Lowered EI premiums, and expanded RRSP benefits are also set to impact tax plans
A handful of federal-level tax changes that take effect in 2020 are expected to provide marginal financial relief to most Canadians.
As announced last month by Finance Minister Bill Morneau, middle-income households will be subject to slightly lower federal income taxes as the basic amount most Canadians earn tax-free was increased from $12,069 to $13,229 on January 1. That increase in the basic personal amount is the Liberal government’s first step toward fulfilling its campaign promise from the recent federal election, which will see the tax-free amount raised up to $15,000 by 2023.
According to the Canadian Taxpayers Federation (CTF), the benefit will be lower for anyone who earns more than $150,473 during the year, and will be zero for Canadians with incomes over $214,368. Those in the lower income brackets, meanwhile, stand to get tax savings of up to $140 this year.
Also effective January 1, employment insurance premiums for individual workers and employees have been slightly reduced. A modest $3.86 was shaved off the maximum annual EI contribution for a worker, reducing it to $856.36; for employers, a $5.41 reduction means that their maximum EI contribution is now $1,198.90 per employee.
Between the increase in tax-free basic income and the decrease in EI premiums, the CTA estimated that residents of Ontario and Quebec earning less than $100,000 annually will experience net savings between $55 and $116.
The first day of 2020 was also a red-letter day on the RRSP front, as it introduced a qualification for Canadians experiencing a breakdown in their marriage or common-law partnership to withdraw money from their RRSP, without incurring a tax penalty, to buy a home.
Following a statement from the Finance Department, individuals who make a withdrawal in the year a separation occurs, or in the four preceding calendar years, are eligible to access the Home Buyers’ Plan (HBP), whether or not they are a first-time home buyer. The HBP, as it is normally applied, allows first-time home buyers to withdraw a maximum of $35,000 from an RRSP to use toward a down payment on a home, without having to pay tax on the withdrawal.
