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Liberal Government Implements Federal Tax Rate Changes

January 14, 2016

The federal Liberal government has followed through on its previously promised changes to federal income tax rates. Effective January 1, 2016, there is a tax cut for individuals in the second-lowest tax bracket and an increase in the tax rate for those earning more than $200,000 of taxable income per year. There has also been a corresponding increase to the tax rate on investment income and Canadian source dividends earned by Canadian-controlled private corporations (“CCPCs”). The resulting proposed amendments to the Income Tax Act (Canada) (the “ITA”) also include a reduction in the Tax Free Savings Account (“TFSA”) annual contribution limit.

Personal Tax Rates

For 2016, the top marginal federal income tax rate increases from 29% to 33% for taxable income over $200,000. The tax rate for taxable income between $45,282 and $90,563 is reduced from 22% to 20.5%. The new 20.5% rate results in a maximum 2016...

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