2018 has started and while many Canadians are still concerned with their 2017 tax return, we must also remember to plan and strategize for the year ahead.
The first step in this process is determining the applicable tax brackets, credit rates, contributions and premiums that will apply to you and your specific situation in 2018.
For your convenience, we have gathered the most popular tax related information and listed it below.
Federal Tax Rates and Brackets
The following are the tax rates individuals will have to pay based on their Taxable Income Level.
Federal Individual Tax Credits
The following non-refundable tax credits are available to taxpayers, who meet the eligibility requirements, in 2018.
The Basic Personal Amount is a non-refundable tax credit that every Canadian is entitled to on their tax return. This amount changes every year, based on inflation.
The Spouse or Common Law Partner Amount can be claimed by a taxpayer, if at any time in the year, you supported your spouse or common law partner and their income was less than $11,809. Only one spouse can claim this amount.
The Eligible Dependent Amount can be claimed if, at some point during the year, you met all of the following criteria:
- You didn’t have a spouse or common law partner or were not living with them, supporting them or being supported by them
- You supported an eligible dependent
- You lived with the dependent in a home you maintained (not on a temporary basis)
- The dependent was, by blood, marriage, common-law or adoption, a parent or grandparent, or a child, grandchild, brother, or sister who was under the age of 18 or had a physical or mental impairment
The Age Amount can be deducted from your tax payable if you are 65 or older in 2018 and your net income is less than $85,863. You will be eligible for a tax credit of $7,333 unless your income exceeds $36,976 at which point the credit will be reduced by 15% of the amount made over and above $36,976.
The Canada Employment Amount is available to Canadian tax payers with employment income, excluding those who are self-employed. This credit is available to help offset the costs of work related expenses, such as uniforms, home computers and supplies. The amount you claim will be equal to the lesser of $1,195 or your employment income of the year.
The Disability Amount helps those with disabilities or those supporting someone with a disability. To be eligible for the Disability Tax Credit (DTC), you must have an approved Form T2201.
The Adoption Expense Credit is a non-refundable tax credit that was put in place to help with the costs associated with adoption. These expenses can be claimed in the year the adoption period ends. Unlike many tax credits, the Adoption Expense credit can be divided among both spouses. It is claimable on expenses that fall into the following categories:
- Fees paid to a licensed adoption agency
- Legal fees, court cost and admin expenses related to the adoption
- Traveling and living expenses, within reason, related to the adoption
- Translation fees
- Fees paid to a foreign institute
- Immigration fees for the child
- Other reasonable expenses required by a provincial or territorial government or the adoption agency
The Medical Expense Threshold is the maximum amount you must deduct from your medical expenses to determine your claimable expenses. To determine your threshold, multiply your 2018 income by 3%. If it is less than $2,302 than reduce your expenses by the result of your calculation. If it is greater, than reduce your expenses by $2,302.
If you have high medical expenses and low income, you may be eligible to receive a Refundable Medical Expense Supplement. For 2018 the maximum supplement is $1,222 or 25% of your medical expenses and disability supports expenses. For more information on this credit, visit the Canada Revenue Agency website.
The Old Age Security (OAS) Clawback Income Threshold is the amount at which those receiving OAS will have to repay their OAS, either entirely or in part. The amount you will have to repay is 15% of the amount over and above the threshold of $75,910.
Canada Pension Plan (CPP) Contributions
The Canada Pension Plan (CPP) is a pension program that provides partial replacement of earnings to contributors and their families during retirement, or in case of disability or death.
The CPP contribution rate for 2018 remains 4.95% of pensionable earnings, up to maximum earnings of $55,900 and is paid by both the employer and the employee.
The basic exemption amount, which is the amount at which CPP begins to be deducted, is unchanged at $3,500.
The maximum possible contribution for an employer and employee is $2,593.80 each ($55,900 x 4.95%). Self-employed individuals will have to contribute $5,187.60 (the aggregate of the employee and employer portions).
Employment Insurance (EI) Premiums
Employment Insurance (EI) provides temporary income support to unemployed Canadians. EI contributions are made by both the employee and the employer.
The 2018 EI premium for employees is 1.66% of earnings, up to a maximum of $51,700. This results in a premium of $858.22 ($51,700 x 1.66%).
The employer EI premium remains unchanged at 1.4 times the employee contribution, resulting in a maximum premium of $1,201.51 ($858.22 x 1.4).
For more information on relevant 2018 tax rates, credits, premiums and contributions, contact us today! We look forward to helping you strategize your 2018 tax return.
