In Canada, there are a number of income tax changes taking effect from January 01, 2020. You should stay informed of these tax changes to better plan your personal taxes and business taxes in Canada.
If you are looking for tax changes available in the 2020 tax season for your 2019 taxes, please navigate to Canada tax changes for 2019.
Basic Personal Amount is Changed
Starting January 01, 2020, the basic personal amount is changed. 2020 basic personal amount is $13,229 which is an increase of $931. from 2019’s amount. It means the first $13,229 is a tax-free amount.
If you are a low income Canadian it can be a saving of $140. (15% of $931). For the middle-income bracket Canadians the savings can go up to $240.
The basic personal amount in Canada is expected to increase up to $15,000 by 2023.
Changes to Payroll Deductions in 2020
If you are an employee, you can see these changes on your paystub and if you a self-employed you should provide for this increase in self-employment taxes (only CPP). Payroll deductions are changed for 2020 as below:
1. Deductions for Canada Pension Plan (CPP)
Canada pension plan (CPP) deductions have been increased from 5.1% to 5.25%. Maximum pensionable earnings are also going up to $58,700. CPP contributions are not a tax, instead, it’s a contribution towards your pension income at retirement.
2. Changes to Employment Insurance (EI) Premiums
Employment insurance premium on the other hand is decreased from 1.62% to 1.58 of insurable earnings. Whereas insurable earnings are increased from $53,100 to $54,200.
Revised Climate Incentive Rebates for 2020
Canadians living in the provinces where they pay federal carbon tax have revised climate incentive rebates for 2020.
Effective April 01, 2020, Federal price on carbon is changing from $20 to $30, therefore, climate incentive payments are revised for the residents of four provinces. These incentives will be available when they 2019 taxes in the tax filing season of 2020.
The residents of Ontario, Manitoba and Saskatchewan will receive higher payments as compared to the previous year. For example, in Ontario, a single adult person will receive $224 as compared to $154 of last year.
New Brunswick residents will not receive rebates when they file their taxes since the province has reached an agreement with Federal govt.
Residents of Alberta will receive climate incentive payments for the first time. First payments to Albertans will be high due to Jan-March 2020 period.
No Changes to TFSA Limits
For 2020, there is no change to contributions to Tax-Free Saving Accounts Limit. The limit is the same as the previous year i.e. $6,000.
Digital Journalism – Income Tax Credit for Digital Subscriptions
Individuals can claim eligible digital subscriptions on their Personal Taxes in Canada. Individuals can claim up to $500 for a maximum tax credit of $75 for eligible amounts paid after 2019 and before 2025.
Qualified Donee – Journalism
Canadians can claim a tax credit for the charitable donations on their Personal income tax returns whereas corporations can claim a deduction for donations if the donations are made to qualified donees. Effective Jan 01, 2020, certain not-for-profit journalism organizations are allowed to register as tax-exempt qualified donees.
New Canada Training Benefit
To keep the labour force up to date with technological changes, Canada training benefit is a refundable tax credit. As a worker, you can get a tax credit up to $250 annually. This amount goes to a notional account which can be tracked on your Notice of Assessment and used for eligible purposes. To be eligible to accumulate this refundable credit you must file your income tax return, be between 26 and 65 years of age, a Canadian resident and have eligible earnings between $10,000 and $150,000.
Home Buyers’ Plan
Starting in 2020, couples who experience a breakdown in a marriage or common-law partnership will be able to access the Home Buyer’s Plan. If your marriage breaks down in the current year or preceding four years of when you intend to make a withdrawal, you can access it even if you do not meet the requirements. For first-time homebuyers, they can withdraw up to $35,000 from RRSP without having to pay RRSP withdrawal penalty.
Other changes for 2020
Other changes for 2020 onwards include:
- Additional types of annuities are permitted under registered plans
- Taxpayers need to file an information return with respect to foreign affiliates. For the tax years begin in 2020 it is 12 months after the tax year-end and 10 months for the year beginning after 2020.
Maroof HS CPA Professional Corporation is a one-stop solution for your personal taxes and corporation taxes need. We provide a wide range of tax services in Canada including individual tax preparation services, tax planning for residents and non-residents in Canada, Corporate income tax preparation services, corporate tax planning, cross border tax issues between US and Canada and other complex tax situations.