Increases to Climate Action Tax Credits

Gradual increases are planned for the provincial Climate Action Tax Credit for eligible taxpayers.

In July of this year, the maximum amount of the annual credit was increased to $155 per adult from $135. This will increase to $174 per adult in July 2020, and $194 per adult in July 2021.

The annual credit per child increased to $46 from $40 on July 1, and will increase to $51 per child in July 2020, and $57 per child in July 2021.

These credits are primarily targeted at helping low income families. Most of these families will receive dill credit if their qualifying income is less that $40,689.

Amortization (CCA) Rates Increased

The federal government has introduced accelerated rates of amortization on capital asset purchases, otherwise known as Capital Cost Allowance (CCA). These will allow businesses to write off their eligible asset purchases faster than in previous years.

The write off will be increased by one half of the original rate on ordinary asset purchases, if the asset purchased will be available for use prior to 2024.

In addition, businesses were previously allowed a write off of only one half of the applicable rate in the year of purchase. These new rules exclude the application of this “half year” rule on eligible purchases.

The half year rule will not apply on any of these asset purchases if the asset is available for use by the business prior to 2028.

If an asset purchase is considered to be a piece of manufacturing or processing equipment, the total write off on the asset will be up to 100% of the net cost of the asset in the year of purchase, if the equipment will be used prior to 2024.

If the equipment becomes available for use in 2024 or 2025, 75% of the purchase can be written off in the year of purchase, and if it is not available for use until 2026 or 2027, 55% can be written off in the first year.

Similar accelerated rates of amortization are available for purchases of clean energy equipment.

Zero emission vehicles will also qualify for special amortization status. These vehicles can be fully written off in the first year if they are available for use prior to 2024.

There is a cap of $55,000 on the amount of the write off if the vehicle is considered to be a passenger vehicle.

If the vehicle qualifies for federal incentives on the purchase of zero emission vehicles, it will not qualify for these special amortization rates. Rather, the vehicle would be written off the same as any other vehicle purchases.

Credit for Digital Subscriptions

A new non-refundable federal tax credit has been introduced for individuals who purchase digital news subscriptions.

The maximum amount of the credit is $500 per year. It is limited to the cost of the standalone digital subscription if the individual purchases a combined digital and newsprint subscription.

To qualify for the credit the amount must be paid after 2019 and prior to 2025. An eligible subscription must be purchased from a qualified Canadian journalism organization that is primarily engaged in the production of written content. If the subscription is with a broadcasting entity, it will not qualify for the credit.

BC Child Opportunity Benefit

Starting this October, the provincial Early Childhood Tax Benefit is changing to the BC Child Opportunity Benefit.

The maximum annual benefit will be $1,600 for a family’s first child, $1,000 for the second, and $800 for each additional child. The children must be under the age of 18 to qualify.

If a family’s net income is under $25,000, they will qualify for the full benefit. If their net income is between $25,000 and $80,000, the benefit will be reduced by 4% of the balance over $25,000, to a minimum of $700 for the first child, $680 for the second child, and $660 for all other children.

If a family’s net income is over $80,000, the benefit is reduced by 4% of the excess until it is totally phased out.

In a scenario of a family with two children, the benefit will be totally phased out at $114,500 of income.

TFSA LIMIT LIKELY TO INCREASE

The 2019 contribution limit for Tax Free Savings Accounts (TFSA) is expected to grow to $6,000. The contribution limit is calculated using an indexing mechanism, in which the base amount compounds annually by the Consumer Price Index, and is then adjusted to the nearest $500.

In 2009, when the TFSA was first introduced, the base amount was established at $5,000. The accumulation of annual increases will bring this amount above $5,750 in 2019. When this number is rounded to the nearest $500, it becomes $6,000.

This increase will bring the total contribution room since inception to $63,500. If a taxpayer has missed contributing in any year, the room for that year remains available for contribution in a later year.

It is important to remember that if a taxpayer transfers investments into a TFSA, they may have to pay tax on the amount that is transferred into the TFSA.

For instance, if an investment has gone up in value by $4,000 when it is transferred into the TFSA, the taxpayer will have to pay tax on that gain. It only holds its tax free status once it goes into the account.