Government Proposes Legislation to Increase Basic Personal Amount
On December 9, 2019, Minister of Finance, Bill Morneau, introduced a Notice of Ways and Means Motion to increase the basic personal amount (“BPA”) for individual taxpayers. Currently, the BPA for the 2020 tax year is $12,298. As promised in its election platform, the minority Liberal government proposes to increase the BPA to $15,000. However, the increase will be gradually phased-in beginning with 2020, and finally reaching $15,000 for 2023—it will be indexed to inflation for 2024 and later years. The government also proposes to increase the spousal or common-law partner amount and the eligible dependant amount by the same amounts as the BPA. A handful of necessary technical amendments to the Income Tax Act are proposed as well.
The proposed BPA amounts are as follows:
- 2020: $13,299
- 2021: $13,808
- 2022: $14,398
- 2023: $15,000
To ensure that the enhanced BPA does not benefit higher income taxpayers, the proposed legislation contains an income-tested phase-out. A taxpayer’s enhanced BPA amount is reduced if their income is subject to the 29% federal tax bracket ($150,473 for 2020) and is completely phased-out once they are in the 33% tax bracket (income over $214,368 for 2020). The phase-out formula is convoluted, but basically it reduces the enhanced amount by the proportion of the taxpayer’s income over $150,473 that is of $214,368. Taxpayers with income exceeding $214,368 will continue to benefit from the regular BPA, which also continues to be indexed.