06 May What’s new in 2020? The tax changes you should be aware of
By Bilal Kathrada
Originally published by CPABC’s Industry Update.
Understandably, 2020 has been a stressful year for everyone thus far. Uncertainty and financial hardships have risen from the COVID-19 pandemic. As part of its ongoing efforts to provide financial relief measures to Canadians, the Federal government has extended this year’s personal income tax filing deadline from April 30 to June 1. The deadline to pay any tax owing without interest has also been extended from April 30 to September 1 (including the June 15th instalment).
To assist you with filing your personal taxes and understanding changes in the coming tax year, we’ve compiled some information on recent tax updates you should be aware of when filing your return in 2020 for the 2019 year.
For up-to-date information of changes to Canadian taxes and benefits due to COVID-19, we encourage you to visit the Government of Canada’s site.
Personal tax credit changes
Effective January 1, 2020, the federal personal and spousal or equivalent to spouse tax credit will increase from $12,069 in 2019 to $13,229 in 2020. The credit is gradually reduced for individuals earning more than $150,473 and the increase is fully eliminated for individuals earning more than $214,368.
This increase will save individuals making less than $150,000 approximately $174 in taxes for 2020 and couples will save approximately $348.
Contribute more to CPP and less to EI
As of January 1, 2020, our Canada Pension Plan (CPP) contributions have gone up, and will continue to increase for the next few years. At the start of this year, CCP contributions increased from 5.10% to 5.25% on earnings between $3,500 and $58,700. If you make an annual salary of $59,000, you can expect to pay an additional $149.10 in your 2020 CPP contributions. This amount will be matched by the employer. Note that CPP contributions will be increasing every year until 2023, when the rate will reach 5.95%. Partially offsetting our increased CPP contributions will be a decrease in Employment Insurance (EI) premiums, which will drop from $1.62 to $1.58 per $100 of insurable earnings. The maximum insurance earnings for 2020 is now $54,200. If you make an annual salary of $55,000, you can expect to save an additional $5.41 in your 2020 EI contributions.
Digital news subscription tax credit
Effective for the 2020 year, there is a new tax credit for a digital news subscription with a qualified Canadian journalism organization. This $500 tax credit may save individuals up to $75 per year.
Save more with your TFSA
Beginning January 1, 2020, you can contribute up to $6,000 to your Tax-Free Savings Account (TFSA). If you’ve never contributed to a TFSA, your lifetime contribution is up to $69,500.
Stock option tax changes delayed
The new rules relating to the $200,000 annual cap on certain employment stock options that qualify for the stock option deduction were to apply as of January 1, 2020. These were originally announced in the 2019 federal budget. These new rules have been delayed and are expected to be included in the 2020 federal budget.
MSP premiums eliminated
Your BC Medical Services Plan (MSP) has been fully eliminated effective January 1, 2020. This will save individuals $450 per year and couples $900 per year. The BC Employer Health Tax is now in effect to cover the costs of MSP premiums.