What’s New for 2016 Tax Returns:

Federal Tax

The newly elected Liberal government proposed a number of changes to the income tax system when it presented a Notice of Way and Means Motion following the Speech From The Throne in December 2015. This was done in order to implement campaign promises made during the last Federal Election and will affect 2016 personal tax returns:

Personal tax rate:

  • Taxpayers in the middle income tax bracket (taxable income from $45,282 to $90,563) will see a drop of 1.5% in its Federal tax rate.
  • A new high income tax bracket (earnings above $200,000) created a new tax rate to go with it. 33%, up from 29%.

Donations:

  • High income individuals taxed at the new 33% rate, will be eligible for a higher (33% up from 29%) donation tax credit to the extent their income exceeds $200,000. For instance, if a taxpayer contributed $10,200 to charity and had income for the year under $200,000 their donation credit would be the same as it was in previous years. If, however, they earned $205,000 and donated the same $10,200 then the first $200 would receive a 15% tax credit and the next $5,000 of the donation would be credited as it was in the past (29%) but the last $5,000 would receive the higher tax credit – because their earnings were $5,000 above the $200,000 threshold. Of course if the taxable earnings were $210,000 or higher than the full amount would be eligible for the higher credit (less the first $200 which receive a lower – 15% credit)