Manitoba: Tax Changes Put Spotlight on Financial Planning in 2020

Evelyn Jacks

If you live in Manitoba, you’ll be getting tax relief from a number of post-election provisions that are noteworthy from a financial planning point of view. The removal of sales taxes on income tax preparation fees, home insurance, and the preparation of estate planning documents such as wills, health care directives and Powers of Attorney make an interesting case for having important financial planning conversations as a new decade begins. Probate fees will also be eliminated in July 2020.

This follows a 1% provincial sales tax reduction that consumers have enjoyed since July 1, 2019, when the rate was reduced from 8% down to 7%. Manitobans will also continue to benefit from previously announced tax changes.

Last year, an increase in the Basic Personal Amount (BPA)projected out to 2020 was also announced along with partial indexing to tax brackets. For 2020, 35,500 people will be taken off the tax rolls as a result.

Changes to Manitoba’s Basic Personal Amount

Tax Year

Basic Personal Amount

Taxpayers taken off tax rolls

2017

$9271

2170

2018

$9382

3900

2019

$9626

19,700

2020

$9809

35,500

 

The Personal Income Tax Brackets will be indexed to inflation by the Manitoba Consumer Price Index (CPI) and will continue to be indexed, as outlined below:

Tax Year

Bracket 1 - 10.80%

Bracket 2 – 12.75%

Bracket 3 – 17.40%

2016

$0 - $31,000

$31,000 - $67,000

Over $67,000

2017

$0 - $31,465

$31,465 - $68,005

Over $68,005

2018

$0 - $31,843

$31,843 - $68,821

Over $68,821

2019 (forecasted)

$0 - $32,670

$32,670 - $70,610

Over $70,610

2020 (forecasted)

$0 - $33,392

$33,392 - $71,956

Over $71,956

 

While this is all an improvement over the bracket creep that had affected Manitoba taxpayers for many years, there is still some catch-up work to do to provide parity with the other provinces Manitoba competes with for labour and business.

Additional changes from the Manitoba March 7, 2019 budget:

  • The Primary Caregiver Tax Credit - this was simplified last year, and this year the registration deadline was aligned with the tax filing deadline of April 30. Only a registration form will be required to verify caregiving has been provided for at least a 90-day period to allow caregivers to claim a flat $1,400 credit. The previous requirement —to calculate the credit based on the number of days that care was provided—was eliminated in the last budget.
  • Refundable tax credits - there were no further changes to personal tax credits, other than to ensure that any Tax on Split Income would not have an effect on the computation of refundable tax credits otherwise available. They will, however, harmonize the TOSI provisions to parallel changes to various non-refundable tax credits.
  • Pension Income Amount and the Veterans Well-being Act - a consequential amendment will be made to the pension income amount to include security benefits received under the Veterans Well-being Act aligns with the federal provisions.

On the business tax side, the following changes will take place:

  • The Small Business Income Limit eligible for Manitoba’s 0% tax rate will increase from $450,000 to $500,000 effective January 1, 2019. This provision was announced in the last budget.
  • The Small Business Venture Capital Tax Credit has been enhanced and extended. Effective March 12, 2018, the $15 million revenue cap was eliminated and the investment minimum reduced from $20,000 to $10,000 in order to access this 45% investment tax credit which offsets Manitoba taxes payable. In this year’s budget, the provision was extended 3 years to December 31, 2022.
  • The Manitoba Book Publishing Tax Credit and Cultural Industries Printing Tax Credit have both been extended 5 years to December 31, 2024.
  • The Cultural Industries Printing Tax Credit has been extended to December 31, 2020.
  • The Film and Video Production Tax Credit has been made permanent with no expiry date.

Some additional perspective : Manitoba has a very expensive tax regime for those who withdraw non-eligible dividends from their private corporations. Here’s how the dividend tax credit rates shake out across the country:

 

2018

2019

 

Eligible

Non-Eligible

Eligible

Non-Eligible

Gross-up

38.000%

16.0000%

38.0000%

16.0000%

BC

12.000%

2.0700%

12.0000%

1.9600%

AB

10.000%

2.1600%

10.0000%

2.0400%

SK

11.000%

3.3330%

11.0000%

3.3620%

MB

8.000%

0.7835%

8.0000%

0.7835%

ON

10.000%

3.2863%

10.0000%

3.2863%

NB

14.000%

2.8530%

14.0000%

2.7500%

NS

8.850%

3.1600%

8.8500%

2.9900%

PE

10.500%

2.9000%

10.5000%

2.7400%

NL

5.400%

3.5000%

5.4000%

3.5000%

NT

11.500%

6.0000%

11.5000%

6.0000%

NU

5.510%

2.7600%

5.5100%

2.6100%

 

In speaking to finance department officials in the Budget lock-up, it was revealed that this is something they are prepared to look at in future budgets. It’s a matter that’s important to Manitobans who end up in nursing homes as well. This is because grossed-up dividends impact net income, the number upon which per diem costs are based.

Evelyn Jacks is President of Knowledge Bureau and best-selling tax author of 55 books. She tweets @evelynjacks.

Additional educational resources: How can you stay up to speed on the effects of the federal and provincial budgets?

For tax and financial advisors: Attend the Winter CE Summits and Spring CE Summits for the latest Canadian tax and economic news and information with an emphasis on tax-efficient personal, corporate, cross-border and late-life planning strategies for the new decade. Be sure to check out the incredible speakers and register before January 10 for the best pricing.

For taxpayers: If you want to become a certified pro and help others in your community, consider taking an introductory tax course: check out Income Tax Filing Fundamentals .

 

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