The Liberal Party remains in power in Canada. What this means for your taxes.

21 septembre 2021

The Liberal Party of Canada has won a minority government for the 2021 election, marking Justin Trudeau’s third term as Prime Minister.

Though the Liberal Party has been in power since 2015, the party introduced some major platform promises that will have a major effect on Canadians’ taxes. Given the status as a minority government, the action on these items and subsequent impact on Canadians’ taxes is uncertain. HR&Block will monitor these changes and ensure support and guidance to keep you informed.

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Income tax rates.

The Liberals promise to create a minimum tax of 15% for everyone who earns enough to qualify for the top bracket to remove their ability to pay no taxes through excessive use of deductions and credits. They plan to continue with the four-year phased-in increase to the basic personal amount to $15,000 for lower-to-middle-income taxpayers.

On the corporate side, they focused on entities avoiding paying taxes or paying too little taxes in comparison to their profits. They’ll work with international partners to implement a global minimum tax on multi-nationals. They promise to raise the general corporate income tax rate from 15% to 18% on profits of banks and insurance companies earning more than $3 billion and will implement a Canada Recovery Dividend on large banks and insurance companies, since their return to profitability was due largely to government COVID relief measures. Lastly, they’re going to increase the resources of the CRA by $1 billion per year to combat aggressive tax planning and tax avoidance.

Home ownership.

The party recognizes the struggles some Canadians have in trying to break into the housing market, so they’re going to introduce a new tax-free First Home Savings Account which would allow Canadians under 40 to save as much as $40,000 toward their first home and will double the First-Time Home Buyers Tax Amount from $5,000 to $10,000.

They’ll introduce an annual 1% tax on the value of property owned by non-residents that is vacant or under-used and will ban new foreign ownership of Canadian houses for the next two years.

Lastly, they will introduce an “anti-flipping tax” on residential properties, requiring properties to be held for at least 12 months.

Workers rights.

Legislation has already been passed to substantially enhance the Canada Workers Benefit for 2021 and implement a new “secondary earner exemption” of $40,000 for the lower-income spouse or common-law partner. Now, they’ve introduced a new EI benefit for self-employed Canadians, delivered through the tax system, that would provide unemployment assistance comparable to EI and lasting for as much as 26 weeks. They will establish an EI Career Insurance Benefit which will provide extended coverage for people who have worked five years or more for the same employer. They are going to extend the temporary flat-rate deduction for working from home expenses for an additional 2 years through the 2022 tax year and increase the deductible amount to $500. They also promised to introduce a new Labour Mobility Tax Credit to allow workers in the building and construction trades to deduct up to $4,000 in eligible travel and temporary relocation expenses, giving them a tax credit of up to $600 a year.

Canadian families.

A major campaign promise, the Liberal party vowed to work with the provinces to build a universal, $10 a day child-care system. And, looking at the housing market again, they’ll also create a Multigenerational Home Renovation tax credit of 15% on up to $50,000 renovation and construction costs for families looking to add a secondary unit to their homes to allow a family member to live with them. They will also expand the Medical Expense Tax Credit to include costs that have been reimbursed to a surrogate mother for her IVF expenses.

Seniors.

Effective July 2022, they’ll increase OAS by 10% for seniors 75 or older, and this legislation has already passed. They will also boost the Guaranteed Income Supplement (GIS) by $500 a person and $750 for couples and increase the CPP survivor benefit by 25%. They will double the Home Accessibility Tax Credit to provide up to an additional $1,500. They don’t have a fulsome plan for an Aging at Home Benefit, but they promise to establish a panel of experts to create one.

Disabled taxpayers.

The Liberal party has promised a Canada Disability Benefit to provide a monthly benefit, similar to the Canada Child Benefit and GIS, for persons with disabilities aged 18 to 64, and will convert the Canada Caregiver Tax Credit into a refundable tax credit. They are also going to expand access to the Disability Tax Credit by modifying the rules relating to the mental functions necessary for everyday life, life-sustaining therapy, and the calculation of therapy time.

Climate change.

They’ll continue with existing policies, including the carbon tax and Climate Action Incentive in those provinces which do not meet federal standards. They will reduce corporate income tax rate by 50% for zero-emission technology manufacturers and are developing an investment tax credit of up to 30% for a range of clean technologies including low carbon and net-zero technologies.

Economic stimulus and COVID recovery benefits.

The plan allows CCPCs to immediately expense up to $1.5 million of growth-enhancing investments in areas like software, patents, and machinery, and plan to improve the Canada Small Business Financing Program by increasing the maximum loan amount from $350,000 to $500,000. They’re also promising to extend loan coverage from 10 to 15 years for equipment and leasehold improvements.

They pledge to extend the Canada Recovery Hiring Program to March 31, 2022, and introduce temporary wage and rent support for Canada’s tourism industry. They will launch the Arts and Culture Recovery Program to match ticket sales for performing arts, live theatres, and other cultural events to make up for reduced capacity, and they will provide the film and television production sector with COVID-related insurance coverage. They will introduce a tax credit to help small businesses improve their ventilation systems.

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