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Net federal tax (Schedule 1)

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Net federal tax (lines 405 to 427, except lines 421 and 422)

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 or line 58 for residents of Quebec.

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 or line 53 for residents of Quebec. Add it to the amount on line 50 or line 53.

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, 214, 215, 219, and 220. Write "federal logging tax credit" and enter the allowable amount below line 50 on Schedule 1 or line 53 for residents of Quebec. Subtract it from the total of the amount on line 50 or line 53 and the amount of any applicable recapture of investment tax credits.

Line 405 - Federal foreign tax credit

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 report that income, or any tax withheld from it, in your foreign tax credit calculation.

Supporting documents - If you are filing electronically, keep all your documents in case we ask to see them at a later date. If you are filing a paper return, attach your completed Form T2209 and documents that show the foreign taxes you paid. 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.

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 2011 to a registered federal political party or a candidate for election to the House of Commons.

Under proposed changes, 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 applies to any contribution made after December 20, 2002.

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

Supporting documents - If you are filing electronically, keep all your documents in case we ask to see them at a later date. If you are filing a paper return, attach your official receipts. 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 2000;
  • 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.

Under proposed changes, eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 1, 2012.

How to claim

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

You have to send the form to us no later than 12 months after the due date of your return for the year the qualified 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, 2011, to February 29, 2012.

Under proposed changes, if you bought shares after 2003 of a provincial or territorial registered LSVCC (that is not a federally registered LSVCC), you can only claim the federal labour-sponsored funds tax credit in respect of those shares if a provincial or territorial income tax credit is also available to be claimed for them.

If you became the first registered holder of an approved share from January 1, 2011, to March 1, 2011, and did not claim the whole credit for it on your 2010 return, you can claim the unused part on your 2011 return. If you became the first registered holder of an approved share from January 1, 2012, to February 29, 2012, you can claim any part of the credit for that share on your return for 2011 and the unused part on your return for 2012.

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 per year.

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

Supporting documents - If you are filing electronically, keep all your documents in case we ask to see them at a later date. If you are filing a paper return, attach your T5006 slips, Statement of Registered Labour-Sponsored Venture Capital Corporation Class A Shares, or official provincial or territorial slips.

Tax Tip
Your province or territory may offer a similar tax credit. For more information, see the provincial or territorial forms in the forms book, unless you were a resident of Quebec on December 31, 2011. In that case, see the guide for your provincial income tax return for Quebec.

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

If you received WITB advance payments in 2011, 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, go to our Working Income Tax Benefit (WITB) page, or see Form RC201, Working Income Tax Benefit Advance Payments Application for 2012.

Note
If you can claim the WITB for 2011, complete Schedule 6.


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 2011. 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 types of income of a child born in 1994 or later are subject to this tax. For more information, 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.

A child under 18 may be subject to the tax on split income in respect of dividends on shares of a corporation. Under proposed changes, after March 21, 2011, any capital gain from the disposition of those shares to a person who does not deal at arm’s length with the child, will be deemed to be a dividend. This deemed dividend is subject to the tax on split income and is considered to be an other than eligible dividend for the purposes of the dividend tax credit.

Line 425 - Federal dividend tax credit

If you reported dividends on line 120 of your return, 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 16.4354% of your taxable amount of eligible dividends reported 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 2011:

  • You were a resident or deemed resident (as defined under E) of Canada at any time in the year.
  • 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 to the:

International Tax Services Office
Post Office Box 9769, Station T
Ottawa ON K1G 3Y4
CANADA

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 2004 to 2010 returns but you do not have to pay minimum tax for 2011, you may be able to claim credits against your taxes for 2011 for all or part of the minimum tax you paid in those years.

To calculate your claim, complete the applicable parts of Form T691, Alternative Minimum Tax. If you are filing electronically, keep your Form T691 for your records. If you are filing a paper return, attach your Form T691.