The Tax Season is upon us! As your Accountant in Oakville, I have summarized the 2016 Personal Income Tax changes, which may affect our clients’ T1 General (Personal Income Tax Returns) one way or another, depending on your own individual circumstances of course. Feel free to call us at 416.454.8812 or email at firstname.lastname@example.org if you have any questions.
Personal Taxes – T1 Personal Income Tax Return
1- High income earners will pay higher taxes:
4% increase in the federal tax rate from 29% to 33% will be applied on individuals for income over $200,000. As a result of this, the maximum personal tax rate in Ontario in 2016 for those with incomes over $200,000 will be as follows:
- Ordinary income (salary or interest): 53%
- Eligible dividends (from most public companies): 34%
- Non-eligible dividends: 30%
2- The middle class will pay lower taxes:
5% decrease in the federal tax rate from 22% to 20.5% on tax payers with income more than $45,283 and less than $90,564.
3- The income splitting tax credit will be removed:
The family tax cut credit will no longer be available. In the past, this credit allowed some families to save up to $2,000 by splitting income between spouses.
4- TFSA – Tax Free Savings Accounts:
The TFSA annual limit will be reduced from $10,000 to $5,500 for 2016
Donations in excess of $200 receive a tax break at higher federal and provincial tax rates. As the highest federal tax rate has increased by 4%, this also means donations will get a 4% boost in tax breaks. For those with incomes in excess of $200,000 who donate, you could receive up to 50.4% (46.4% in 2015) of your donation back in a tax reduction.