2020 Tax Adjustments in Canada

A Guide:

As we entered the year 2020, Canadians were introduced to a series of adjustments in the tax system. It’s crucial for both individuals and businesses to be aware of these changes for effective tax planning. Below is a simplified overview of the significant tax changes that started from January 1, 2020. 

Updated Basic Personal Amount 

The basic personal amount—the income portion you don’t pay tax on—saw an increase to $13,229, which is $931 more than the previous year. This hike means that individuals can earn up to this amount before owing any federal tax. For those in the lower-income bracket, this could translate to savings of $140, while those in the middle-income range could see savings up to $240. This amount is projected to rise to $15,000 by 2023. 

Modifications to Payroll Deductions 

Employees will notice changes in their paystubs reflecting the new payroll deductions, which include: 

• Canada Pension Plan (CPP) Contributions: The CPP deduction rate has risen slightly from 5.1% to 5.25%, with the maximum pensionable earnings increasing to $58,700. These contributions are geared towards securing pension income for retirement. 
• Employment Insurance (EI) Premiums: There’s a slight decrease in EI premiums from 1.62% to 1.58% of insurable earnings, while the maximum insurable earnings have increased to $54,200. 

Climate Action Incentive Payments 

For those in provinces subject to the federal carbon tax, climate action incentive payments have been revised. Starting April 1, 2020, the federal price on carbon went from $20 to $30, prompting an adjustment in the incentive payments. Residents of Ontario, will see an increase in these payments. However, New Brunswick residents will no longer receive rebates due to an agreement with the federal government. Alberta residents will be eligible for these payments for the first time. 

Steady TFSA Contribution Limit 

The Tax-Free Savings Account (TFSA) contribution limit remains unchanged at $6,000 for the year 2020. 

Digital News Subscription Tax Credit 

Canadians can now claim a tax credit for digital news subscriptions. This non-refundable credit allows for claims up to $500, translating to a maximum tax credit of $75, for eligible amounts paid for subscriptions post-2019 and before 2025. 

Support for Journalism 

Certain non-profit journalism organizations have been granted the status of tax-exempt qualified donees as of January 1, 2020, allowing for tax credits on charitable donations to these entities. 

Canada Training Benefit 

A new refundable tax credit, the Canada Training Benefit, has been introduced to support workers in keeping their skills up-to-date with technological advancements. Eligible workers can accumulate a credit of up to $250 annually, which can be tracked via the Notice of Assessment and used for eligible training expenses. 

Home Buyers’ Plan (HBP) Accessibility 

The HBP has been made more accessible for individuals going through a separation or divorce. Those affected can now tap into the HBP even if they don’t meet the first-time homebuyer requirement, allowing withdrawals up to $35,000 from RRSPs without incurring penalties. 

Other Notable Changes 

• Additional annuity options are now available under registered plans. 
• An extended filing period for information returns regarding foreign affiliates, now due 12 months post-tax year-end for 2020 and 10 months for subsequent years.