Following the exposure of the Trump tax reform plan, Canada's tax reform has also been placed on the agenda. Starting in 2017, there will be many major moves in tax reform across Canadian provinces, with a series of significant new policies on the horizon. Specifically, Canada's tax reform plan generally includes the following basic elements:
Nationwide Tax Reform
I. The Canadian federal government will eliminate four tax credit items for children's arts, fitness, education, and textbook expenses.
However, parents with children under 16 can prepay up to $250 CAD for arts training courses and $500 CAD for fitness and sports courses, and may claim these as tax credits on their 2016 tax returns.
II. The new 2017 tax law eliminates income splitting for families.
This also means that for families with children under 18, the higher-income spouse can transfer up to $50,000 CAD of income to the lower-income spouse for tax deduction purposes, with a maximum tax credit of $2,000 USD.
III. Life Insurance: New insurance calculation methods will reduce the benefits of life insurance.
IV. Corporate Tax: For various small and medium-sized enterprises, starting from 2017, copyright income will be fully taxed as investment income.
V. Investors will no longer be able to rebalance their purchased non-registered Mutual Funds using the 'level-payment' method. Starting in 2017, gains from these fund investments will be taxed in the same manner as stocks.
Tax Reforms in Canadian Provinces
Newfoundland and Labrador:
Newfoundland and Labrador will be the only province to increase income tax rates in 2017. This means that individuals with an annual income between $35,000 CAD and $70,300 CAD will pay a 14.5% personal income tax, an increase of one percentage point from July 2015.
Quebec:
Quebec will reform its controversial health insurance contribution.
Ontario:
Ontario residents will receive an 8% rebate on electricity costs. The maximum fee for payday loans will be reduced to $18 per $100 CAD borrowed. At the same time, the maximum land transfer tax rebate for first-time homebuyers will increase to $4,000 CAD, and a carbon tax will be officially introduced.
British Columbia:
British Columbia is eliminating Medical Services Plan (MSP) premiums for school-aged children and teenagers.
Alberta:
Alberta will reduce the small business income tax rate from 3% to 2%. At the same time, a carbon tax will be introduced, but low- and middle-income earners will be eligible for carbon tax rebates.
The maximum RRSP contribution limit will increase, but the Tax-Free Savings Account (TFSA) limit will remain unchanged at $5,500 CAD.
【Summary】Due to the pressure of continuous tax cuts from various aspects in the United States, the Canadian federal government may eliminate more tax credits. This also means that the tax burden for Canadian immigrants is expected to decrease further.
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