The New Year brings with it a number of tax changes that will impact Canadians’ paycheques. Here are the highlights to be aware of…
Canada Pension Plan (CPP) contributions increase from 4.95% to 5.1% on earnings between $3,500 and $57,400. It's the first of five years of graduated increases running until 2023, when the rate will hit 5.95%.
Partially offsetting the rise in CPP contributions is a decline in Employment Insurance (EI) premiums, from $1.66 to $1.62 per $100 of insurable earnings.
Low income workers can now qualify for a more generous Canada Workers Benefit. The maximum benefit will increase by between $300 and $400, based on whether the applicant is single or part of a family. That brings the maximum benefits to $1,355 for a single person or $2,335 for a single parent or couple, depending on income levels.
In jurisdictions that don't have carbon pricing mechanisms of their own, Ottawa will levy a tax on fossil fuels of $20 per tonne of greenhouse gas emissions starting this year, rising by $10 each year until it reaches $50 a tonne by 2022. Once the carbon tax is in place, the cost of a litre of gasoline will go up 4.42 cents, natural gas will go up 3.91 cents per cubic metre and propane will go up 3.10 cents a litre.
Postage stamps are also rising to $1.05 for a single domestic letter mail stamp; $1.27 for a U.S. letter mail stamp; and $2.56 for an international stamp.
Many personal income tax credit and benefit amounts are being indexed to inflation: the basic personal amount rises to $12,069 and the annual contribution limit to tax-free savings accounts will increase to $6,000 from $5,500 previously.
Lastly, business owners can now generate up to $50,000 in passive income before they start to lose access to the advantageous small business tax rate.
