Income Tax Changes For 2020 Tax Year
December 24th, 2020
Posted in: Tax
Each year the Canadian Federal Government/Canada Revenue Agency (CRA) make adjustments that affect our income tax filings. Here is an overview of the changes that will affect taxpayers for the 2020 tax year. This video goes over the highlights of the tax changes for 2020 to get you started.
Tax-Free Savings Accounts (TFSAs) Stay The Same
There has been no change to the limit we can contribute to a TFSA–it remains at $6000 for 2020.
Basic Personal Amount Increase
The basic personal amount exemption has been raised from $12,069 to $13,229 for 2020.
Income Tax Rate Increase
There has been a 1.9% increase in income tax rates.
Income tax rates for 2020 and 2019 (for comparison):
“Canadian income tax rates vary according to the amount of income you earn, and you pay different rates on different portions of your income. This is a marginal tax rate system. Our tax brackets change each year, usually with inflation. This year it increased by 1.9%.
In tax-year 2020*, Canada’s Income Tax Brackets are:
15% on the first $48,535 of taxable income, plus
20.5% on the next $48,534 of taxable income (on the portion of taxable income over $48,535 up to $97,069), plus
26% on the next $53,404 of taxable income (on the portion of taxable income over $97,069 up to $150,473), plus
29% on the next $63,895 of taxable income (on the portion of taxable income over $150,473 up to $214,368), plus
33% of taxable income over $214,368
In tax-year 2019*, Canada’s Income Tax Brackets were:
15% on the first $47,630 of taxable income, plus
20.5% on the next $47,629 of taxable income (on the portion of taxable income over 47,630 up to $95,259), plus
26% on the next $52,408 of taxable income (on the portion of taxable income over $95,259 up to $147,667), plus
29% on the next $62,704 of taxable income (on the portion of taxable income over 147,667 up to $210,371), plus
33% of taxable income over $210,371”
(From this site)
Increase To Maximum RRSP Contribution Limit
The limit to the maximum amount we can contribute to an RRSP has been increased to $27,230.
Increase To CPP Contribution Rates
Over the next five years, the CPP contribution rate will increase to 5.95%. The CPP rate for 2020 is increased to 5.25%.
Digital News Subscriptions Tax Credit
We will now be able to claim digital news subscriptions on our income taxes.
Here is a great article summarizing the changes that will affect Canadian taxpayers when we start doing our taxes for 2020.
Contact Shaw & Associates Chartered Accountants for all your income tax planning needs—now is a good time to sit down with us and get your finances in shape for reporting your 2020 income taxes. One complimentary meeting with us will put you and your business on a more profitable and positive path.