Tax Changes from the 2016 Alberta Budget

Posted on Apr 16, 2016

The 2016 Alberta budget, tabled on April 14th, contained a hand full of  personal and corporate tax changes as well as the implementation of a new Carbon Levy.   Below is a brief summary of the tax changes contained in the budget.  Please call our office if you have any questions.  We would be happy to arrange a meeting to discuss how these measures may apply to your situation, assist you with the preparation and filing of your tax returns, and discuss tax planning opportunities.

Personal Tax Changes

Graduated tax brackets

There are no changes to the personal tax rates; however, the new tax brackets announced in the 2015 budget will be fully in effect for 2016 and will be indexed starting in 2017.

Beginning in 2015 graduated tax brackets were introduced as listed below.

Income up to $125,000    10%
$125,001 to $150,000       12%
$150,001 to $200,000      13%
$200,001 to $300,000     14%
over $300,000                   15%

The resulting combined federal and Alberta tax rates for 2016 will be as follows

Income up to $45,282     25%
$45,283 to $90,563          32%
$90,564 to $125,000       36%
$125,001 to $140,388      38%
$140,389 to $150,000      41%
$150,001 to $200,000     42%
$200,001 to $300,000    43%
over $300,000                  44%

Dividend tax credit

Alberta will amend its dividend tax credit for “other than eligible” dividends (paid from corporate income taxed at the small business rate) to reflect the reduction in the small business corporate tax rate as noted below.

Alberta will maintain the dividend tax credit rate at 10% for “eligible” dividends (paid from corporate income taxed at the general rate).

Corporate Tax Changes

Corporate tax rates

The small business tax rate will be reduced from 3% to 2% effective January 1, 2017.  The resulting combined federal and Alberta small business tax rate will be 12.5%.

There were no changes to the general corporate tax rate.

Capital Investment Tax Credit

This will be a new credit to encourage corporations to make investments in certain eligible capital assets.  The budget indicated that further details regarding this credit will be announced later this year.

Alberta Investor Tax Credit

This will be a new credit to encourage investment in eligible small and medium sized businesses in Alberta.  The budget indicated that further details regarding this credit will be announced later this year.

Other Tax Changes

The budget also introduced a Carbon Levy to be imposed starting January 1, 2017, at a price of $20 per tonne of carbon dioxide equivalent, and increasing to $30 per tonne on January 1, 2018.  This levy will apply to diesel, gasoline, natural gas, and propane.  The budget indicated that certain rebates will be available for low and middle income individuals.