It's official. Today the Liberal government announced that they will make a change to federal income tax brackets starting in 2016.
There are two parts to this change. The first is cutting the "middle class" income tax bracket from 22% to 20.5%. If your taxable income is between $45,282 and $216,987 you'll pay less tax. The second part of this change is the introduction of a new 33% tax bracket for people who earn more than $200,000 each year.
So, how will this impact you? Here's a calculator we whipped up so you can find out.1
Are you curious about today's other announcements?
- The annual TFSA limit will be reduced from $10,000 to $5,500 (indexed to inflation); the 2015 limit will remain at $10,000.
- Starting in July, the UCCB and CCTB will be replaced with one non-taxable Canada Child Benefit; the formal changes won't be announced until the budget in the spring, but in the meantime you can find a calculator here.
- The family tax cut will be repealed.
These changes don't take effect until 2016, so none of these announcements will impact your 2015 tax return. If you need a refresher on tax brackets and marginal tax rates, you can find that here.
1 This calculator uses 2016 tax brackets. Please note, this calculator does not include any changes to the family tax cut or to child benefits.