If you have any questions about these tax changes, or how they may apply to your situation
Published: February 13, 2020
Updated: February 13, 2020
A new taxation year can often bring tax changes. We have compiled a summary of the most significant federal tax changes that may affect your 2019 personal income tax return, as well as changes that may help you save taxes in 2020 and beyond.
Enhanced Canada Pension Plan
As you are likely aware, your Canada Pension Plan (CPP) contributions increased on January 1, 2019 and will continue to increase each year until 2023 (or 2024 if your income exceeds a new earnings ceiling). Similar enhancements were made to the Quebec Pension Plan.
When you file your personal income tax return for the 2019 tax year, take note that your CPP/QPP contributions consist of a base amount and an enhanced amount. While a non-refundable tax credit on the CPP/QPP base amount continues to be available, a new tax deduction—instead of a tax credit—can be claimed on the enhanced portion of the CPP/QPP. The maximum amount of the new tax deduction for 2019 is $80.85.
Home Buyers' Plan
The first-time Home Buyers' Plan (HBP) withdrawal limit increased to $35,000 from $25,000 for withdrawals made after March 19, 2019. If you qualify, this means that you and your spouse or common-law partner can withdraw up to $70,000 tax-free from your RRSP towards the purchase of a principal residence.
In addition to the withdrawal limit increase, an individual can re-qualify for the HBP following the breakdown of a marriage or common-law partnership in certain circumstances, starting in 2020. Note that specific circumstances must be met in order to be eligible.
Learn more by reading our recent tax tip Can you benefit from recent changes to the Home Buyers' Plan
Canada Training Credit
A new refundable tax credit, the Canada Training Credit (CTC), will be available beginning in 2020. If certain conditions are met, you will accumulate $250 each year, up to a lifetime maximum of $5,000, to be used in calculating the CTC. The Canada Revenue Agency (CRA) will determine your CTC limit for the 2020 tax year and communicate it to you on your Notice of Assessment for your 2019 tax return. Eligible individuals will be able to apply their accumulated CTC balance against up to half the cost of eligible fees, which include eligible fees paid to a university, college, or other educational institution providing courses at a post-secondary level or an institution providing certified occupational-skills courses.
Basic Personal Amount
In late 2019, the federal government proposed an increase to the Basic Personal Amount (BPA), which is an amount that individuals can earn before they have to pay federal income tax. The proposal increases the BPA to $13,229 in 2020 and ultimately to $15,000 by 2023. However, the benefit of the increased BPA is reduced for individuals with net income above $150,473 (which is the threshold for the second highest tax bracket in 2020) and eliminated for individuals with net income over $214,368 (which is the threshold for the top tax bracket in 2020).
Digital subscriptions tax credit
A new 15% non-refundable tax credit for subscriptions to Canadian digital news is available to individuals on eligible amounts paid after 2019 and before 2025. Up to $500 in costs paid towards eligible digital subscriptions in a taxation year will qualify for a maximum tax credit of $75 annually.
Additional types of annuities allowed under registered plans
To provide greater flexibility in managing retirement savings, it is proposed that two new types of annuities—Advanced Life Deferred Annuities (ALDAs) and Variable Payment Life Annuities (VPLAs)—will be permitted under certain registered plans beginning in 2020. Under the proposals, ALDAs will be allowed under a Registered Retirement Savings Plan, Registered Retirement Income Fund, Deferred Profit Sharing Plan, Pooled Registered Pension Plan (PRPP) and defined contribution Registered Pension Plan (RPP). In addition, VPLAs will be permitted under a PRPP and defined contribution RPP.
Tax-Free Savings Account contribution limit
Contributions to a Tax-Free Savings Account (TFSA) do not give rise to a tax deduction and when money is withdrawn, the accumulated contributions and income received are not taxable. Each year, taxpayers are entitled to a specified annual contribution limit. For 2020, the TFSA annual contribution limit remains at $6,000 and any unused contribution room will carry forward.
The information in this publication is current as of January 12, 2020.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.