All rights reserved. Send us your documents in confidence. Yes, the changes propose to increase the maximum Spouse or common-law partner amount and the Amount for an eligible dependant, in tandem with the proposed increases in the BPA. The return and guide for 2020 will be published early in 2021. The CRA encourages employers and payers to check Canada.ca for more information. So, you’d be well advised to get some index funds like iShares S&P/TSX 60 Index Fund in your TFSA as well. The amounts covered differ from province to province. The Basic Personal Amount (BPA) is a non-refundable credit that can be claimed by all tax filers. Thanks to the basic personal amount tax credit, any federal tax on your first $13,229 has a 15% credit on it. The increase would be phased in starting in 2020. Christopher Liew, CFA | January 18, 2021 | More on: FN Image source: Getty Images So, all the money you earned from both dividends and capital gains would be tax free. With a $1,984 position in the stock, you’ll generate $79 a year in dividends. These investments could also be worth considering... Just Released! In the case of an over-deduction, employers and payers can reimburse the individual in the year for the excess amount of income tax deducted, adjust the individual’s records to show the correct income tax deducted and reduce a future remittance to the CRA by the reimbursed amount. Income Tax Act s. 118 (1), 118 (1.1) The basic personal amount (BPA) is $12,298 for 2020, increased by indexation to $12,421 for 2021. It takes into account contributions to the Québec Pension Plan and the health services fund, and premiums under the Québec parental insurance plan and the Employment Insurance program. Basic personal amount re: Nova Scotia income taxes 2021 is $8,481. For example, let’s say you made $35,000 in 2016. The maximum amount you can save with the basic personal amount in 2020 is $1,984. The federal Basic Personal Amount has been changed to the following: Where NI ≤ $151,978, BPAF = $13,808 Where $151,978 < NI < $216,511, BPAF= $13,808 - (NI - $151,978) × ($1,387 / $64,533) Where NI ≥ $216,511, BPAF = $12,421 For employers and payers using the administrative relief option, your federal tax calculations may not match the amounts determined on PDOC for individuals with net income above $150,473. That is, $13,229 times 0.15 — or 15%. You claim the basic personal amount on line 30000 of your tax return. If you earn less than $13,229 this year, you won’t be able to claim the full $1,984. On December 9, 2019, the Government tabled a Notice of Ways and Means Motion that proposes to amend the Income Tax Act to increase the basic personal amount to $15,000 by 2023. However if your total non-refundable tax credits are more than what you owe, you will not get a refund for the difference. Note: If you are a payroll subscriber, Sage 50 Accounting obtains the latest Basic Personal Amount when you install the latest January payroll updates. You can see where that line appears on the form on the CRA’s website. In addition, the maximum BPA will be increased to $15,000 by 2023 as follows: Individuals whose net income is too high to benefit from the increased BPA will continue to claim the existing BPA. Basic personal amount (*This amount could vary depending on the employee's income. If you invest your money in a TFSA, you get to keep all of those gains tax free. The purpose of the basic personal amount is to provide full relief from provincial income tax to all tax filers with taxable income below the BPA. The purpose of the BPA is to provide a full reduction from federal income tax to all individuals with taxable income below the BPA. However if you do not use these tools and use a BPA of $13,229 for all individuals, then higher income individuals (income above $150,473) who would not be entitled to the full amount can ask for additional tax to be deducted by completing Form TD1, 2020 Personal Tax Credits Return, and the accompanying worksheet and giving the completed form to their employer or payer. If you earn over $13,229, you don’t save any money on amounts from $13,230 and above. In this article, I’ll be exploring the federal basic personal amount in detail — including how much you can save with it, and what you can do with the savings. For 2020, the CRA will administratively allow employers and payers to use a BPA of $13,229 for all individuals, until their payroll systems and procedures are updated to fully implement the proposed legislation.