In October of 2015, the Federal Liberal Party, led by Justin Trudeau, obtained a majority of the available seats, giving the required strength to more quickly pass bills and implement the party platform. On December 7, 2015, they introduced a number of provisions from their campaign platform.
Steve McGaghran
CPA, CA, CGA, LPA and Partner
Millards Chartered Professional Accountants
Steve McGaghran, CPA, CA, CGA, LPA and Partner at Millards Chartered Professional Accountants says that the impact of the changes will depend on your tax bracket.
“If you have an income in excess of $200,000, your tax rate will increase by 4%, from 29% to 33%. If you make between approximately $45K and $90K annually, your tax rate will decrease by 1.5%. The result is a maximum savings of about $670.”
Other changes include a reduction in the TFSA contribution limit and increases in the federal donation tax credit.
The Federal Liberal Party returned the TFSA annual contribution limit for 2016 and onwards to $5,500. That’s a reduction from the one-time $10,000 limit in 2015.
The federal donation tax credit for donations in excess of $200 will be increased to 33%, but only to the extent the individual has income subject to the new 33% personal tax rate. All taxpayers will still receive a 15% federal donation tax credit on the first $200 of gifts. Taxpayers who do not have earnings in the top tax bracket of 33% will receive a 29% federal donation tax credit on gifts in excess of $200, which is the same credit that was available in prior years.
“For example, consider a taxpayer that has an income of $225,000, and claims $60,000 of charitable donations. If the donations were made and claimed in 2016, the federal donation tax credit would be $18,732, whereas if the donations were claimed in 2015, the credit would be $17,372.”
The newly adopted tax provisions of the Federal Liberal Party also include changes for business. Canadian Controlled Private Corporations receive an increase of 4% in general to the refundable tax incurred on investment income.
“Essentially these changes will eliminate a tax deferral opportunity which would have otherwise been created with the above 4% increase in top personal tax rates.”
The changes above have already been introduced into legislation and began at the beginning of the year. In part 2 of this article, Millards Chartered Professional Accountants reveals the second round of Federal Liberal Party programs that begin on July 1st, 2016.
Do you have questions about what the new tax rules mean for you or your business? Contact a Millards Chartered Professional Accountants representative today and find out more.
Steve McGaghran, CPA, CA, CGA, LPA, is a partner at Millards Chartered Professional Accountants. His practice areas include both personal and corporate tax planning as well as accounting and auditing. He has extensive experience with small and medium sized business and auditing of both private and not-for-profit organizations.
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