Canada Tax Changes 2019

Canada Pension Plan Enhancements: Starting from January 1, 2019, employee contributions to the Canada Pension Plan (CPP) can be deducted from taxes, which was previously available only as a tax credit. This enhancement means that higher contributions will lead to increased benefits.

Canada Workers Benefit: This new benefit has replaced the Working Income Tax Benefit (WITB) as of January 1, 2019. The Canada Workers Benefit is a refundable tax credit that is more generous than the WITB, providing greater assistance to working Canadians with lower incomes. The benefits from this change will be seen in early 2020 when the 2019 income tax returns are filed.

New Rules for Investment Income in Corporations: The tax rates for investment income, including capital gains for Canadian Controlled Private Corporations (CCPC), remain unchanged. However, there are new rules for passive investments. If a CCPC earns more than $50,000 in passive income, the small business deduction will be reduced by $5 for every dollar over $50,000. This means that if passive income reaches $150,000, the small business deduction is eliminated.

Small Business Tax Rate Reduction: The small business tax rate has been reduced from 10% to 9%.

Dividend Tax Credit Adjustments: Adjustments have been made to the non-eligible dividends – dividends from CCPCs – to reflect the new passive investment income rules.

Capital Cost Allowance for Zero-Emission Vehicles: A 100% first-year capital cost allowance is available for zero-emission vehicles purchased by self-employed individuals or employees who are permitted to deduct employment expenses. This allowance applies to vehicles acquired after March 18, 2019, and must be put into use before 2024.

Redesigned Income Tax Package: The Canada Revenue Agency (CRA) has redesigned the income tax return package for 2019, which will look different from previous years.

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