The Canadian government has announced increases to payouts to seniors under the Canada Pension Plan (CPP) and Old Age Security (OAS), starting January 1, 2016. Tax Free Savings Accounts (TFSAs) are having their limits decreased to $5,500 for 2016 from $10,000 in 2015.
Changes to CPP and OAS
Canada Pension Plan payments are increasing in 2016 by 1.2 percent, which means that someone receiving the maximum amount will see a $330 increase for the year over 2015. The Old Age Security benefit is increasing by far less with a 0.1 percent increase for the first quarter of 2016. CPP raises are introduced annually, while OAS is introduced quarterly. For a full breakdown, see the press release from Employment and Social Development Canada.
Manitoba tax rules are also changing
Manitoban seniors may see a significant tax savings from the Manitoba government in 2016 in the form of a significant increase to the provincial school tax credit. The maximum rebate will increase from $470 to $2,300, and will only not be applicable to a small percentage of seniors in higher value homes.
TFSA limit decrease in 2016
The TFSA limit decrease will have an impact on higher income seniors. Seniors who previously relied on TFSAs as savings vehicles should consult a financial planner to determine a new financial course of action, especially if they were planning on contributing close to the limit. The good news is that if you haven’t used your contribution limits in the past, you are able to carry forward unused contribution room from past years.
Home Accessibility Tax Credit
A new tax credit seniors can take advantage of in 2016 is the Home Accessibility Tax Credit (HATC). Any Canadian over 65 can apply for the credit, which is 15% of any renovation designed to improve accessibility and/or safety in a dwelling. The maximum credit is $1,500 on a $10,000 renovation.
If you would like to find out how the new changes to provincial and federal taxes and benefits will affect your own financial picture, consider talking to a financial planner or accountant. They will be able to properly advise you on how new tax and benefits rules will affect your personal financial profile, and likely make up for their consultation fee on the money they can save you in 2016.
If you want to improve your existing home and make it more accessible using the new Home Accessibility Tax Credit, but don’t have the funds, consider a reverse mortgage on your home. Contact us at Horizon Equity for more information on how to apply and what you would qualify for.