Alberta Budget: Income Tax Changes

by in KD Professional Accounting Services News
Alberta Budget: Income Tax Changes

Below are the budget highlights from the March 26, 2015 budget. The charts and bullet points below are from taxtips.ca. We have reproduced this information in order to help bring it to you in a form that is easily digestible. Here are the highlighted measures from the Alberta budget that affect income taxes or are affected by income taxes:

2 new tax brackets starting in 2016

Health care contribution levy applicable to taxable income of $50,000 +, collected via the personal tax return.

Alberta Family Employment Tax Credit (AFETC) being enhanced, effective July 1, 2015

New refundable tax credit - Alberta Working Family Supplement (AWFS) - benefit of up to $2,760 depending on income and number of children

Charitable donations tax credit rate for total donations over $200 to be reduced from 21% to 12.75% for 2016 and later taxation years.

Gasoline and diesel tax rates to be raised by 4 cents to 13 cents per litre effective 12:01 am March 27, 2015

Tobacco tax increase effective 12:01 am March 27, 2015

Insurance premiums tax to increase by one percentage point on April 1, 2016

Two New Tax Brackets (See Chart below)
The Alberta 2015 Budget introduced 2 new tax brackets starting in 2016.  In theory this seems terrible, but unless your taxable income (income after deductions) is greater than $100,000 you will not notice. Further, the increase is so small (1/2 %) that most people will not even notice.

Alberta Personal Income Tax Brackets and Tax Rates in Future Years

Taxable Income

2016

2017

2018

2019 &
Later


First $100,000

10.0%

10.0%

10.0%

10.0%

over $100,000 up to $250,000

10.5%

11.0%

11.5%

11.5%

over $250,000

11.0%

11.5%

12.0%

11.5%

Health Care Levy (See Chart Below)
There is a new levy (aka tax) that will be included when you file your 2015 personal taxes (April 2016) to “help” pay for health care. The levy is based on income. Anyone below $50,000 in taxable income will not pay the levy, while there is an incremental increase on how much you pay, which is based on your taxable income.

Alberta Health Care Contribution Levy

Taxable Income

Levy Amount

first $50,000

No levy

over $50,000 up to $70,000

(taxable income - $50,000) x 5% to a maximum of $200

over $70,000 up to $90,000

$200 + (taxable income - $70,000) x 5% to a maximum of $400

over $90,000 up to $110,000

$400 + (taxable income - $90,000) x 15% to a maximum of $600

over $110,000 up to $130,000

$600 + (taxable income - $110,000) x 15% to a maximum of $800

over $130,000

$800 + (taxable income - $130,000) x 25% to a maximum of $1,000

Charitable Donation Credit
The Alberta Government has reduced the tax credit for charitable donations by 8.25% which when combined with the federal tax credit means that the tax credit on donations over $200 is reduced from 50% (29% fed + 21% AB) to 41.75% (29% fed + 12.75 AB). This means that the tax benefit of donating to charity will be greatly reduced in Alberta, but will still be the best tax deduction available to most people.

Alberta Family Employment T0061 Credit
Starting July 1, 2016, the AFETC will be enhanced further. The rate at which benefits are phased in will be increased from eight percent to 11 percent on working income over $2,760. The phase-out threshold will be increased from $36,778 to $41,250.

Alberta Working Family Supplement (AWFS)
This new credit will benefit working families earning between $2,760 and $41,220 annually. Families with one child may receive an maximum annual benefit of $1,100 depending on income. Additional annual benefits will be provided for each of the next three children in a family. The maximum benefit for any family will be $2,750 in tax credits.

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