ARCHIVED - Net federal tax

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• Net federal tax (lines 405 to 445)
  • 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 - Additional tax on RESP accumulated income payments
  • Line 424 - Federal tax on split income
  • Line 425 - Federal dividend tax credit
  • Line 426 - Overseas employment tax credit
  • Line 427 - Minimum tax carry-over
• Line 445 - Section 217 tax adjustment
• Line A - Surtax for non-residents of Canada and deemed residents of Canada

Net federal tax (lines 405 to 445)

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 55 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 50 on Schedule 1. Add it to the amount on line 50.

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 whichever of the following two amounts is less for each province in which you had a logging operation:

• 66.6667% of the logging tax paid for the year to the province; or
• 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, 209, 214, 215, 219, and 220. Write "federal logging tax credit" and the allowable amount below line 50 on Schedule 1. Subtract it from the total of the amount on line 50 and the amount of any applicable recapture of investment tax credits.

Line 405 - Federal foreign tax credit

Deemed residents - This credit is for foreign income or profits taxes you paid on income you received from outside Canada and reported on your Canadian tax return. Complete Form T2209, Federal Foreign Tax Credits, to calculate your credit and enter the amount from line 10 on line 405 of Schedule 1.

Note
You may have deducted an amount on line 256 for income that is not taxable in Canada under a tax treaty. In that case, do not include that income, or any tax withheld from it, in your foreign tax credit calculation.

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 2010, you may be able to claim a foreign tax credit. Contact the International Tax Services Office for the special rules that may apply to you.

Supporting documents - Attach your completed Form T2209 and documents that show the foreign taxes you paid to your return. If you paid taxes to the United States, attach your W-2 information slip, U.S. 1040 return, and any other supporting documents that apply.

Tax Tip
Deemed Residents - Your federal foreign tax credit on non-business income may be less than the tax you paid to a foreign country. If so, you may be able to deduct on line 232 the amount of net foreign taxes you paid for which you have not received a federal foreign tax credit. This does not include certain taxes you paid, such as those on amounts you could have deducted under a tax treaty on line 256. For more information, see Interpretation Bulletin IT-506, Foreign Income Taxes as a Deduction from Income.

Lines 409 and 410 - Federal political contribution tax credit

Enter on line 409 the total you and your spouse or common-law partner contributed during 2010 to a registered federal political party or 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 that you received or will receive for making it. Generally, an advantage includes the value of certain property, service, compensation, use, or any other benefit. This change applies to any contribution made after December 20, 2002.

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

Supporting documents - Attach your official receipts to your return. Do not attach official receipts for amounts shown in box 14 of your T5003 slips, in box 105 of your T5013 or T5013A slips, or on financial statements showing an amount a partnership allocated to you. Keep copies of all your documents in case we ask to see them at a later date.

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;
• have unclaimed credits from the purchase of qualified property after 1999;
• have an amount shown in box 41 of your T3 slips;
• have an amount shown in box 107 or 128 of your T5013 or T5013A slips;
• have an amount shown in box 128 of your T101 slips;
• have a partnership statement that allocates to you an amount that qualifies for this credit;
• have an investment in a mining operation that allocates certain exploration expenditures to you; or
• employ an eligible apprentice in your business.

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).

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

Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 1, 2011.

How to claim

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

The time to submit Form T2038(IND) for a qualifying expenditure is limited. To be able to claim a credit for such an expenditure, you have to send the form to us no later than 12 months after the due date of your return for the year the expenditure arises.

Tax Tip
You may be able to claim a refund of your unused investment tax credit (see line 454).

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 prescribed labour-sponsored venture capital corporation (LSVCC) from January 1, 2010, to March 1, 2011.

If you became the first registered holder of an approved share from January 1, 2010, to March 1, 2010, and did not claim the whole credit for it on your 2009 return, you can claim the unused part on your 2010 return. If you became the first registered holder of an approved share from January 1, 2011, to March 1, 2011, you can claim any part of the credit for that share on your return for 2010 and the unused part on your return for 2011.

Enter your net cost on line 413. Net cost is the amount you paid for your shares, minus any government assistance (other than federal or provincial tax credits) on the shares. Enter the amount of the credit on line 414. The allowable credit cannot be more than 15% of the net cost, to a maximum of $750.

Note
If the first registered holder of the share is an RRSP for a spouse or common-law partner, either the RRSP contributor or the annuitant can claim this credit for that share.

Supporting documents - Attach your T5006 slips, Statement of Registered Labour-Sponsored Venture Capital Corporation Class A Shares, or official provincial or territorial slips to your return.

Line 415 - Working Income Tax Benefit (WITB) advance payments

If you received WITB advance payments in 2010, enter the amount from box 10 of your RC210 slip. To view your RC210 slip online, go to our My Account page. For more information, visit our Working Income Tax Benefit (WITB) page or see Pamphlet RC4227, Working Income Tax Benefit.

Note
If you can claim the WITB for 2010, complete Schedule 6 to calculate the amount to which you may be entitled.

Line 418 - Additional tax on RESP accumulated income payments

You may have received an accumulated income payment from a registered education savings plan (RESP) in 2010. If so, you may have to pay an additional tax on all or part of the amount shown in box 040 of your T4A slips. Enter the amount from line 10, 13, or 16 (whichever applies) on Form T1172, Additional Tax on Accumulated Income Payments from RESPs. For more information, see Guide RC4092, Registered Education Savings Plans (RESPs).

Line 424 - Federal tax on split income

Certain income of a child who was born in 1993 or later is treated differently (see Split income of a child under 18). If this tax applies, calculate it on Form T1206, Tax on Split Income, and enter the amount from line 5 on line 424 of Schedule 1.

Line 425 - Federal dividend tax credit

If you reported dividends on line 120, enter 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 17.9739% of your taxable amount of eligible dividends included on line 120.

If you received dividends (other than eligible), the federal dividend tax credit is 13.3333% of your taxable amount of dividends reported on line 180.

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

Note
Foreign dividends do not qualify for this credit.

Line 426 - Overseas employment tax credit

You may be able to claim this credit if both of the following apply for 2010:

• you were a resident or deemed resident of Canada at any time in the year; and
• you have employment income from certain kinds of work you did in another country.

To make your claim, use Form T626, Overseas Employment Tax Credit, and mail it with your tax return. For more information, see Interpretation Bulletin IT-497, Overseas Employment Tax Credit, and Form T626.

Line 427 - Minimum tax carryover

If you paid minimum tax on any of your 2003 to 2009 returns but you do not have to pay minimum tax for 2010, you may be able to claim credits against your taxes for 2010 for all or part of the minimum tax you paid in those years.

To calculate your claim, complete the parts of Form T691, Alternative Minimum Tax, that apply. Attach the form to your return.

Line 445 - Section 217 tax adjustment

Complete this line only if you have entered on line 32 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.

Note
Do not forget to complete Part 1 of Schedule C.

Line A - Surtax for non-residents of Canada and deemed residents of Canada

You pay this tax 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 A on the back 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 with a permanent establishment in Canada, you have to pay provincial or territorial tax on that income. Use Form T2203, Provincial and Territorial Taxes for 2010 - 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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Date modified:

2011-01-05