ARCHIVED - Schedule 1, Federal Tax Calculation (lines 500 to 518)

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There are two methods (Method A or Method B) on Schedule 1 that you can use to calculate your federal tax. If you have a straightforward tax situation, use Method A, and follow the instructions on Schedule 1. If you have to use Method B, the information that follows will help you complete Schedule 1.

If you have to pay minimum tax, or if you are claiming an overseas employment tax credit, see Form T691, Calculation of Minimum Tax, or Form T626, Overseas Employment Tax Credit Calculation, before completing the schedule.

Line 500 - Tax adjustments
Line 502 - Federal dividend tax credit
Line 504 - Minimum tax carry-over
Line 506 - Basic federal tax
Line 507 and 508 - Federal foreign tax credit
Line 511 - Additional federal foreign tax credit
Line 518 - Additional investment tax credit

Li ne 500 - Tax adjustments

You may be entitled to a tax adjustment if you:

• reported on lines 114 and 152 of your return a lump-sum Canada Pension Plan or Quebec Pension Plan disability benefit; or
• reported on line 130 of your return a lump-sum amount from your pension or deferred profit-sharing plan for benefits that accrued before 1972.

If either of these situations apply to you, we will use this line to record any tax adjustment to which you are entitled.

Lin e 502 - Federal dividend tax credit

If you reported dividends on line 120, enter the dividend tax credit on line 502. This amount is the total of the dividend tax credits from taxable Canadian corporations shown on the dividend information slips. If you didn't receive dividend information slips, the dividend tax credit is 13.33% of the taxable amount of dividends from taxable Canadian corporations (see line 120).

Note

Foreign dividends do not qualify for this credit.

Line 504 - Minimum tax carry-over

If you paid minimum tax for any year from 1988 to 1994, and you do not have to pay minimum tax on your 1995 return, you may be able to deduct part or all of that tax from your 1995 taxes payable. To calculate your claim, complete Part VIII of Form T691, Calculation of Minimum Tax. Attach the completed form to your return.

Line 506 - Basic federal tax

Your basic federal tax is a subtotal you use for certain calculations. For example, the federal individual surtax is a percentage of your basic federal tax.

Overseas employment tax credit - To make your claim, use Form T626, Overseas Employment Tax Credit Calculation. Enter the result of the calculation on line 506. For details, get Interpretation Bulletin IT-497, Overseas Employment Tax Credit, from us.

Lines 507 a nd 508 - Federal foreign tax credit

This credit is for foreign income or profits taxes you paid on income you received from outside Canada. Certain tax treaties with other countries may affect whether you are eligible for this credit.

You have to do a separate calculation for each country for which you claim a foreign tax credit, unless the total tax you paid to all foreign countries is $200 or less.

You also have to do a separate calculation for business income taxes and non-business income taxes paid to each foreign country. You can carry unclaimed foreign business income taxes back three years and forward seven years.

In most cases, the foreign tax credit you can claim for each foreign country is the lower of the following two amounts:

• the foreign income tax you actually paid; and
• the tax due to Canada on your net foreign business and non-business income from that country.

Note

If you paid taxes on income from foreign property (other than real property), your foreign tax credit cannot be more than 15% of your net income from that foreign property. However, you can deduct on line 232 the part of the foreign taxes you paid on income from a foreign property that is more than 15%.

For details on how to calculate your claim, get Interpretation Bulletin IT-270, Foreign Tax Credit.

How to claim

• Complete the federal foreign tax credit area on Schedule 1 and attach the schedule to your return. For a more detailed calculation, complete Form T2209, Calculation of Federal Foreign Tax Credits. Attach it to your return.
• Attach a note showing your calculations. Show all amounts in Canadian dollars. See "How do you report foreign income and other amounts?" on page 7 of this guide.
• Attach proof, such as an official receipt, showing the foreign taxes you paid.
• If you paid taxes to the U.S., attach a copy of your W2 information slip, U.S. 1040 return, and any other supporting documents that apply.
• If you were a member of a partnership and are entitled to claim a part of the foreign taxes the partnership paid, include in your calculation the amount shown in the financial statements or in box 33 of your T5013 slip.

Tax Tip

Your federal foreign tax credit may be less than the tax you paid to a foreign country. If the total of all your foreign tax credits on non-business income is less than the net foreign taxes you paid, you may be able to claim a deduction for the unused amount on line 232. Also, if you were not a resident of Quebec, you can get a further credit against your provincial or territorial income tax. You have to complete Form T2036, Calculation of Provincial Foreign Tax Credit, and attach a copy to your return.

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. For details on how to calculate your credit, contact us.

Since there is no line on the return to claim your tax credit, write in "federal logging tax credit" and your allowable credit below line 30 on Schedule 1. Subtract your allowable credit from the amount on line 30, and enter the result on line 406 of your return (if negative, enter "0").

Line 511 - Additional federal foreign tax credit

If you claimed a foreign tax credit, you may be able to claim an additional federal foreign tax credit. Use Part II of Form T2209 to calculate this credit. Claim this amount on line 511.

Line 518 - Additional investment tax credit

You may also be able to reduce your individual surtax by part of your unused investment tax credit for 1995. See Form T2038(IND.) for details.

Date modified:

2002-02-04