How the federal budget will affect income tax

New tax brackets are announced with the lower middle-income tax bracket being reduced from 22% to 20.5%

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Budget 2016 banner V2

When Finance Minister Bill Morneau tabled the Liberals’ maiden budget Tuesday, we saw a commitment to the process of tax simplification. As promised, the Liberals made changes to the federal income tax brackets. Starting in 2016, the middle class income tax bracket will drop from 22% to 20.5%. That means if your taxable income is between $45,282 and $90,563, you’ll pay less tax. However, those earning more than $200,000 a year can expect to pay more income tax, with the introduction of a new 33% tax bracket.

Those counting on a boost to their income from stock options and were concerned about possible changes and caps on stock option gains need not worry. Even though a cap of $100,000 on this favourable tax treatment was anticipated, no changes were made. At present, investors and employees are taxed on 50% of the gains of stock options.

 

 

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