2020 Tax Rates
2020 Tax Tips and Reminders
2020 TFSA limit is $6,000
The Tax-Free Savings Account (TFSA) limit was $6,000 for 2019 and $5,500 for 2018, 2017 and 2016, $10,000 for 2015, $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. The total room available in 2020 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $69,500.
Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.
2020 RRSP Limit
The RRSP contribution limit is $27,230 in 2020 ($26,500 in 2019). The limit will increase to $27,830 in 2021. If you or your employer do not contribute to a pension plan, your 2020 “earned income” for RRSP purposes must be at least $154,611 to create RRSP contribution room of $27,830 in 2021. Please see the news release.
2020 Employment Insurance Rates
Employment Insurance (EI) rates for 2020 have changed to 1.58% (vs 1.62% for 2019) of earnings for employees. The maximum annual premium decreased to $856.36 (from $860.22 in 2019). The rate for employers is 1.4 times the employee rate or 2.212%. The maximum insurable earnings for 2020 increases to $54,200 from $53,100 in 2019.
2020 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020 will be $58,700 – up from $57,400 in 2019. Contributors who earn more than $58,700 in 2020 are not required or permitted to make additional contributions to the CPP.
The basic exemption amount for 2020 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.
The employee and employer contribution rates for 2020 have increased to 5.25% from 5.10% in 2019, and the self-employed contribution rate will increase to 10.5%.
The maximum employer and employee contribution to the plan for 2020 will be $2,898.00 and the maximum self-employed contribution will be $5,796.00. The maximums in 2019 were $2,748.90 and $5,497.80.
Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.
Employer Health Tax
Effective January 1, 2019, the EHT exemption has increased from $450,000 to $490,000. More information on Employer Health Tax: https://www.fin.gov.on.ca/en/tax/eht/index.html
Accelerated Capital Cost Allowance (CCA)
Accelerated CCA is available on additions from November 21, 2018 to December 31, 2027. Prior to the rule change, the “half-year rule” allowed half a year of capital cost allowance in the year of acquisition. Now, for most assets, the usual half year of CCA available in the year of acquisition will be tripled for acquisitions to December 31, 2023. For example, a Class 10 vehicle which is normally subject to a 15% CCA claim in the first year would now be allowed a 45% CCA claim. For acquisitions in calendar years 2024 to 2027, the usual half year of CCA will effectively be doubled rather than tripled. After the acquisition year, CCA will return to the normal rate on the remaining pool in the CCA class.
Tuition and Textbook Credits
For 2020 federal tax purposes, the tuition credit is available; however, the textbook credit is no longer available. For 2020 Ontario tax purposes, the tuition and textbook credits are no longer available.
Climate Action Incentive Payment
The climate action incentive (CAI) is a refundable credit which consists of a basic amount and a supplement for residents of small and rural communities. The basic amount is $224 and the spouse or common-law partner amount is $112 and $56 for each qualified dependant. More information on Climate Action Incentives:
Capital Gains Exemption
The lifetime capital gains exemption for capital gains on qualified small business corporation shares has increased to $883,384 in 2020 from $866,912 in 2019. The lifetime capital gains exemption for capital gains on qualified farm property is $1,000,000 for 2020 and 2019.
Prescribed Interest Rates
The prescribed rates for the first quarter of 2020 is as follows:
- The interest rate charged on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums will be 6%.
- The interest rate to be paid on corporate taxpayer overpayments will be 2%.
- The interest rate to be paid on non-corporate taxpayer overpayments will be 4%.
- The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 2%.
For more information please see CRA’s website on prescribed interest rates
2020 Combined Federal and Ontario Tax Brackets for Individuals
|Taxable Income||Regular Income%||Ineligible (Private Corporation) Dividends %||Eligible Canadian Dividends %||Capital Gains %|
|$0 to $44,740||20.05||9.24||0.00||10.03|
|$44,741 to $48,535||24.15||13.95||0.00||12.08|
|$48,536 to $78,783||29.65||20.28||6.39||14.83|
|$78,784 to $89,482||31.48||22.38||8.92||15.74|
|$ 89,483 to $92,825||33.89||25.16||12.24||16.95|
|$92,826 to $97,069||37.91||29.78||17.79||18.95|
|$97,070 to $150,000||43.41||36.10||25.38||21.70|
|$150,001 to $150,474||44.97||37.90||27.53||22.48|
|$150,475 to $214,368||47.97||41.35||31.67||23.98|
|$214,369 to $220,000||51.97||45.95||37.19||25.98|
|$220,001 and up||53.53||47.74||39.34||26.76|
(This table does not include the Ontario Health Premium)
2020 Federal and Ontario Combined Corporate Income Tax Rates
|Canadian Controlled Private Corporations||Other Corporations|
|Small Business Income(up to $500,000)||Investment Income***||General Manufacturing and Processing||General Active Business Income|
|**30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.
***Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.