Personal tax rates
Effective as of 2016, the tax rate for the second lowest federal tax bracket ($45,282 to $90,563 of taxable income) decreased from 22% to 20.5%, and a new top federal tax rate of 33% has been implemented for individuals with taxable income in excess of $200,000.
Capital gains exemption
For 2016, the capital gains exemption for qualified small business corporation shares has risen from $813,600 to $824,177. This exemption will be indexed for inflation in subsequent years. The capital gains exemption for qualified farm or fishing property remains at $1,000,000.
Charitable donations
The first time donor super credit on up to $1,000 of donations will be available again in 2016. This increased tax credit adds 25% to the current credit and only applies to cash donations; donations in kind are not eligible. This credit is only available to individuals if neither the individual nor the individual's spouse has claimed a donation tax credit in the preceding five tax years.
Coinciding with the new top tax bracket mentioned earlier, the 33% tax rate will apply in calculating an individual's donation tax credit for charitable donations over $200 to the extent that he/she has taxable income in excess of $200,000.
New rules relating to charitable donations made by an individual by will came into effect in 2016. Essentially, these rules consider an individual's estate to have made the donation at the time the property is transferred to the donee, but they do allow some flexibility as to who can claim the donation tax credit if the estate is considered a Graduated Rate Estate. If you plan on making such donations through your will, we recommend that you contact your Crowe MacKay tax advisor to see how these new rules will affect you and your estate.
Estate Planning
Recent tax changes have significantly changed the taxation of estates. Planning that was incorporated into wills created before 2016 may no longer be effective as a result. We recommend you review the details of your will and related estate planning arrangements to determine whether changes are required as a result of these tax changes. Contact your Crowe MacKay tax advisor for further details.
Early Childhood Educator School Supply tax credit
The Early Childhood Educator School Supply tax credit is a refundable tax credit that is new for 2016. This credit will allow an employee who is a teacher or early childhood educator to claim a 15% refundable tax credit on up to $1,000 of purchases of eligible teaching supplies during the year.
Home Accessibility tax credit
Starting in 2016, the Home Accessibility tax credit is available for seniors (age 65 and older) and individuals who qualify for the disability tax credit. This credit allows these individuals to claim a tax credit on up to $10,000 of expenses incurred to perform a "qualifying renovation" on their home. Such a renovation must allow the individual to gain access to, or be mobile or function within the home, or reduce the risk or harm of the individual within or gaining access to the home.
Reporting the disposition of a principal residence
In previous years, CRA had stated that the sale of a principal residence did not have to be reported unless the gain on the sale was not fully sheltered by the principal residence deduction. Effective as of 2016, an individual will now be required to report the sale of his/her principal residence on his/her personal income tax return in order to claim the principal residence deduction. CRA has indicated that basic information relating to the disposition and the property (e.g. date of acquisition, proceeds of disposition and a description of the property) will need to be reported on the return. If you sold your principal residence during the year, please ensure that you retain the necessary documentation so that the disposition can be reported on your return.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
