Major 2013 Federal and Provincial Changes Affecting Individuals
Introduction of First-Time Donor’s Super Credit
The 2013 federal budget introduced a temporary First-Time Donor’s Super Credit (FDSC), effective for donations made on or after March 21, 2013. First-time donors are eligible for a 40 per cent tax credit (15 per cent + 25 per cent) for the first $200 in donations, and a 54 per cent credit (29 per cent + 25 per cent) for donations in excess of $200, up to $1,000.
First-time donors are defined as such if neither they nor their spouse or common-law partner claimed the donation tax credit for the previous five taxation years.
New tax rules for ineligible dividends paid by Canadian Controlled Private Corporations, starting in 2014.
Individuals operating their business through a corporation, the income paid to themselves will attract the same amount of tax, no matter whether this income is received as dividends or salary.
Safety deposit box deduction has been eliminated.
2013 is the last year you are able to claim.
High Income Tax Bracket Change
The Ontario government introduced a high tax bracket in 2012. In 2013, individuals will be taxed at a rate of 13.16 per cent for the portion of their taxable income in excess of $509,000, up from 12.16 per cent of $500,000 in 2012. This is supposed to be a temporary tax bracket until Ontario’s deficit has been eliminated in several years.
Labour Sponsored Venture Capital Corporations’ tax credit will be gradually phased out. The current Federal tax credit is 15% on maximum $5,000 investment. It will be reduced to 10% in the 2015 taxation year; to 5% in 2016; and eliminated for the 2017 and subsequent taxation years.
Government allowing deferral of OAS payments up to 5 years. Beginning July 1, 2013 individuals who are eligible for OAS may elect to defer receiving OAS for up to 5 years, in return for a higher annual pension. Pension will increase by 7.2% annually, up to a maximum of 36% at age 70. There is no financial advantage in deferring your OAS pension after age 70. In fact, you risk losing benefits. If you are over the age of 70, apply now.
CPI Adjustment to Income Tax Brackets and Non-Refundable Tax Credits
The taxable income thresholds in all four federal tax brackets were increased by 2.0 percent in 2013 to mirror changes in the consumer price index (CPI). Furthermore, all indexed non-refundable tax credits also increased by 2.0 percent in 2013 in order to reflect the CPI adjustment.
Increase in RRSP Annual Contribution Limit
The annual RRSP contribution ceiling was raised to $23,820 in 2013, from $22,970 in 2012. The annual maximum dollar limit is indexed to the increase in the average wage.
Increase in RPP Annual Contribution Limit
Money-purchase plan registered pension plan (RPP) contribution limits increased in 2013 to $24,270, from $23,820 in 2012; it is raised annually based on the increase in the average wage.
The maximum pension limit for defined-benefit RPPs increased in 2013 to $2,697 per year of service, up from $2,647 in 2012; it is raised annually based on the increase in the average wage, and is tied to the 1/9th of the money-purchase limit.
Increase in TFSA Contribution Limit
The 2013 contribution limit for the Tax-Free Savings Account (TFSA) has risen to $5,500 from $5,000.
Canada Child Tax Benefit Payments (CCTB)
Beginning July 2013, CCTB national child benefit (NCB) supplement payments to Canadians rose to $2,221 for the first child (from $2,177), $1,964 for the second child ($1,926) and $1,869 for each subsequent child (from $1,832).
As a result, the maximum annual benefit under the combined CCTB and NCB supplement increased to $3,654 (from $3,582) for the first child; to $3,397 (from $3,331) for the second child; and $3,402 (from $3,335) for each subsequent child. The maximum indexed child disability benefit (CDB) supplement for parents in low and modest-income families with children who have disabilities and a net family income of less than $43,561 (from $42,707), increased to $2,626 (from $2,575) in 2013.
Increased Threshold for All Income Tax Brackets
The taxable income thresholds in all three Ontario provincial tax brackets were increased by 1.8 per cent in 2013, reflecting changes to Canada’s consumer price index (CPI) in Ontario. All indexed non-refundable tax credits also increased by 1.8 per cent.