CHANGES EFFECTING PARENTS
Canada Child Tax Benefit (CCTB)
Starting July 2016 the new Canada Child Tax Benefit will replace the Universal Child Care Benefit (UCCB). Under the UCCB, $160/mth for children under 6 and $60/mth for children 6 to 17 is received. UCCB is added to an individual’s income and taxed at their income bracket.
Under the new Canada Child Tax Benefit starting in July 2016, the amount paid for each child will be based on the income of the family. Households with lower income will receive more under the CCTB than under the UCCB. While households with higher income will receive less and household with income over $190,000 will see an elimination of benefits. The amount received under the CCTB will be tax-free.
Canada Child Tax Benefit at various household incomes for illustration purposes:
Income $30,000 –$6,400 annually per child under 6 + $5,400 annually per child 6-18
Income $60,000 – $4,300 annually per child under 6 + $3,300 annually per child 6-18
Income $100,000 – $2,830 annually per child under 6 +$1,830 annually per child 6-18
Income $150,000 – $1,230 annually per child under 6 + $230 annually per child 6-18
To know how much Canada Child Tax Benefit you will get, go here:
The Children’s arts and fitness tax credits will be eliminated by the end of 2017.
Income splitting for couples with children will be eliminated effective January 1, 2016. Prior to 2016, couples with children under 18 years of age were able to transfer up to $50,000 of taxable income to their spouse resulting in a reduction of $2,000 in income tax liability.
CHANGES EFFECTING SENIORS
Guaranteed Income Supplement for single seniors will be increased by up to $947 annually effective July 2016. The Old Age Security and Guaranteed Income Supplement benefits will on start at 65 years instead of 67 years of age.
CHANGES EFFECTING STUDENTS
Education tax credit and textbook tax credit will be eliminated effective January 1, 2017.
Student Grants will be increased with low income families seeing an increase from $2,000 to $3,000 per year. Middle income families seeing an increase from $800 to $1,200 and part time students seeing an increase from $1,200 to $1,800
CHANGES TO PERSONAL INCOME TAX RATES
Effective January 1, 2016, federal tax rate for income between $45,283 and $90,563 will be reduced to 20.5% from 22%. While, the rate for income over $200,000 will be increased to 33% from 29%.
CHANGES EFFECTING BUSINESSES
Small business deduction & CCPC
Small Business Income Tax Rate to be 10.5% on the 1st $500,000 of active business income down from 11% with further reductions proposed for 2017, 2018, 2019.
A Canadian-Controlled Private Corporation (CCPC) will not be eligible for the small business deduction on income that is earned from providing service to another private corporation if one of its shareholders or a person that does not deal at arm’s length with the shareholder has an interest in the other CCPC.
Investment income earned from an associated corporation’s will not be eligible for the SBD.
Investment income earned by a CCPC, will see increases in the tax rate from 46.2% to 50.2%. While Canadian source dividends earned by CCPC will see increases in the tax rate from 33.33% to 38.33%. The refundable tax account increases on the Investment income and Canadian source dividends earned will increase respectively from 26.67% to 30.67% and 33.33% to 38.33%.
Eligible Capital Property (ECP)
ECP will be replaced by a new capital cost allowance (CCA) class. Balances of ECP will be transferred to a new CCA class as of January 1, 2017. The opening CCA class balance will be depreciated at a rate of 7% for the first 10 years. Up to $3,000 of the ECP balance to be transferred can be deducted as a current expense and not added to the new CCA class.
Under ECP, 75% of expenditures were added to CEC and deprecated at a rate of 7%. Under the new CCA class 100% the expenditures will be included and deprecated at an annual rate of 5%.
2016 BUDGET CANADA – OTHER
Teachers will be able to claim a refundable tax credit up to a maximum of $150 on eligible teaching supplies. The tax credit is calculated as 15% on amount spend up to $1,000. Eligible supplies must be used in a school or in a regulated child care facility for the purpose of teaching in the classroom.
The EI premiums will be reduced started in 2017 from $1.88 to $1.65 per $100 of insurable earnings and the waiting period for benefits will be reduced from two weeks to one.