Tax Update 2016:
As tax season approaches you are likely reviewing the information you collected last year and preparing to collect what is needed for this year. You may also be considering whether your return will be substantially different than it was in the prior year, or if you can expect a similar amount owed or refunded once you’ve filed. Whether you’re happy with a Liberal government or not, they have arrived in office and are making some changes that could affect your taxes this year, and we’ve got the details you need right here.
A new tax rate has been introduced, applicable to those with income levels between $45,282 and $90,563. For this bracket, the federal rate will drop from 22% to 20.5% and is expected to remain in place for all future tax years. Should you have the full $90,563 in taxable income this will result in savings of $679.22. If you took advantage of the Family Tax Cut last year, however, you may not realize all of these savings.
Another federal tax bracket has been added, increasing the highest combined tax rate for individuals to 53.53%.
The provincial rates in Ontario have not changed, but the federal increases will lead to new combined tax rates for Ontario Residents.
Look here for more detail.
In 2015 the Conservative government had increased the annual TFSA contribution limit from $5,500 to $10,000. For 2016, our new government has trimmed the limit back down to $5,500. This is a great vehicle for investing, but be sure to track your contribution limit diligently as there are some steep penalties for over contributing.
Canada Child Benefit
The Universal Child Care benefit has been eliminated and replaced with the Canada Child Benefit (CCB), which will provide a maximum of $6,400 per child under 6 and $5,400 for children 6 through 17. This maximum amount can be increased by up to $2,730 for children who are eligible for the disability tax credit. The full amount can be received only by families earning less than $30,000 per year, after which the amount is reduced. It will be further reduced for incomes above $65,000, and will be eliminated for incomes above $188,433.
If you’re interested in seeing where your family stands, you can find an online calculator here.
Teacher and Early Childhood Educator School Supply Tax Credit
A new refundable tax credit has been put in place for eligible educators, meaning those holding a teacher’s certificate or diploma, or a certificate in early childhood development recognized in the province or territory in which they are employed. The new credit would allow educators to claim up to $1,000 of eligible supplies for which they paid personally, as long as they are able to supply a receipt, and have the supplies certified as used for educational purposes by their employer. At the applied rate, claiming the full $1,000 would result in a refundable tax credit of $150.
Children’s Fitness and Arts Tax Credits
These are both being phased out over two years; for 2016 the limit on the fitness credit has been reduced to $500 from $1,000 and the arts credit to $250 from $500, with no change to the supplemental amounts for the disability tax credit. You can expect this credit to disappear entirely for 2017.
Principal Residence Exemption
In an effort to reduce abuse of the principal residence exemption, especially by non-residents, the CRA has added a number of additional rules for taxpayers claiming the principal residence exemption, including increased reporting requirements. If you have sold your home during the year, make sure to let your accountant know.