal tax on split income

NewAs of January 1, 2018, in addition to the tax on split income (TOSI) applying to certain types of income of a child born in 2001 or later, the TOSI may now also apply to amounts received by adult individuals from a related business. Where TOSI applies, the disability tax credit can now be used to reduce the individual’s tax payable for the year. However, income that is subject to TOSI must now be added to the individual’s net income to calculate various deductions, credits and benefits. For more information, see Form 1206, Tax on Split income.

⬤Line 425 – Federal dividend tax credit

If you reported dividends on line 120 of your return, claim on line 425 of Schedule 1 the total of the dividend tax credits from taxable Canadian corporations shown on your information slips.

If you received eligible dividends, the federal dividend tax credit is 15.0198% of your taxable amount of eligible dividends reported on line 120 of your return.

If you received "other than eligible dividends," the federal dividend tax credit is 10.0313% of your taxable amount of dividends reported on line 180 of your return.

For explanations of eligible dividends  and "other than eligible dividends," see line 120.

⬤▮▲Line 427 – Minimum tax carryover

If you paid minimum tax on any of your 2011 to 2017 returns but you do not have to pay minimum tax for 2018, you may be able to claim credits against your taxes for 2018 for all or part of the minimum tax you paid in those years.

To calculate your claim, complete the applicable parts of Form T691, Alternative Minimum Tax.

Supporting documents – Attach the form to your return.

▲Line 445 – Section 217 tax adjustment

Complete this line only if you have entered on line 38 of Schedule 1 the amount from line 16 of Schedule A.

If this is your situation, complete Part 2 of Schedule C, Electing under Section 217 of the Income Tax Act, to determine the amount to enter on line 445 of Schedule 1.

⬤▮▲Line 54 – Surtax for non-residents of Canada and deemed residents of Canada

This tax is paid instead of a provincial or territorial tax. If you did not have a business with a permanent establishment in Canada, follow the instructions at line 54 of Schedule 1 to calculate this surtax.

If you are reporting employment income in addition to section 217 eligible income, or if you had income from a business (including income you received as a limited or non-active partner), and the business has a permanent establishment in Canada, you have to pay provincial or territorial tax on that income. Use Form T2203, Provincial and Territorial Taxes for 2018 – Multiple Jurisdictions, to calculate your provincial or territorial tax (except for Quebec). Attach a copy of the form to your return.

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