With the implementation of the federal Liberal majority government, we are going to experience some immediate changes to the tax act.
The changes that were effective as of Jan. 1, 2016, are:
• The change in the Federal Personal Tax rates with the addition of a new tax bracket for those people with incomes in excess of $200,000 of 33%. The second tax bracket for those with incomes between $45,281 and $90,563 will have the tax reduced to 20.5%. However the following bracket for those with incomes over $90,564 will still have to pay 26%. So the pressure is on to find ways to keep the taxable income level below $90,564.
• The TFSA limit will go back down to $5,500.
• The donation tax credit increases to 33% but only if your income is above the $200,000 mark.
The rest of the changes are still in the proposal stage and they are:
• The creation of a new Child benefit that will absorb the current Universal Child Care Benefit, National Child Supplement and Child Tax Benefit. The proposal is for a base amount of $6,400 per child under 6 and $5,400 per child who is between the ages of 6 to 17 that will be tied to family income level and the amounts will be non taxable.
• The elimination of the Family tax cut. The pension splitting will remain and there is a proposal to increase the Guaranteed Income supplement by 10%.
• A reduction in EI premiums and an increase in CPP benefits are under consideration.
• The Northern Residents deduction is to be increased by a third and be indexed to inflation.
The home buyers program is to be made more flexible for those people encountering significant life challenges
• The education and textbook credits are to be cancelled and replaced by an increase in student grants. The tuition tax credit will remain.
• A new refundable credit called the Teacher and Early Childhood Educator School Supply Tax Credit was supposed to be implemented for 2015 and is a credit for school supplies to a maximum of 15% of $1,000. However, no formal announcement has been made by the government with respect to this credit at this time.
So for 2016, the only additional receipts that you would be required to keep would be those for the Teacher and Early Childhood Educator School Supply Tax Credit.
One other item that needs mentioning is the Home Accessibility Tax Credit. This credit can be claimed on an annual basis and is limited to 15% of $10,000 per year of expenses incurred after 2015.
These expenses must have been incurred to renovate the home to make it more accessible or to reduce the risk of harm for the person living there. In order to qualify for this credit you must be 65 or older or be eligible for the Disability Tax Credit.
Gabriele Banka is a CPA, CGA and the owner of Banka & Company, CPA.