Major changes applicable for 2019 are as below. The below list is not conclusive of all the tax changes as applicable from 2019, however, these are the major changes the interesting majority of taxpayers in Canada.
Canada Pension Plan Enhancements
Canada Pension Plans (CPP) and Quebec Pension Plan (QPP) are being enhanced gradually. Starting January 01, 2019 employee contributions to CPP or QPP will be allowed as a tax deduction as compared to a tax credit previously. If you make higher contributions to CPP, you will get improved benefits.
Canada Workers Benefit replaces Working Income Tax Benefit
Canada Workers Benefit (CWB) replaced Working Income Tax Benefit (WITB) and the change will be applicable beginning January 01, 2019. A refundable tax credit of Canada Workers Benefit is more generous than the former WITB and provided more benefits for the working Canadians with lower income. Benefits are going to be received in early 2020 when 2019 income tax returns would be filed.
New Investment Income Rules for Corporations
Tax rates for Canadian Controlled Private Corporations (CCPC) are not changed when it comes to investment income including capital gains. However, tax rates that are applicable to passive investments have been changed.
Effective 2019, CCPCs who do not distribute the cash and instead make passive investments are taxed at higher tax rates if the corporation earns more than $50,000 in passive income. For every dollar earned in passive income over $50,000, the small business deduction is reduced by $5. It means if your passive income reaches $150,000, small business deduction becomes zero since an extra $100,000 reduced $500,000 of small business deduction in full.
The first $50,000 of passive income is still taxed at 50%.
Dividend Tax Credit
Non-eligible dividends – dividends from Canadian Controlled Private Corporations (CCPCs) – will be adjusted to reflect the changes as applicable to New passive investment income rules for corporations.
Small Business Tax Rate Reduction for 2019
Small business tax rate has been changed from 10% to 9%. Check out the corporate tax rates for 2019 here.
Capital Cost Allowance on Zero-emission vehicles
Capital cost allowance on zero-emission vehicles is available for self-employed individuals (un-incorporated businesses) or the individuals with employment income where employment expenses deduction is allowed. (You can deduct certain employment expenses if you have Conditions of Employment from your employer). Temporary enhanced first-year capital cost allowance of 100% is allowed on zero-emission vehicles on eligible vehicles. Such eligible vehicles must be acquired after March 18, 2019, and should be available for us before 2024 whereas this enhanced CCA will be reduced for the vehicles become available for use after 2023 and before 2028.
A new look of 2019 Income tax package in Canada.
CRA has redesigned the Income-tax return for 2019. You should expect to see a different look as compared to previous years.
Maroof HS CPA Professional Corporation provides income tax preparation services for both individuals and businesses in Canada. For personal tax returns in Canada, EFILING will be available from February 24, 2020. You can find a personal income tax checklist here.