The quick guide to 2016 personal income tax changes

On December 7, 2015, tax measures were announced by the Liberal government. This guide provides a brief overview of some of the personal income tax changes that go into effect in 2016 making you aware and, where possible, prepared for any that impact you.

  • income tax rates.
    • For taxable income over $200,000, the marginal federal tax rate will increase from 29% to 33%.
    • Taxable income between $45,282 and $90,563 will see a reduction in the marginal federal tax rate. The rate will change from 22% to 20.5%.
  • tax-free savings account (TFSA). In 2015, the TFSA contribution limit was $10,000. The limit for 2016 will be $5,500 with contribution limits indexed to inflation for future years.
  • donation tax credit. The current rate is 15% on the first $200 and 29% for donations in excess of $200. In other words, if you donate $250, the credit will be calculated as 15% x $200 + 29% x $50. For the 2016 tax year, the 15% is unchanged but the 29% rate will increase to 33%. However, there is an additional component that considers a individual’s taxable income. It works like this. The 33% will apply to the lesser of the amount of donations in excess of $200 and the individual’s taxable income over $200,000.
  • family tax cut. Available in 2014 and 2015, the family tax cut provided an annual maximum $2,000 non-refundable tax credit. This is eliminated for 2016.
  • new Canada child benefit. Effective July 1, 2016, the current Universal Child Care Benefit (UCCB) will be replaced by the Canada Child Benefit. This is a new program that is expected to the income-tested and non-taxable (the UCCB is taxable).

Income tax is complex and changes frequently. Get in touch and request a personal income tax checklist to help you get all the tax credits and deductions you’re entitled to.





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