The Ontario budget contained a number of changes to the Ontario personal and corporate income taxes. The highlights are summarized below.
Personal Income Tax:
- The tuition and education tax credits will be discontinued beginning in the fall of 2017.
- Residents of Ontario who have unused tuition and education tax credits available for carry-forward on December 31, 2017 will be able to claim them in future tax years.
- Tax filers moving to Ontario from other provinces after December 31, 2017 will not be able to claim accumulated tuition and education tax credits in Ontario.
- The children’s activity tax credit will end as of January 1, 2017.
- The healthy homes renovation tax credit will end as of January 1, 2017.
- Split Income of certain related children will be taxed in a parallel manner to the federal approach. As a result, the top marginal personal income tax rate will of 20.53% will apply starting January 1, 2016.
Corporate Income Tax:
- Changes will be made to parallel the changes to the gross-up rate for non-eligible dividends as part of the 2015 federal budget. As a result, the Ontario non-eligible dividend tax credit rate will decline from 4.5% for 2015 to 4.2862% for 2016. A review is being done of the non-eligible dividend tax credit rate for 2017 and subsequent years.
- For eligible R&D expenditures incurred in tax years that end on or after June 1, 2016, decrease the Ontario Research and Development Tax Credit rate from 4.5% to 3.5% and decrease the Ontario Innovation Tax Credit rate from 10% to 8% (Prorated for year ends straddling June 1, 2016).
These changes apply to the calculation of Ontario Income Tax only.