The indexing factor for federal tax credits and brackets for 2016 is 1.3%. The following federal tax rates and brackets will be in effect for individuals for the 2016 tax year:
Dollar amounts on which individual non-refundable federal tax credits for 2016 are based, and the actual tax credit claimable, will be as follows:
Each new tax year brings with it a listing of tax payment and filing deadlines, as well as some changes with respect to tax planning strategies. Some of the more significant dates and changes for individual taxpayers for 2016 are listed below.
The Canada Pension Plan contribution rate for 2016 is unchanged at 4.95% of pensionable earnings for the year.
The Employment Insurance premium rate for 2016 is 1.88%.
Yearly maximum insurable earnings are set at $50,800, making the maximum employee premium $955.04.
As in previous years, employer premiums are 1.4 times the employee contribution. The maximum employer premium for 2016 is therefore $1337.06.
Planning for 2016 taxes when the year has barely started and the filing deadline for 2015 returns is still months away may seem more than a little premature. Nonetheless, taking some time to review one’s tax situation—and perhaps putting a few strategies in place—at the beginning of the year can help avoid a cash flow crisis or other financial shock when the RRSP contribution deadline looms or it is tax filing (and tax payment) time in the spring of 2017. And, while many tax planning and tax saving strategies can be implemented throughout the tax year, getting an early start on such planning usually leads to the best results.
The Canadian income tax system, as it applies to individuals, operates on a calendar year basis. While there are a few exceptions (RRSP contributions and pension income splitting being the important ones), the general rule is that, in order to be effective for a particular taxation year, tax planning strategies must be implemented before the end of that year.
Old Age Security (or OAS) is one the two main components of Canada’s government-sponsored retirement income system—the other being the Canada Pension Plan (CPP). There are also federal and provincial supplements which are available to lower-income seniors. While many retired Canadians receive both OAS and CPP benefits every month, the two plans are quite different. The only determinants of the amount of Canada Pension Plan benefits receivable are one’s contribution amount and the age at which one elects to begin receiving benefits; other sources of available income or one’s overall income level are not considered. Eligibility for OAS, on the other hand, is based on Canadian residency. Essentially, a person aged 65 and older who has lived in Canada for at least forty years after the age of 18 is eligible for full OAS benefits. Where the length of Canadian residency after age 18 is less than forty years, a partial pension is earned at the rate of 1/40th of the full monthly pension for each full year lived in Canada. OAS benefits are fully indexed to inflation.
