Income Tax 2020 – Tax Changes Canadian Families Need to Know

It’s tax season!

When it comes to filing your income tax return, gone are the days of sitting down with a calculator and pencil to fill out a paper form. I admit, I loved doing that as a kid with my dad. Proud math nerd here!

Whether you hire an accountant or use a software program, there are important money saving tax changes for Canadians this year. Taking advantage of these recent federal and provincial tax changes will keep money in your bank account after filing your tax return.

Take a look at this list of Top Tax Software in Canada for help with filing your tax return.

Now, let’s look at the tax changes for 2020 that will most affect Canadian families:

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Income Tax 2020 – Tax Changes Canadian Families Need to Know: Rates and Deduction Limits

1) The Federal and Provincial income tax brackets are increasing so the tax bracket you fall into might change. See the table below.

2) Employment Insurance premiums decreased in 2019 to 1.58%. Down from 1.62% in 2018.

3) The amount you receive for the Canada Child Benefit will again increase. For children under 6, the maximum a parent can receive will now be $6,639…up from $6,496. For children under 17, it is now $5,602…up from $5,481 in 2019.

Tax Bracket for 2020

Tax Bracket (rounded to the nearest dollar)	Federal Income Tax Rate
0 to $48,535	15%
$48,535 to $97,069	20.5%
$97,069 to $150,473	26%
$150,473 to $214,368	29%
above $214,368	33%

Tax Free Savings Account Contributions

The amount you can contribute to your TFSA is increasing by $6000 in 2020. It increased the same amount in 2019. A tax free savings account is a great way to grow your money without having to pay taxes on any profits you make. Unlike a registered retirement savings plan (RRSP) you won’t pay any tax when you withdraw your money.

If you’ve never contributed to a TFSA, you now have $69,500 in contribution room. Use the TFSA Contribution Calculator to see how much room you have left to contribute.

TFSA Contribution Limits Per Year

Year	Limit	Total
2020	$6,000	$69,500
2019	$6,000	$63,500
2018	$5,500	$57,500
2017	$5,500	$52,000
2016	$5,500	$46,500
2015	$10,000	$41,000
2014	$5,500	$31,000
2013	$5,500	$25,500
2012	$5,000	$20,000
2011	$5,000	$15,000
2010	$5,000	$10,000
2009	$5,000	$5,000

Related Article: Great Investment Ideas For Low And Middle Income Earners

Home Buyers’ Plan

The Home Buyers’ Plan (HBP) allows you to withdraw money from your RRSP to make a down payment on your first home. You won’t have to pay any tax on the money but it will have to be paid back within 15 years. My husband and I took advantage to the HBP when we purchased our first house ten years ago.

As of March 2019, home buyers can now withdraw $35,000 each from their RRSPs to contribute towards a down payment.

If your marriage or common-law relationship broke down, you now have access to the HBP. Money withdrawn from a RRSP the year of the split, or the preceding four years, can be used for a house purchase, even if it’s not your first home.

Basic Personal Amount

The Basic Personal Amount is set to increase to $13,229 for 2020. This is the amount of money you can earn from your job that is federal tax exempt. The Federal government plans to continue increasing this amount to $15,000 by 2023.

For example, if you made $30,000 in income for the year, you will pay about $140 less in income tax in 2020.

This increase won’t apply to everyone. It will gradually be phased out for Canadians making $150,473 and over. Read how the BPA changes affect wealthy individuals.

Tax Breaks for Parents

If you are receiving maternity or parental benefits in 2020, your employment insurance payments will now be tax exempt at source.

Adoptive parents who are staying home with their new family member, and receiving EI, are now are eligible for 15 weeks of paid leave.

The tax-free Canada Child Benefit is increasing as well. Parents with babies under 1-year-old will see a 15% increase in their payment. The base amount is expected to rise to $7,750 in July 2020.

The Child Disability Benefit is going to double for parents looking after a child under the age of 18 with a disability. This works out to almost $3000 for some parents.

Carbon Tax Rebate

For residents of a province without a carbon tax system, currently Manitoba, Ontario, Alberta and Saskatchewan, the federal government is offering the Carbon Action Incentive (CAI) tax rebate. The rebate will increase over time as the tax on carbon rises.

The amount of the rebate depends on what province you live in and the size of your household. The CAI rebate can be claimed on your income tax and will affect the amount you owe or your refund.

It is important to know that the amount of tax credit you can claim is dependent upon the size of your family. Only one person per household can claim it.

An average, a family of four will receive the Climate Action Incentive as follows:

Province	Incentive Amount
Saskatchewan	$809
Manitoba	$486
Ontario	$448
Alberta	$888

Here is a provincial breakdown based upon household size and tax year.

See here for more information on the federal carbon tax in Canada.

Related Article: How To Save Money On A Low Income

Income Tax 2020: Changes to Provincial Taxes

Added:

Ontario

The Low-Income Individuals and Families (LIFT) tax credit is designed so that someone working full-time and making minimum wage pays no provincial tax. If you qualify, you’ll receive a tax reduction of approximately $450.

Childcare Access and Relief from Expenses (CARE) refundable tax credit is directed at families with children up to 16 years old, who earn up to $150,000 a year. The credit covers a range of childcare options such as day camps and boarding schools.

This credit is in addition to the regular provincial and federal childcare deductions. Those who qualify will be credited up to $6,000 per child under 7, and $3,750 for children 7 to 16.

New Brunswick

The tuition tax credit was eliminate in 2017 but is now back. Students, or a family member, can again claim tuition paid between 2017 through 2019.

Read: How To Make A Christmas Budget And Stick To It!

Taken away:

British Columbia

The provincial education tax credit is no more. You can still claim your kid’s tuition fees.

Wondering how to invest your tax refund? See my post on Investment Ideas for Low and Middle Income Earners.

Money Saving Tip:

Make the most of any money you get from your tax refund and save it in a high-interest savings account.

Consider a no-fee, digital bank option such as EQ Bank’s Savings Plus account. Your money earns a 1.50% everyday interest rate*, which is up to 40 times higher than what some big banks offer on their regular savings accounts.

There is no minimum balance and withdrawals, Interact e-Transfers®, bill payments, deposits and mobile cheques are all free – making it a great online banking choice.

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income tax 2020: Changes Canadian families need to know – Filing Your Tax Return in Canada

April 30, 2020 is the date by which most Canadians need to file their 2019 tax return and pay any tax due.

If you are self-employed you have until June 15th, although you must pay any tax due by April 30, 2020.

If you are a keener like me, you can file your return as early as February 24th. However, make sure you’ve received all your tax slips. They aren’t due until March 2nd. If you file online, the Canada Revenue Service may not have your tax slips on file until mid-March.

Read more about the deadlines and how to file your tax return.

For more information about income tax changes in 2020 that affect Canadian families and information on filing your personal income tax return visit the Government of Canada.

*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

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