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.