Federal and Ontario Tax Changes for 2020
There are a number of 2020 tax changes to be aware of. For starters, the federal tax brackets are moving up with inflation. The brackets are all increasing by 1.9%. The new federal brackets are as follows:
- $0 – $48,535 at 15%
- $48,535 – $97,069 at 20.5%
- $97,069 – $150,473 at 26%
- $150,473 – $214,368 at 29%
- $214,368 and above at 33%
Basic Federal 2020 Tax Changes
The Federal Basic Personal Amount is being adjusted from $12,069 in 2019 to $12,298 in 2020. For taxpayers earning more $12,298, the credit is calculated by applying the lowest federal tax bracket (15%) to the Basic Personal Amount. This makes the credit worth $1,844. The Canada Government has plans to increase the Basic Personal Amount up to $15,000 by 2023. The Ontario Basic Personal Amount, which applies to your provincial taxes is unchanged at $10,582.
CPP & EI Changes
CPP contribution rates will each increase to 5.25% in 2020 from 5.1% in 2019. The rate for self-employed taxpayers rate is 10.5%, paying the combined portion for employer and employee. Maximum pensionable earnings in 2020 are $58,700. Maximum employer or employee contribution to the plan for 2020 is up to $2,898 and the maximum self-employed contribution is double that or $5,796.
In 2020 the EI rate drops from 1.62% to 1.58% of insurable earnings up to a maximum of $54,200. This means a maximum employee premium of $856.36 for 2020. Employees must also pay Employment Insurance premiums, with employers paying 1.4 times the amount of employee contributions.
Other Changes For Tax Year 2020
2020 maximum RRSP contribution room at 18% of earned income increases to $27,230 for 2020, up from $26,500 in 2019.
The Age credit for taxpayers ages 65 or above is $7,637 in 2020, up from $7,494 in 2019.
The Canada Child Care Benefit continues to inflate. In 2020 the maximum a parent can receive is $6,639 for children under the age of 6, and $5,602 for children ages 6 to 17.
The annual contribution limit on the Tax-Free Savings Account is being increased to $6,000 for 2020. If you’ve never contributed and you’ve been eligible to contribute since 2009, you’d have total contribution room of $69,000. As the name suggests you money grows tax-free. And unlike RRSP withdrawals when you draw down from your tax-free savings account you don’t pay income tax.
We are Durham Region’s tax experts in both personal income tax and corporate income tax handling personal filing, strategic corporate tax planning and everything in between. Contact us to build a strategy for your 2020 plan now. by calling our Pickering office at 1-905-831-6383.
James Abbott CMA and Associates
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