Tax changes for 2011

It may well be true that there's nothing certain in life but death and taxes, but while the essential characteristics of death don't change much from year to year, tax rules do.

But let's face it. This year, the changes just aren't as exciting. The 2010 federal budget didn't contain the raft of new tax-break goodies that previous budgets had often dangled — nothing like the now defunct home renovation tax credit, for example.

But while 2010's changes may not have generated the same buzz as earlier years, there are still changes to be aware of. Many stem from the budget. Others are a result of routine indexing.

Here are the main changes affecting individual taxpayers:

Medical expenses

Holy nose job! The March budget did away with the ability of people to have their facelift, liposuction, hair transplant, botox or tooth-whitening qualify as an eligible medical expense for the medical tax credit. This means that cosmetic surgery that's not considered medically necessary will count as an eligible expense only if it took place before March 4, 2010.

Universal child care benefit

The budget also made a change that could benefit thousands of single parents who receive the universal child care benefit. As of the 2010 tax year, the UCCB can now be taxed in the hands of the child that qualifies for the eligible dependent credit. Before, it was the single parent who had to claim the income.

Beginning in July 2011, parents who have separated and share joint custody of a child will also be able to share the UCCB and the Canada child tax benefit (CCTB), along with the child component of the GST/HST credit. Previously, one parent had to claim the benefits. 

Registered disability savings plans

Starting in 2011, people who couldn't afford to contribute to a registered disability savings plan in one year will now be allowed to carry forward their unused entitlements to Canada disability savings grants and Canada disability savings bonds for up to 10 years. Previously, no carry-forward was allowed.

The budget also unveiled plans to allow for the tax-free rollover of a deceased individual's RRSP or RRIF proceeds to the RDSP of a financially dependent infirm child or grandchild, as long as there's contribution room. This measure applies for deaths occurring after March 3, 2010.

Inflation adjustments to tax brackets and tax credits

On rare occasions, inflation can sometimes benefit taxpayers. Tax bracket thresholds and non-refundable tax credit amounts were boosted by 0.6 per cent in 2010 to reflect the higher cost of living.

The inflation indexing amount for the 2011 tax year is 1.4 per cent.

Click here to see the 2010 and 2011 amounts.

U.S. Social Security benefits

Canadian residents who have been receiving U.S. Social Security benefits since before Jan. 1, 1996, will only have to pay tax on 50 per cent of those benefits. The old rule had decreed that 85 per cent was taxable. This budget change is retroactive to Jan. 1, 2010.

Stock options

Employees who exercised stock options after March 4, 2010, can no longer elect to defer the taxation of up to $100,000 of stock option benefits to a future year. Now, taxes on the benefits must be paid in the same year the options are exercised.