<p><a href="http://www.moneysense.ca/tag/budget-2016/" rel="attachment wp-att-150316"><img class="alignnone size-full wp-image-150316" src="http://www.moneysense.ca/wp-content/uploads/2016/03/Budget-2016-banner-V2.jpg" alt="Budget 2016 banner V2" width="885" height="300" srcset="http://www.moneysense.ca/wp-content/uploads/2016/03/Budget-2016-banner-V2-300x102.jpg 300w, http://www.moneysense.ca/wp-content/uploads/2016/03/Budget-2016-banner-V2-768x260.jpg 768w, http://www.moneysense.ca/wp-content/uploads/2016/03/Budget-2016-banner-V2-660x224.jpg 660w, http://www.moneysense.ca/wp-content/uploads/2016/03/Budget-2016-banner-V2.jpg 885w" sizes="(max-width: 885px) 100vw, 885px" /></a></p>
<p>The Federal Budget made some important tax changes for families.  The good news is that the much rumoured increase to the capital gains inclusions rate did not come to fruition in this budget,  and the anticipated changes to stock option benefits have been deferred for now.  But  If you’ve invested in corporate class mutual funds, you ‘ll want to do any switching between funds on a tax-free basis now until September as that special tax-free treatment will disappear.</p>
<p>Charities will also wince at the cancellation of a provision expected to begin in 2017, introduced in the last Budget.  That is, the donation of sales  proceeds from a qualifying private corporate or real estate dispositions will no longer qualify for a capital gains exemption if proceeds are donated to charity.</p>
<p>Families will be happy with the introduction of the <strong>Canada Child Benefit</strong>, which is a refundable credit based on family net income.  Specifically, the new CCB provides a maximum benefit of $6400 per child under age of six and $5400 per child age six to 17.</p>
<p>See scenarios attached.  The clawback zones are what we need to watch:</p>
<table>
<tbody>
<tr>
<td></td>
<td colspan="2">Current Clawback Rules</td>
</tr>
<tr>
<td>Income</td>
<td>MTR(tax)</td>
<td>MTR with clawbacks</td>
</tr>
<tr>
<td>$30,000</td>
<td>20.05%</td>
<td>20.05%</td>
</tr>
<tr>
<td>$40,000</td>
<td>20.05%</td>
<td>40.10%</td>
</tr>
<tr>
<td>$50,000</td>
<td>29.65%</td>
<td>51.15%</td>
</tr>
<tr>
<td>$60,000</td>
<td>29.65%</td>
<td>51.15%</td>
</tr>
<tr>
<td>$70,000</td>
<td>29.65%</td>
<td>51.15%</td>
</tr>
<tr>
<td>$80,000</td>
<td>31.48%</td>
<td>72.48%</td>
</tr>
<tr>
<td>$90,000</td>
<td>37.91%</td>
<td>58.41%</td>
</tr>
<tr>
<td>$100,000</td>
<td>43.41%</td>
<td>63.91%</td>
</tr>
<tr>
<td>$110,000</td>
<td>43.41%</td>
<td>63.91%</td>
</tr>
<tr>
<td>$120,000</td>
<td>43.41%</td>
<td>43.41%</td>
</tr>
<tr>
<td>$130,000</td>
<td>43.41%</td>
<td>43.41%</td>
</tr>
<tr>
<td>$140,000</td>
<td>43.41%</td>
<td>43.41%</td>
</tr>
<tr>
<td>$150,000</td>
<td>46.41%</td>
<td>46.41%</td>
</tr>
<tr>
<td>$160,000</td>
<td>47.97%</td>
<td>47.97%</td>
</tr>
<tr>
<td>$170,000</td>
<td>47.97%</td>
<td>47.97%</td>
</tr>
<tr>
<td>$180,000</td>
<td>47.97%</td>
<td>47.97%</td>
</tr>
<tr>
<td>$190,000</td>
<td>47.97%</td>
<td>47.97%</td>
</tr>
<tr>
<td>$200,000</td>
<td>47.97%</td>
<td>47.97%</td>
</tr>
<tr>
<td>$210,000</td>
<td>51.97%</td>
<td>51.97%</td>
</tr>
<tr>
<td>$220,000</td>
<td>51.97%</td>
<td>51.97%</td>
</tr>
<tr>
<td>$220,000+</td>
<td>53.53%</td>
<td>53.53%</td>
</tr>
</tbody>
</table>
<p>How much you get is based on 2015 family net income, which is determined on the tax return (2015) currently being filed.  So be sure to dig for every deduction that reduces your net income on Line 236.  Also, a tip for the future:  RRSP planning for families is extremely important as clawback zones can bring marginal tax rates well over 50% in some cases, as you will see later.</p>
<p>Do refugees get the benefits?  Foreign-born individuals who are Indians and not Canadian citizens and permanent residents under the Immigration and Refugee Protection Act may legally reside in Canada and receive the CCB.  A new limitation is being introduced with regard to eligibility for retroactive payments.  Currently individuals may apply for CCTB and UCCB as far back as the introduction of the programs. Income-tax based credits, however, are limited to a 10-year limitation.  Retroactive application of UCCB and CTB will align after 2016, to the 10-year limitation.</p>
<p>Unfortunately, there is no non-refundable tax credit for minor children for those who do not qualify for the income-tested benefits. This was removed when the previous government introduced the Universal Child Care Benefit enhancements and the Family Tax Cut.</p>
<p>Other non-refundable tax credits will be removed as well:  the education/textbook amounts will disappear, as will the refundable children’s fitness credit.</p>
<p><strong>The Canada Child Benefit: See how it affects you </strong></p>
<p>The changes the Liberal government has introduced for families has varying result, depending on family net income, how many children the family has, and whether they are under six or six to 17.  We did some calculations at Knowledge Bureau to see how families fare in 2016.</p>
<p>The key learnings are that while middle families are generously rewarded with the combination of tax rate reductions and enhanced refundable tax credits,  but their marginal tax rates increase significantly as incomes rise to an upper middle class range:  50% for income levels between $70,000 and $80,000 and over<strong> 67% </strong>for income levels between $90,000 and $120,000.<strong>  </strong>This makes RRSP planning a must for those families in order to reduce family net income below the $70,000 threshold.</p>
<p>Let’s look now at the effects of the changes on a low-income family. In this case, net family income is $30,000 and there are three little children in the family – each under six:</p>
<p>Scenario: Ontario family has three children under 6 and family net income of $30,000</p>
<table>
<tbody>
<tr>
<td></td>
<td colspan="3">Both work ($15K each)</td>
<td colspan="3">One Works ($30K)</td>
</tr>
<tr>
<td></td>
<td>Old Rules</td>
<td>New Rules</td>
<td>Difference</td>
<td>Old Rules</td>
<td>New Rules</td>
<td>Difference</td>
</tr>
<tr>
<td>Earned Income</td>
<td>$30,000</td>
<td>$30,000</td>
<td>$0</td>
<td>$30,000</td>
<td>$30,000</td>
<td>$0</td>
</tr>
<tr>
<td>&#8211; Federal Tax</td>
<td>1,318</td>
<td>454</td>
<td>+864</td>
<td>1,466</td>
<td>602</td>
<td>+864</td>
</tr>
<tr>
<td>&#8211; Provincial Tax</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr>
<td>= Net After Tax</td>
<td>$28,682</td>
<td>$29,546</td>
<td>+$864</td>
<td>$28,534</td>
<td>$29,398</td>
<td>+$864</td>
</tr>
<tr>
<td>+ UCCB</td>
<td>5,760</td>
<td>0</td>
<td>-5,760</td>
<td>5,760</td>
<td>0</td>
<td>-5,760</td>
</tr>
<tr>
<td>+ CTB</td>
<td>9,656</td>
<td>19,200</td>
<td>+9,544</td>
<td>9,656</td>
<td>19,200</td>
<td>+9,544</td>
</tr>
<tr>
<td>+ GSTC</td>
<td>987</td>
<td>987</td>
<td>0</td>
<td>987</td>
<td>987</td>
<td>0</td>
</tr>
<tr>
<td>+ Prov CTB</td>
<td>3,324</td>
<td>3,324</td>
<td>0</td>
<td>3,324</td>
<td>3,324</td>
<td>0</td>
</tr>
<tr>
<td>= Total Income</td>
<td>$48,409</td>
<td>$53,057</td>
<td>+$4,648</td>
<td>$48,261</td>
<td>$52,909</td>
<td>+$4,648</td>
</tr>
<tr>
<td>Monthly Income</td>
<td>$4,034</td>
<td>$4,421</td>
<td>+$387</td>
<td>$4,022</td>
<td>$4,409</td>
<td>+$387</td>
</tr>
</tbody>
</table>
<p>Source: Knowledge Bureau, Inc.</p>
<p>Conclusions:</p>
<ul>
<li>Under the new rules a low-income family with three children will be better off by almost $400 per month.</li>
<li>This family has after-tax income of $4,409 per month.</li>
<li>Whether single-earner or two working spouses makes little difference.</li>
<li>The tax system added 75% to earned income under the new rules with one earner.</li>
</ul>
<p><strong> </strong></p>
<p>The post <a rel="nofollow" href="http://www.moneysense.ca/save/taxes/budget-winners-and-losers-child-benefit/">Budget winners and losers &#8211; Child Benefit</a> appeared first on <a rel="nofollow" href="http://www.moneysense.ca/">MoneySense</a>.</p>
