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Middle-class tax cut, new tax bracket and lower TFSA contribution limit

The new federal government has announced measures to cut income taxes for the middle class, introduce a new tax bracket and reduce the TFSA contribution limit. Here is an outline of the changes:

  1. Return to the $5,500 TFSA contribution limit, indexed annually
    For 2016, the TFSA contribution limit will be $5,500. This is a drop from the 2015 limit of $10,000, but it will be indexed to inflation starting in 2017.
  2. Changes to personal income tax rates
    From January 1, 2016, the second income bracket will drop from 22% to 20.5%. For Quebec residents, the drop will be from 18.4% to 17.1%. The government is also introducing a new 33% tax rate (27.6% for Quebec residents) for people earning more than $200,000. The $200,000 threshold will be indexed annually.
Personal income tax rates
Taxable income – 2016 ($) Current tax rate (%) Tax rate from 2016 (%)
Quebec1 All other provinces Quebec1 All other provinces
45,282 or less 12.5 15.0 12.5 15.0
45,283 to 90,563 18.4 22.0 17.1 20.5
90,564 to 140,388 21.7 26.0 21.7 26.0
140,389 to 200,000 24.2 29.0 24.2 29.0
Over 200,000 24.2 29.0 27.6 33.0

Your Desjardins advisor can help you assess how these changes will affect your financial strategy.

  1. Including Quebec federal tax abatement

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