2020 Small Business Corporate Income Tax Changes
2020 corporate income tax rates for active business income limit $500,000:
- Federal: 9%
- BC: 2%
2020 corporate income tax rates for investment income:
- Federal: 38.7%
- BC: 12%
The federal business limit of $500,000 begins to be reduced when a CCPC’s taxable capital reaches $10 million, and is eliminated when taxable capital reaches $15 million. This phase-out of the small business deduction is also in effect in some provinces. The federal 2018 budget implemented changes to reduce the business limit based on the investment income of a CCPC, for taxation years beginning after 2018.
2021 Canada Pension Plan (CPP) Maximum Pensionable Earnings
The CPP maximum pensionable earnings for 2021 is $61,600, up from $58,700 in 2020. The maximum employer/employee contribution is $3,166.45 and $6,332.90 for self-employed with the rates at 5.45% & 10.5% respectively.
2021 Personal Tax Changes
Basic Personal Amount
Effective January 1, 2021, the Basic Personal Amount is proposed to increase to $13,808 for 2021. This is the first step in the Government’s proposal to increase the amount to $15,000 by 2023.
Home Buyers’ Plan
The Home Buyers’ Plan (HBP) helps first-time home buyers save for a down payment by allowing them to withdraw up to $35,000 from a registered retirement savings plan to purchase or build a home without having to pay tax on the withdrawal.
Beginning in 2020, individuals who experience a breakdown of a marriage or common-law partnership—in the year of making a withdrawal or in any of the four preceding calendar years—will be able to access the Home Buyers’ Plan, even if they do not meet the first-time home buyer requirement.
Lifetime Capital Gains Exemption (LCGE)
There is an $892,218 for 2021 lifetime capital gains exemption (LCGE), which equates to a $446,109 lifetime capital gains deduction (1/2 of the $892,218 LCGE). The 2020 LCGE limit, indexed by a factor of 1.010, is $883,384.
2021 RRSP Contribution Limits
The RRSP contribution limit for 2021 is $27,830, up from $27,230 in 2020, an increase of 1.022%.
2021 TFSA Contribution Limit
The TFSA contribution limit for 2021 is $6,000.