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Happy New Year? Here’s how changes coming Jan. 1 will affect your wallet

There were plenty of changes in 2016 as the Trudeau government put its priorities in motion.

When Canadians file their taxes this spring, they’ll calculate how new tax rates and child benefits worked out for their household.

But the changes don’t stop there. The start of 2017 brings a bunch more.

Here’s some of what to expect.

More carbon pricing

Some Canadians already feel the effects of the fight against climate change in their wallets.

B.C. residents have paid a carbon tax since 2008. Quebec residents have absorbed the cost of that province’s cap-and-trade system since 2013

As of Jan. 1, the prevalence of these kinds of costs expands, particularly in two provinces, as federal and provincial emissions reduction plans ramp up.

In Alberta, there’s a new carbon tax.

Emissions from burning fossil fuels will be taxed at a rate of $20 per tonne. That increases to $30 per tonne in 2018, and Premier Rachel Notley’s government is expected to keep moving towards the federal goal of $50 per tonne by 2022.

How much will that cost an Alberta household? Try CBC’s carbon tax calculator.

GTA Gas Prices 20110511

Drivers in Alberta and Ontario will pay more at the pump for gasoline, as new carbon emissions reduction measures begin to bite. (Nathan Denette/Canadian Press)

Ontario’s alternative plan — a cap-and-trade scheme that auctions off pollution credits to offer a financial incentive to reduce emissions — also kicks in. 

Its overall impact remains to be seen. But Premier Kathleen Wynne’s government has warned consumers the system may add about $5 a month to home heating bills and about four cents per litre to the price of gasoline. 

Payroll deduction changes

Here’s what to look for on your first pay stub in 2017.

Employment insurance (EI) and Canada Pension Plan (CPP) deductions will reappear on the paycheques of workers who maxed out their deductions part way through 2016.

But the move to a new, seven-year “break-even” calculation for EI premiums could bring savings worth up to $118.85 annually for those making $51,300 or more.

Previous premiums, set at $1.88 per $100 earned, were delivering more revenue to the government than it required to administer and pay benefits. A new, lower premium was announced in September for workers ($1.63) and employers ($1.63 x 1.4 = $2.28). Some small employers qualify for an additional premium reduction.

Wealthy Tax Exodus 20160418

Federal tax brackets and several kinds of deductions are indexed to inflation, which means that even if a salary hasn’t changed, an employee’s bottom line might. (Graeme Roy/Canadian Press)

In Quebec, where EI works differently, 2017 premiums will be $1.27 per $100 of earnings, down from $1.52. Quebec residents covered under the Quebec Parental Insurance Plan (QPIP) will see their premiums reduced by 36 cents. 

The lower payroll deductions may translate into $955 million in savings for employees and their employers. (That’s also less revenue for the federal government to balance its books.)

The maximum annual insurable earnings for both EI and CPP are indexed to inflation and will increase slightly in 2017.

That translates into deductions of up to $836.19 for EI and $2,564.10 for CPP.

That CPP premium has risen by $19.80 for those making $55,300 or more — partly offsetting the savings from the EI premium cut. 

The agreement between the federal government and the provinces (excluding Quebec) to enhance the CPP won’t be felt until 2019, when contributions begin rising over seven years at levels beyond this year’s adjustment for inflation. 

Workers may also notice the effects of indexation on the amount of federal tax deducted from their pay. Federal income tax thresholds, the basic personal amount and several other credit amounts, will increase by 1.4 per cent for 2017. 

Fiat Chrysler-Takata

The new calculation for EI premiums could bring savings worth up to $118.85 for workers making $51,300 or more. (Carlos Osorio/Associated Press)

Shorter waiting period for EI

The two-week waiting period before EI benefits, including special benefits for maternity or disability leave, start paying out will be reduced to one week starting Jan. 1. 

Employers that co-ordinate their benefits with EI may need to adjust for the shorter wait time.

Self-employed workers who opted in to the EI system and wish to draw on special benefits in 2017 will need to have earned a little more in order to qualify: the annual earnings requirement increases to $6,888, up from $6,820 in 2016.

2017 tax changes0:51

Tax credit elimination

Several federal tax credits have been eliminated for 2017. (That doesn’t mean you can’t claim them one last time this spring on your 2016 tax return.)

Federal textbook and education tax credits have been eliminated because they’re not targeted based on income — income-targeted policy has been a priority for this Liberal government. Leftover amounts from these tax credits carried forward before 2017 can still be claimed in subsequent years.

The tuition tax credit remains unchanged.

Dalhousie University

Federal textbook and education tax credits have been eliminated, but the tuition tax credit remains. (CBC)

The children’s fitness and arts credits are eliminated for 2017, after being cut in half for 2016.

The federal credit for labour-sponsored venture capital corporations has also been eliminated, although a federal tax credit for provincially registered corporations was restored in 2016 and is worth up to $750.

Life insurance tax changes

A bill passed under the previous Conservative government in 2014 to “modernize” the taxation of life insurance policies also takes effect Jan.1. The delay gave Canadians planning their retirements and the insurance industry time to prepare for the change.

In simplest terms, the changes impact the total amount of money that can accumulate in a life insurance policy that gets preferential tax treatment. The changes aim to differentiate between protection-oriented policies and investment-oriented policies. 

Policies issued prior to Jan.1 are “grandfathered,” so the changes won’t retroactively affect retirement plans unless changes are made after this date, such as converting to another type of policy coverage.

The amount of tax paid on a prescribed annuity is changing, as the Canadian Revenue Agency updates its tables to reflect longer expected lifespans. Annuities bought before the end of 2016 could provide higher after-tax income than those purchased later.

And don’t forget: after rising to $10,000 in 2015, the limit for contributions to a tax-free savings account dropped back to $5,500 and stays there for 2017.

Free admission to national parks

If calculating the impact of this is giving you a math headache, head to one of Canada’s national parks for a break.

Admission is free throughout 2017 to mark Canada’s 150th anniversary.

Lake Louise

Admission is free this year at Canada’s national parks, including Banff National Park. (Christine Boyd/CBC)

Article source: http://www.cbc.ca/news/politics/january-first-changes-government-1.3900568?cmp=rss