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On December 7, 2015, Finance Minister Bill Morneau tabled a Notice of
Ways and Means Motion, indexing amounts to 2016 and reducing the tax rate on
income of $45,282 - $90,563 from 22% to 20.5%. He also announced a new tax rate
on income over $200,000 that will increase the top rate from 29% to 33%. This announcement is consistent with the
election platform of the new Liberal government, as they anticipate such
changes will “strengthen the middle class”.
Below is a chart comparing the top personal tax rates in 2015 with the newly announced 2016 rate. It is also assumed that the B.C. temporary rate and tax bracket will be rescinded in 2016 as originally planned.
In keeping with their election promises, Mr. Morneau also confirmed that the Tax Free Savings Account (TFSA) annual contribution limit will return to $5,500 from the current year's limit of $10,000.
What do these changes mean for you? If you earn more than $200,000 annually, it likely means that your tax bill will be increasing. But there are still a few things that can be done now to minimize the impact. You may want to consider the following suggestions:
The new top tax rate increase will also have the following impact:
The effect of the above changes is illustrated in the top flowed through rates for inactive income:
Flowed Through RatesInactive Income
The time for planning is now. If you are going to be impacted by these new tax rates, now is the time to develop your overall tax strategy. In order to determine the strategy that works best for you and your family, it is recommended you speak with your local MNP Tax Advisor today.
For more information please contact Loren Kroeker, Senior Vice President, Tax, at 250.734.4330 or [email protected], or an MNP Tax Advisor in your region.
Related Topics:Tax Rates; Personal Tax; Government
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