Tax tips 2016

14 March, 2016

We recently put up our pails marking the start of our maple syrup season. This time of year is brings mixed emotions. It is exciting because it means winter is over and nice weather is on its way. The downside is that it’s tax time and we may have to pay income taxes that are owed.

It is a good time to highlight recent changes affecting tax returns. Although we cannot change last year’s bill, steps taken now can impact next year’s taxes. The first interesting point to note is that the highest tax bracket you can reach in Ontario is now above 50%. The good news is this doesn’t apply to most of us. In fact, people earning less than $100,000 can expect to see tax rates remain unchanged or even drop slightly. Below is some information from Ernst & Young that outlines the changes from last year to this year.

 Taxable Income

 2015

 2016

 $30,000

 20.05%

 20.05%

 $50,000

31.15%

 29.65%

 $70,000

32.98%

 31.48%

 $100,000

43.41% 

 43.41%

Source: Ernst & Young tax calculator www.ey.com


If you are collecting public pensions, CPP and OAS max out at $1,092 and $570 respectively. Keep in mind that the OAS claw back starts at $73,000 recapturing 15 cents on every dollar of income up to $119,000 when all of the OAS would be clawed back. This may be important for those who can control the amount of taxable income they receive in retirement.

Another important change for some is the RRIF minimum withdrawal amounts. If you did not opt for a change last year, the payment should have stayed the same however, if it makes sense you may elect to receive the new lower minimum withdrawal amount going forward. At age 71 the minimum was 7.38% whereas the new minimum is 5.28%. This may prevent some people from having their OAS clawed back as mentioned above. Individuals need to convert their RSP to a RRIF no later than the year they turn 71 with payments starting the following year. People do not have to wait until then, and should investigate if it makes sense to so earlier.

For readers who are not retired, the RSP limits are 18% of the previous year’s earned income up to a maximum of $25,370. Any unused contributions can be carried forward until subsequent years. This carry forward is similar to the Tax Free Savings Account. If you have not opened one yet, you can contribute a total of $46,500 into the plan. If you have maxed out historically, you can contribute an additional $5,500 this year.

Hopefully knowing these amounts, brackets and characteristics will benefit you in the year to come. Information is valid as of January 2016 and subject to change. 

Greg Dowdall CFP®, CIM®, FCSI®, is a Senior Financial Advisor with IPC Securities Corporation. To download a free retirement readiness kit visit www.gregdowdallpresents.com