Personal Tax Implications of the Election
With the Liberal government re-elected, it is time to consider how your taxes could be impacted by their election promises.
You should however keep in mind that the Liberals are now managing a minority government so their ability to implement their planned changes is reliant on securing votes from other parties (and also that they did not do a great job of fulfilling their campaign promises in their last term…).
Nonetheless, the major changes that they are suggesting to go ahead with are the following:
1. The basic personal amount will likely be increased from the current $12,069. Normally this amount is increased by inflation each year, but the Liberals had promised to increase it by 15 per cent over their four-year term.
This increase won’t be universal though as it will be reduced for anyone earning more than $147,667 and eliminated for those in the top tax bracket, which is $210,371 in 2019.
2. Maternity and parental benefits received through the employment insurance (EI) program are expected to become tax-exempt at source starting in 2020. Someone that receives $45,000 per year in EI benefits would come out ahead by approximately $150 per month.
3. Old Age Security (OAS) is planned to increase by 10 per cent for seniors over age 75 who earn less than $77,580 per year. This could equate to an increase of up to $60.75 per month and is proposed to kick in July of next summer.
4. Canada Pension Plan (CPP) survivor payments are supposed to see an increase of 25 per cent. Currently, a spouse or common-law partner can receive up to 60 per cent of what their deceased spouse previously received and this increase could add up to $173 per month of your money being returned to you.
5. Adoptive parents could also see a change in their EI benefits as the Liberals proposed eligibility for a 15-week leave; the exact same as for maternity leave.
6. The Canada Child Benefit (CCB) is planned to see an increase for those parents who have children less than one year of age. The 15 per cent boost would be for the first year only and then the CCB amount would decrease to the regular amount.
7. The Child Disability Benefit applies to families caring for a child under the age of 18 with a disability and the Liberals are planning to double the benefit amount to $5,664 per year.
8. Announced in their last budget, the Canada Training Credit was proposed to start in 2020 and would help cover up to 50 per cent of eligible tuition and fees associated with training. If they continue to plan on implementing this, they would likely stick to their previously suggested lifetime limit of $5,000.
We will have to wait and see for sure which items are actually voted through, but our constantly changing tax regime in Canada highlights just how important it is to have a “living” financial plan.
A living plan is a written document that shows where you are today, where you want to get to and details how you will get there. As tax rules change, the “how” needs to be regularly updated and adapted!