May 2020 Newsletter

It’s hard to go a day without thinking about the COVID-19 virus and its impact on our lives. Most governments, including ours, have provided significant financial support to those most affected. In this regard, the Canadian federal government has announced some income tax relief, which are summarized below.

Spouse credit 

If you have a spouse (or common-law partner) with little or no income whom you support, you can claim the spouse tax credit. For 2020, the federal credit is 15% of the amount by which $13,229 exceeds your spouse’s or partner’s income for the year, if your income for the year is $150,473 or less. (If your income exceeds $150,473, the credit is reduced gradually, and down to 15% of $12,298 in excess of your spouse’s or partner’s income if you are in the highest tax bracket; see the January Tax Letter regarding the changes to the personal and spouse credit for 2020.) Accordingly, the credit is reduced to the extent your spouse has any income and is eliminated once your spouse’s income reaches $13,229 or more (or the reduced dollar amount if your income exceeds $150,473). A provincial credit is also available and the amount depends on the province.

One-half of a capital loss is an allowable capital loss, which is normally deductible only against taxable capital gains. However, if the capital loss is a "business investment loss", then one-half of it is an "allowable business investment loss" (ABIL) deductible against all sources of income.

A business investment loss includes a capital loss disposition to an arm’s length person of:

  1. a share of a "small business corporation", or
  2. a debt owed by a Canadian-controlled private corporation (“CCPC”) that is either:
    • a small business corporation, or
    • bankrupt, or
    • an insolvent corporation that qualified as a small business corporation when it was in the process of being wound up.