Personal finance cheat sheet — 2016

Following its success in 2015, the personal financial cheat sheet is back with some important updates.

Since my cheat sheet in 2015 seemed to be quite popular with our readers, here is the updated version of the key numbers related to personal finance for 2016.

RRSP: the limit for 2017 is $26,010, meaning 2016 earned income of $144,500 is required to maximize the amount since the limit is 18%.
RRSP Limit

Canada Pension Plan: the year’s maximum pensionable earnings (YMPE) for 2016 is $54,900. The year’s basic exemption (YBE) is $3,500. At a contribution rate of 4.95%, the maximum CPP contribution is therefore $2,544.30. For self-employed individuals the contribution rate is 9.9%, so the maximum CPP contribution is $5,088.60.

The maximum CPP retirement pension for 2016 is $1,092.50 a month or $13,110 a year. The maximum survivor’s benefit for a survivor 65 and older is 60% of that, or $7,866 annually. The amount of the death benefit has been fixed at a maximum of $2,500.

In 2016 the reduction for collecting the CPP pension before age 65 as early as age 60 is 0.6% per month (7.2% a year). The premium for waiting to start after age 65 up to age 70 is 0.7% a month (8.4% a year).
Key CPP Figures

Tax-free savings account: the TFSA started in 2009 for Canadian residents aged 18 and older. Under proposed legislation, starting on January 1, the annual TFSA limit for 2016 will decrease from $10,000 to $5,500. The TFSA annual room will be indexed to inflation and rounded to the nearest $500.

TFSA Contribution Limits

Registered education savings plan: contributions to an RESP are not tax deductible but earnings in the plan accumulate on a tax-deferred basis. When the funds are paid out to fund a child’s education, the accumulated income earned in the plan is taxed in the child’s hands at his or her lower tax rate.

Since 2007 there has been no annual contribution limit but the total lifetime ceiling is $50,000 per beneficiary. RESPs are often set up as family plans so you can allocate the plan assets among related children or change the beneficiary of the plan to someone else in the family.

One of the key benefits of an RESP is that the federal government pays a subsidy called the Canada education savings grant (CESG) for each child who is a beneficiary of an RESP from the day the child is born to the end of the calendar year of his or her 17th birthday. Payments made to an RESP under the CESG or under a designated provincial program are not included when determining if the lifetime limit has been exceeded.

The current annual maximum CESG per beneficiary is $500, which is 20% of the first $2,500 of contributions paid annually. Each child is entitled to a cumulative CESG limit of $7,200. In some cases the CESG will have to be repaid. This can happen if the beneficiary doesn’t pursue higher education or the plan is terminated.

Old age security: a change in the 2016 federal budget is the proposal to cancel the provisions in the Old Age Security Act that increase the age of eligibility for OAS and guaranteed income supplement (GIS) benefits from age 65 to 67. The eligibility age will be restored to age 65.

For 2016 the maximum annual OAS pension is $6,846.24, based on the $570.52 maximum monthly amount for the first and second quarters of 2016. The OAS threshold amount after which clawback begins is at net income of $73,756 in 2016. All OAS will be clawed back at net income of $119,398, since 15% of any income in excess of the threshold amount is clawed back.

Note that the OAS pension is adjusted for inflation on a quarterly basis, so this amount will probably increase during the remainder of 2016.

OAS and Clawback Limits

Maximum marginal tax rates: the combined maximum marginal tax rate is the rate a person will pay on income that falls in the top federal tax bracket of $200,000 and above. For provinces and territories that have tax brackets higher than the top federal bracket, the chart reflects the rates above their top bracket. Those brackets are $220,000 in Ontario, $300,000 in Alberta and $500,000 in the Yukon.

Maximum Marginal Tax Rates

 (as at March 22, 2016)