The Canada Revenue Agency (CRA) has been prolific recently, releasing its 2015 T1 General Income Tax and Benefits return, its schedules and auxiliary tax forms, together with accompanying guides and pamphlets. To get through them all is a challenge. So is understanding the volume of changes for the 2016 tax year. Here are 10 key reasons to see your tax specialist early in the 2016 tax filing season.
1. For all taxpayers.Changes to federal tax brackets and rates – the middle income bracket is reduced to 20.5% from 22%, while a new high-income rate will apply to those with taxable income over $200,000. These changes will affect other provisions on the tax return, including charitable donation calculations, trust and estate taxes, taxes on split income with minors.
2. Tax-Free Savings Account (TFSA) annual contribution limits were reduced for 2016, back to $5,500 from the 2015 maximum room of $10,000. However, there has been a reinstatement of indexation for 2016 and subsequent taxation years.
3. RRSP contribution roomremains at 18% of earned income, but the maximum contribution for 2016 is $25,370; for 2015 it’s $24,930. Any top-up for 2015 must be made by February 29, 2016.
4. For employees. There are changes to the calculation of automobile benefits. For 2015 the limit on tax-exempt auto allowances paid by employers to employees that use personal vehicles for business purposes, increased.
5. For those who turn 65 in 2016, the ability to postpone OAS benefits for up to five years if income is high. This could happen if a generous exit package is received, for example.
6. For retirees, the opportunity to recontribute withdrawals from a RRIF in 2015, when the withdrawal rules were relaxed. However, this must be done before February 29, 2016.
7. For families. The removal of the Family Tax Cut in 2016 could reduce refunds in spring 2017. An RRSP contribution could be especially helpful in reducing both net and taxable income in the 2016 tax year. This would not only save tax dollars, but the RRSP could also actually embellish cash flow for the family by creating or increasing the eligibility for the new Child Tax Benefit, expected to start in July.
8. More news for families: cut down on withholding taxes. Starting in the 2015 and future tax years, more is deductible for child care – $1,000 more in fact – in each of the maximum dollar categories: children under 7; children age 7-16; and disabled children for whom care is required. You can adjust tax withholdings as a result of these deductions, but you must file a T1213 form requesting permission from CRA. This is the right time of the year to do so. This is also an opportunity for those who make RRSP contributions, support payments, or claim medical expenses, charitable donations, and employment expenses to reduce their withholding taxes by completing form T1213, too.
9. For those caring for the sick and disabled, tapping into the Compassionate Care Benefits is much more generous – they are available for up to six months, as opposed to six weeks, starting in 2016. In addition, a new Home Accessibility Tax Credit may bring relief in 2016.
10. For business owners. Corporate tax rates are on their way down, dividend taxation is changing and a newly indexed capital gains exemption is available for 2016 if small business shares will be sold. The new amount is $824,176. Farmers and fishers can claim $175,824 on top of this for a total of $1 million when their enterprises are sold this year.
Courtesy Fundata Canada Inc.© 2016. Evelyn Jacks is president of Knowledge Bureau. This article originally appeared in the Knowledge Bureau Report. Reprinted with permission. All rights reserved.
