Happy New Year from your team at Finatics Accounting!
Below is a summary of 2021 Canadian payroll tax changes that will be in effect starting January 1, 2021:
- Federal Personal Tax Credits increase from $12,421 to $13,808. The 2021 TD1 forms are now available on CRA’s website. The federal personal exemption of $13,808 is for those with employment income of less than $151,978. Those with income greater than $151,978 may owe additional income tax at year end when completing the income tax and benefit return unless a request is made to deduct additional tax at source by completing the TD1-WS form.
- Federal and provincial income tax brackets are increasing to keep up with inflation. Updates can be found on the Government of Canada website.
- EI premiums stay the same at 1.58% while the maximum annual insurable earnings increased from $54,200 to $56,300. The maximum annual premium an employee would pay is $889.54. If your employees are earning more than the maximum, it equates to an increased contribution of $33.18 per year for the employee and $46.46 to your business expense.
- CPP premiums are increasing (the third of five consecutive years of scheduled increases to reach 5.95%) from 5.25% to 5.45%, the maximum annual pensionable earnings are also increasing from $58,700 to $61,600 (the basic exemption stays the same at $3,500). The maximum an employee can contribute is $3,166.45. If your employees are earning more than the maximum, it equates to an increased contribution of $268.45 per year to both the employee and your business expense.
Additional changes to Tax Free Savings Account (TSFA) and Registered Retirement Savings Plan (RRSP):
- TFSA contribution limit for 2021 remains at $6,000 and the cumulative total is now $75,500.
- RRSP contribution limit for 2021 increases from $27,230 to $27,830.
From the team at Finatics Accounting Solutions we wish you a safe, healthy and prosperous 2021!