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New tax rules affect students, investors, and self-employed

Students who received scholarships in 2010 for post-secondary programs that consist mainly of research are now eligible for scholarship exemption and the education amount only if they lead to a college or CEGEP diploma, or a bachelor, masters, or doctoral (or equivalent) degree. Post-doctoral fellowships are now taxable.

There was a time when Canadians could deduct botox injections as medical expenses on their tax returns, but now all the benefits of the cosmetic procedure are entirely aesthetic.

Ottawa closed the loophole for any cosmetic medical and dental expense claims in March last year. It's one of the many changes taxpayers need to keep in mind when planning their taxes this year.

Here are some of the other major changes:

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Students

Students who received scholarships in 2010 for post-secondary programs that consist mainly of research are now eligible for scholarship exemption and the education amount only if they lead to a college or CEGEP diploma, or a bachelor, masters, or doctoral (or equivalent) degree. Post-doctoral fellowships are now taxable.

If you received a scholarship, fellowship or bursary for a part-time program, the exemption is limited to the amount of tuition paid for the program plus the costs of related materials.

Single parents

Single parents with children under the age of six can take advantage of an improvement in the allocation of child benefits between parents who share custody. As of July 2011, parents who share custody equally will be able to separately receive their half of the Canada Child Tax Benefit, Universal Child Care Benefit and child component of the GST/HST credits.

Also, single parents can designate all Universal Child Care Benefit amounts received in 2010 as the income of a dependant on their tax returns.

Peter Coles of H&R Block says for federal tax purposes, such a designation will only be beneficial if your taxable income is more than $40,970. But parents in the lowest bracket can receive provincial tax savings, he says, because most provinces allow your children to earn a small income without affecting claims for eligible dependants. Unfortunately, parents in Alberta, Manitoba and the Northwest Territories cannot benefit because the tax rules for dependants are different there.

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Disabled people

New tax rules allow those who qualify for the Registered Disability Savings Plan to carry forward unused government grants and bonds dating back to 2008. So for those who qualify for the disability savings bond, simply opening an RDSP this year will allow them to collect up to $4,000.

Beginning in July, the proceeds from a deceased individual's registered retirement savings plan, registered retirement income fund or registered pension plan can be rolled over into the RDSP of a financially dependent child or grandchild with a disability, without triggering taxes and probate fees.

The self-employed

You may be able to enter into an agreement with the Canada Employment Insurance Commission through Service Canada to participate in the new Employment Insurance Measure for Self-Employed People, which provides benefits for maternity and parental leave, sickness and compassionate care.

Investors

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A "security option benefit" occurs when you buy securities through your employer at a pre-established price that is below fair market value. You used to be able to defer reporting these taxable benefits until you sold the securities, but if you bought such securities after March 4, 2010, the election to defer the benefit is no longer available.

U.S. social security recipients

If you received U.S. social security benefits in 2010, you may be eligible to claim a deduction of 50 per cent of the benefits received.

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About the Author
Report on Business Community Editor

Dianne Nice is community editor for Report on Business and writes about social media. Previously, she was The Globe's online editor for Careers and Personal Finance and has written about these topics for Report on Business and Globe Investor. More

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