This year will definitely stand out as unique when it comes to the typical financial routines for Canadians. The Covid-19 pandemic has led to drastic changes in employment, earnings and the general lifestyles of Canadians everywhere. By this time in the year, filing taxes would be long over with the average Canadian. This is not the case this year, which is why we wanted to put together this brief guide about tax changes in Canada this year. For one thing, the deadline to file taxes was extended from April 30th to June 1st. In addition to this, there are many more tax changes Canadians should know about.
Tax Changes You Should Know in 2020
1. Tax Rates and Limits
To get started, let’s look at some of the tax changes we were expecting to occur this year. For instance, tax brackets for federal and provincial payments will be increasing as expected to keep up with inflation. In addition, EI premiums will be decreasing from 1.62% to 1.58% for 2020. We will also see a rise in pensionable earnings, along with contribution rates from employers and employees. These will be increasing by 5.25% in the upcoming year. Finally, we will continue to see the Canada Child Benefit indexed according to inflation, meaning parents can receive more in benefits per child in 2020.
Continuing with last year’s trend, annual contribution limits on tax-free savings accounts will again rise by $6000. That means those who have yet to contribute to a TFSA who have been eligible since 2009 can have nearly $70,000 in contribution room!
3. Basic Personal Amount
Just to remind you, the BPA is a tax credit that basically all Canadian taxpayers are eligible to claim. Those who make more than $147,667 annually will have their BPA reduced however. Those who make more than $210,371 will not be eligible for a tax break in any amount. For the rest of Canadians, they can earn just over $12,000 this year before paying income tax. By 2023, the Liberal government has vowed to increase that rate to $15,000.
4. Senior Benefits
Old Age Security as well as the survivor benefit from CPP will be increasing this year as part of 202’s tax changes. The OAS will be increasing by 10% for seniors over the age of 75 who earn less than $77,580. This means an annual increase of $729 for OAS starting in July of this year. Simultaneously, survivors over the age of 65 will be able to receive 60% of their partner’s pension, while those between 60 and 64 will be entitled to 37.5%.
5. Parental Benefits
Additional tax breaks and benefits are in store for parents this year, as the cost of childcare continues to rise steadily across the country. As we mentioned, the Canada Child Care Benefit is slated to increase this year. Along with this, the Child Disability Benefit is going to double in 2020, meaning an additional $2800 for parents with disabled children under 18 years of age. In addition to these financial increases, the federal government has promised a 15-week leave for adoptive parents, which is the same length as maternity leave.
6. Home Buyers’ Plan
The Canadian housing market has been quite volatile in recent years, especially in major cities like Vancouver, Montreal and Toronto. As a result, the government has made some efforts to help the first time home buyers access the funds they need for a down payment. After being stagnant for a number of years, the RRSP withdrawal amount which can be put toward home purchases has increased to $35,000 per person. That means couples can put up to $70,000 towards their home purchase.
There are lots more interesting tax changes in store for 2020, and with so much uncertainty around the Covid-19 situation, we could be in store for more changes. If you have more questions about tax changes, please visit the official Government of Canada Taxes site, or call us.
To keep on top of all the tax changes that will be important to your finances this year, be sure to keep an eye out for more information from Genesa CPA. We are also available to handle any tax inquiries and concerns, as the deadline to file has been extended until June 1st. Feel free to call or email to set up a consultation to find out what benefits you may qualify for in 2020.