Federal Tax Changes: How They Affect Physicians
On December 7, 2015, the federal government announced some changes to Canada’s taxation laws, including a reduction in the TFSA contribution limit and the creation of a new highest personal tax bracket. Here’s how the changes could impact the finances of Canadian physicians as well as some planning opportunities physicians should review with their tax advisor. The annual TFSA contribution limit will revert back to $5,500 from its current $10,000 limit, effective January 1, 2016. Going forward, the TFSA limit will be indexed for inflation (in increments of $500). Planning Opportunities New top tax rate: Effective January 1, 2016, for individual taxpayers, a new tax rate of 33% will apply to taxable income in excess of $200,000. The previous top rate of 29% will continue to apply to taxable incomes between $140,388 and $200,000. In addition to the new top rate, the second tier income tax rate will drop from 22% to 20.5% on taxable incomes between $45,282 and $90,563. Charitable donations: As a result of the new tax bracket, the federal charitable donation non-refundable tax credit is changing, effective January 1, 2016. Estates and trusts: The new tax bracket and 33% rate will also apply to all estate and trusts, with the exception of qualified disability trusts and graduated rate estates. Impact to incorporated physicians: Incorporated physicians should see no immediate changes to the corporate taxes other than the changes necessary to align corporate attributes with the new personal top tax bracket. Planning Opportunities If you are in the highest tax bracket, completing these transactions before December 31, 2015 could save you as much as 4% in income tax. Consult your tax advisor to determine what opportunities apply to your particular circumstances. MD and the Canadian Medical Association will continue to monitor any aspects of the federal government’s fiscal agenda that may specifically impact physicians in Canada. If you have any questions regarding these tax changes, your MD Advisor can provide you with more information.TFSA Contribution Limit is $5,500 Again
Personal Income Tax Changes