2019/2020 Tax Changes

For year 2020, the basic personal credit is $12,298,  For 2019, it’s $12,069. (Note that the newly re-elected federal Liberal government promised to raise the basic personal amount over four years to reach $15,000, phasing out the benefits of the increase at incomes over $147,667.)

Clients may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.

The maximum RRSP contribution for 2019 is $26,500; for 2020, $27,230.

In 2020, the annual TFSA limit is $6,000, for a total of $69,500 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual limit for 2019 is $6,000, for a total of $63,500 in room available in 2019 for someone who has been eligible since 2009.

For the 2020 tax year medical expense threshold, the maximum is 3% of net income or $2,397, whichever is less. For 2019, the max is 3% or $2,352, whichever is less.

For 2020, the maximum pensionable earnings is $58,700 ($57,400 in 2019), and the basic exemption amount remains $3,500 for 2019 and 2020.

The maximum annual insurance earnings (federal) for 2020 is $54,200; for 2019, $53,100.

After March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017. This program has now expired.

This non-taxable benefit was effective July 1, 2016, and replaced the universal child care benefit. In 2020, the maximum CCB benefit is $6,765 per child under age six and up to $5,708 per child aged six through 17. In 2019, those amounts are $6,639 per child under age six and up to $5,602 per child aged six through 17.

As of 2018, the maximum child care expense deduction limit amounts that can be claimed are $8,000 for children under age seven, $5,000 for children aged seven through 16, and $11,000 for children who are eligible for the disability tax credit.

If you have a dependent who is physically or mentally impaired, you may be able to claim up to an additional $2,182 in calculating certain non-refundable tax credits.

The disability amount for 2020 is $8,576 (non-refundable credit; $8,416 in 2019), with a supplement up to $5,003 for those under 18 (the amount is reduced if child care expenses are claimed; $4,909 in 2019).

The child disability benefit is a tax-free benefit of up to $2,886 (2020) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions. For 2019, the amount is $2,832.

The lifetime capital gains exemption is $883,384 in 2020 and $866,912 in 2019.

Canada’s Federal 2016 Budget

With Canada’s 2016 federal budget just around the corner, we consider what tax measures our new government might have for us.

Our new Liberal government has already implemented some of the tax measures promised in its platform.

These changes, and others, are in Bill C-2, An Act to amend the Income Tax Act (first reading on December 9, 2015) and are discussed in the following Tax Insights:

The Finance Minister Bill Morneau commented on the following personal tax changes, which were promised in the Liberal party platform:

1. personal tax rates – starting January 1, 2016:
   1. A. the tax rate on incomes over $200,000 will increase from 29% to 33%;
   2. B. the second lowest tax rate will drop from 22% to 20.5%, decreasing taxes by up to $671 (based on 2015 tax brackets);
2. Tax-Free Savings Account (TFSA) contribution limit – will be rolled back from $10,000 to $5,500 and indexing will be reinstated, for contributions made in respect of the 2016 and later years;
3. income-splitting – the measure that allows some families with children under 18 to reduce their taxes by up to $2,000 will be cancelled, starting 2016;
4. Universal Child Care Benefit, Canada Child Tax Benefit and National Child Benefit Supplement – will be replaced with a new Canada Child Benefit, for payments starting July 1, 2016; the Liberal party platform had stated that the new benefit would be income-tested and tax-free;

The first two measures appeared in a Notice of Ways and Means Motion that was released. The latter two will be in the 2016 federal budget.

The Notice of Ways and Means Motion also increases:

1. the Canadian-controlled private corporation (CCPC) investment income surtax from 6 2/3% to 10 2/3%, which therefore raises the overall tax on investment earned in a CCPC by 4%;
2. the Part IV Tax rate from 33 1/3% to 38 1/3%;
3. the dividend refund rate on taxable dividends paid by a corporation from 33 1/3% to 38 1/3%;

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Canada’s Federal 2014-2015 Budget

Canada’s federal Finance Minister, Jim Flaherty, delivered his 2014 Federal budget.

Personal

Medical Expense Tax Credit

The budget proposes to make certain amounts paid for the design of an individualized therapy plan eligible for the Medical Expense Tax Credit. The amounts would be eligible where the cost of the therapy itself would be eligible for the medical credit and certain conditions are met, including that:

• An individualized therapy plan is required to access public funding for specialized therapy, or a medical doctor or an occupational therapist prescribes an individualized therapy plan
• The plan is designed for an individual with a severe and prolonged mental or physical impairment who is, because of the impairment, eligible for the Disability Tax Credit.

The budget also proposes to add expenses for service animals specially trained to assist an individual in managing their severe diabetes to the list of expenditures eligible under the medical credit.

Mineral Exploration Tax Credit

The budget extends the eligibility for the Mineral Exploration Tax Credit for flow-through share investors for one year to flow-through share agreements entered into on or before March 31, 2015.

Adoption Expense Tax Credit

The budget proposes to increase the maximum amount of eligible expenses for the 15% Adoption Expense Tax Credit to $15,000 per child for 2014 (up from $11,774). This amount will be indexed to inflation for taxation years after 2014.

Pension transfer limits

The amount of a lump-sum commutation payment from a defined benefit registered pension plan (RPP), received by a plan member who is leaving the RPP that may be transferred to a RRSP, RRIF, certain registered pension plans or a pooled registered pension plan on a tax-free basis is generally reduced if the RPP is underfunded, subject to certain exceptions. The portion of the commutation payment that exceeds the transferable amount must be included in the taxpayer’s income for the year in which it is received.

The budget proposes to extend the circumstances in which the maximum transferable amount, for a plan member leaving an underfunded defined benefit registered pension plan will be the same as if the plan were fully funded. In particular, the benefit reduction will be disregarded in the computation of the transferable amount if either:

• Where the plan is an RPP other than an individual pension plan, the reduction in the estimated pension benefit that results in the reduced commutation payment is approved pursuant to the applicable pension benefits standards legislation, or
• Where the plan is an individual pension plan, the commutation payment to the plan member is the last payment made from the plan (i.e., the plan is wound up).

The application of this rule must be approved by the CRA, and will apply in respect of commutation payments made after 2012.

GST/HST Credit

The budget proposes to allow the CRA to automatically determine if an individual is eligible to receive the GST/HST Credit. Each individual who is eligible for the GST/HST Credit will receive a notice of determination rather than having to apply for the credit. This measure will apply for 2014 income tax returns and for subsequent taxation years.

Search and Rescue Volunteers Tax Credit

The budget proposes a Search and Rescue Volunteers Tax Credit to allow eligible ground, air and marine search and rescue volunteers to claim a 15% non-refundable tax credit based on an amount of $3,000. This measure will apply to the 2014 and subsequent taxation years.

Business and rental income of trusts and partnerships

The budget proposes to apply the tax on split income where a minor is allocated income from a partnership or trust that is derived from business or rental activities conducted with third parties. Specifically, the budget proposes to amend the definition of “split income” to include income that is, directly or indirectly, paid or allocated to a minor from a trust or partnership where the income is derived from a business or a rental property, and a person related to the minor is either:

• Actively engaged on a regular basis in the activities of the trust or partnership to earn income from any business or rental property, or
• In the case of a partnership, has an interest in the partnership (whether held directly or through another partnership).

This measure will apply to the 2014 and subsequent taxation years

Here are 10 highlights from the 2014 federal budget:

• $1.5 billion over 10 years to support research and innovation at post-secondary institutions in areas that “create long-term economic advantages for Canada.”
• $305 million over five years to expand and upgrade broadband service in rural and northern areas. The investment is expected to bring better service to 280,000 households.

Related:

• Budget grab bag has relief for consumers, higher taxes for smokers
• $323.4 million over two years to continue to improve First Nations water and wastewater.
• $25 million over five years to continue efforts to reduce violence against aboriginal woman and girls.
• boosting the adoption expense tax credit to $15,000 to recognize the costs of adopting a child. The new limit, up from $11,774, would apply to adoptions finalized after 2013.
• A tax credit for search and rescue volunteers who perform at least 200 hours of service a year.
• After a year that saw major floods in Alberta and the Greater Toronto area, Ottawa is pledging to explore options for residential flood insurance. “Canada is the only G8 country without residential flood insurance coverage,” the budget said.
• A hike in the excise duty on tobacco products will add at least $4 to a carton of 200 cigarettes. The higher tax will pump $685 million into the federal coffers in 2014-15. As well, Ottawa has earmarked $91.7 million over five years to enhance the RCMP’s ability to combat contraband tobacco.
• $11.4 million over four years to expand vocational training for people with autism spectrum disorders.
• $44.9 million over five years to combat prescription drug abuse, including a campaign to educate Canadians on the safe use, storage and disposal of prescription drugs.