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Canada Revenue Agency: What is the Basic Personal Amount Tax Break?

When you file taxes, there are various deductions, credits, and expenses that can be leveraged to reduce your overall tax liability. One such tax credit introduced by the Canada Revenue Agency is the basic personal amount or BPA.

What is the Basic Personal Amount?

According to the Canada Revenue Agency, the basic personal amount is a non-refundable tax credit that can be claimed by all Canadian residents. The main aim of this tax credit is to provide, a “full reduction from federal income tax to all individuals with taxable income below the BPA. It also provides a partial reduction to taxpayers with taxable income above the BPA.”

A non-refundable tax credit reduces what you may owe. Alternatively, in case the refundable tax credits are higher than what you owe you are not eligible for the difference.

The Canada Revenue Agency increased the basic personal amount in 2020 to $13,229, up from $12,298 in 2019. This increase in BPA is for Canadians with a net income of $150,473 or lower.

Further, the increase in the BPA is gradually reduced as the net income increases. So, for Canadians earning between $150,473 and $214,368 the increase in amount is reduced and in case your net income is above the threshold amount of $214,368 the change does not apply to you and your BPA will stay at $12,298.

The Canada Revenue Agency will increase the BPA to $15,000 by 2023

For the 2021 taxation year, the Canada Revenue Agency will increase the BPA to $13,808 while this figure will rise to $14,398 for the 2022 taxation year and to $15,000 for the 2023 taxation year. Post-2023, the increase in the basic personal amount will be indexed to inflation.

Canadians who have a net income above the maximum threshold amount will continue to claim the existing BPA which will be indexed for inflation every year.

How much can you reduce your taxable income by the BPA?

Let’s take an example. Suppose John has a net income of $39,000. The federal income tax that will be levied on this income will be $5,850. Now we know the basic personal amount is $12,069 for 2019 which means John can claim 15% or $1,810.35 which in turn will reduce his federal income tax liability to $4,039.65.

This tax credit figure will increase to $1,984.35 in 2020. 

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