Tax breaks for northern residents

South Peace Staff
South Peace News

For residents living in designated northern areas of Canada, there are special tax deductions meant to offset the higher costs of living in remote areas. The zones are designated by the government and fall into two categories: prescribed northern zone and prescribed intermediate zone.

If you are living in the prescribed northern zone, you are entitled to receive a basic deduction of $8.25 per day for each day you live there. This means a deduction of $3,011.25 if you reside in the zone for the entire year.

Prescribed intermediate zones are less remote and receive a deduction of $4.125 per day for each day of residency for a deduction of $1,505.63 if you live there for the whole year.

Taxpayers who maintain or live in a dwelling in the prescribed zone are entitled to an additional daily deduction. Again, it is $8.25 for the northern zone and $4.125 for the intermediate zone. A dwelling includes a house, apartment or mobile home but not a hotel room, bunkhouse or room in a boarding house.

And no matter what zone you live in, your residency deductions cannot exceed 20 per cent of your net income.

There are rules about how many people can claim the deduction in one dwelling. If two or more people share a dwelling and both are claiming the basic deduction, neither can claim the additional deduction. If only one of the residents claims the basic deduction then that person can also claim the dwelling deduction. It may help to consult a tax professional to see who should claim the deductions to maximize the tax savings.

If your employer provides you with free trips out of the zone and these trips are included in your income as a taxable benefit, you may also be entitled to the special travel deduction. Your claim amount is limited to the lesser of: 1. The travel benefit received from your employer;

2. The total travel expenses you incurred; and

3. The cost of the lowest return airfare available at the time between the airport closest to your residence and the nearest designated city.

Designated cities include: Vancouver, Edmonton, Calgary, Saskatoon, Winnipeg, Toronto, Montreal, Moncton, St. John’s, North Bay, Ottawa, Quebec City and Halifax. Even if you did not travel to one of these cities or may not have flown, the claim amount is still limited by this restriction.

Unless you made trips for medical reasons, you are only allowed to claim the deduction for two trips per year for each member of the household. There is no limit on the trips required for medical travel.

Residents in the intermediate zone receive only half of the travel deduction amount.

In order to claim any of the northern residents deductions, a taxpayer must have resided in a prescribed zone for a continuous period of at least six consecutive months beginning or ending in the year. Because the qualifying period of residence may begin or end during the taxation year, the actual number of days of residence in the prescribed zone may be less than six months during a given taxation year.

A tax professional at H&R Block can talk about other credits and deductions that may affect you.

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