The changes introduced by the Liberal federal budget late last month will affect a number of economic areas, but perhaps the most drastic impact for everyday Canadians comes in the form of new tax law. With the tax filing deadline looming at the end of April, it’s the perfect time to go over what’s changed: new breaks for low-income and middle-class families, the addition of new tax credits, and the discontinuation of others.
Read on for our breakdown of the Liberal budget tax changes.
New Benefits for Families
When it comes to family taxes, it’s out with the old and in with the new – the Liberals are replacing the Universal Child Care Benefit (UCCB) and the Canada Child Tax Benefit (CCTB) with the Canada Child Benefit. Starting in July, nine out of 10 families will see a bump in their child benefits. Under the current system, a family with one child earning $30,000 would get $4,852 after tax for a child under six, or $3,916 for a child between the ages of six and 17. Under the new system, low-income families with a child under six will see $6,400 per child, while those with a child between the ages of six and 17 will see $5,400. This adds up to an average increase of $2,300 per family.
Hikes for Higher Earners
In efforts to adhere to their promise introduce “fairness for the middle class”, the Liberals are targeting tax brackets for the wealthiest, while the bracket for the middle class has been trimmed from 22 per cent to 20.5 per cent. Those with taxable income between $45,282 and $90,563 will pay less tax. If you’re single and fall in this tax bracket, you can expect a reduction in your tax bill of $330, while couples can expect an average reduction of $540. Meanwhile, those earning over $200,000 will pay a little more to the tax man under the Grits’ newly introduced 33 per cent tax bracket.
Income Splitting Axed
As promised, the Liberals have repealed the controversial Family Tax Credit. The Family Tax Credit let families with children under 18 reduce their tax bill by up to $2,000 through income splitting.
Improved Child Disability Benefits
The Liberals are lending parents with disabled children a helping hand. The Grits are increasing the Child Disability Benefit up to $2,730 for each child who qualifies for the Disability Tax Credit.
Children’s Fitness and Arts Tax Credits Cut
In the current tax system, families are eligible for a tax credit of $150 and $75 per child under the Children’s Fitness and Arts Tax Credits. These are being gradually reduced. There will be a 50 percent reduction in the maximum eligible expenses in 2016, before the tax credit is completely eliminated in 2017.