The Canadian tax code is not the easiest to understand. But, thanks to Jamie Golombek, a prominent Canadian tax and estate planning expert writing in the Financial Post (January 1, 2017) clarity is available. What follows is a digest of Mr. Golombek’s invaluable insights:
The Canada Revenue Agency (CRA) announced that the inflation rate used to index the 2017 brackets and amounts is 1.4%. This rate was calculated by taking the percentage change in the average monthly Consumer Price Index (CPI) data as reported by Statistics Canada for the 12-month period ended September 30, 2016 relative to the average CPI for the 12-month period ended on September 30, 2015.
Tax brackets for 2017
For 2017, we have five federal tax brackets: zero to $45,916 (15%), $45,916 to $91,831 (20.5%), $91,831 to $142,353 (26%), and $142,353 to $202,800 (29%). Anything above that will be taxed at 33%. Provincial taxes vary, by jurisdiction.
Basic personal amount
The federal basic personal amount for 2017 is $11,635. This amount is eligible for a non-refundable tax credit. All non-refundable credit amounts (other than the newly, three-tiered donation credit) are calculated at the lowest federal bracket rate, which is 15%. If your income is less than $11,635, you won’t pay any federal tax.
Canada Pension Plan (CPP) contributions
While CPP rates aren’t changing (4.95% for employees and 9.9% if you’re self-employed), the maximum pensionable earnings for 2017 is set at $55,300, up from $54,900 in 2016.
EI premium rate and maximum
Employees must also pay employment insurance premiums. For 2017, the EI rate is dropping for the first time in a decade to 1.63% (from 1.88% for the past four years) of insurable earnings, up to a 2017 earnings maximum of $51,300. This translates to a maximum employee premium for 2017 of $836.19.
2017 RRSP Limit
Your 2017 RRSP limit is based on 18% of your 2016 earned income, up to a maximum of $26,010 (up from $25,370 in 2016), less any pension adjustment. To hit the maximum RRSP contribution for 2017, your earned income in 2016 must be $144,500 or more.
2017 TFSA contribution limit
The 2017 TFSA contribution limit will be frozen, once again, at $5,500. If you have yet to open your first TFSA, due to the unlimited carry forward associated with TFSA contribution room, you can now contribute a total of $52,000 to your TFSA, provided you were at least 18 years of age in 2009 and a resident of Canada since that time.
2017 RDSP Grant & Bond Limits
Finally, if there is someone in your family eligible for the disability tax credit (DTC), consider the Registered Disability Savings Plan. RDSPs are tax-deferred plans open to Canadian residents eligible for the DTC, their parents and other eligible contributors. Up to $200,000 can be contributed to the plan until the beneficiary turns 59, with no annual contribution limit. While contributions are not tax deductible, all earnings and growth accrue on a tax-deferred basis.
Given the sensitivity of all tax-related commentary, it is vital that you consult a tax specialist – Scotia Wealth Management offers those resources – before making tax decisions.
For further information and advice, please contact us today.