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Principal Changes to the Guide Formulas to Calculate Source Deductions and Contributions

Below are the changes made to the guide Formulas to Calculate Source Deductions and Contributions for 2012.

Variable E - Value of personal tax credits

The indexation factor to calculate the value of personal tax credits for 2012 is 2.66%.

In addition, to take into account the new amount for workers 65 or older that may be claimed in 2012 using the Source Deduction Return (form TP-1015.3-V), we have modified the definition of variable E to distinguish indexed amounts (variable E1) from  non-indexed amounts (variable E2). Variable E is thus defined as follows:

E = Value of personal tax credits indicated on form TP-1015.3-V
= E1 + E2
If the result obtained is not a multiple of 5, round it off to the nearest multiple of 5. If the result is halfway between two multiples of 5, round it off to the higher multiple.
where
E1 = Indexed value of personal tax credits, which corresponds to one of the following amounts:
  • the indexed value of variable E for 2011 multiplied by 1.0266;
  • the amount from line 7 of form TP-1015.3-V, for individuals who completed the 2012-01 version of the form;
  • $10,925 (the basic amount for 2012), for employees who began employment in 2012 and who did not complete form TP-1015.3-V, or for new beneficiaries who did not complete the form.
Note
The indexed value of variable E for 2011 corresponds to the value of variable E for 2010, multiplied by the indexation factor for 2011. 
E2 = Non-indexed value of the personal tax credits, which corresponds to the amount from line 9 of form TP-1015.3-V, for individuals who completed the 2012-01 version of the form.

Variables H, H1 and H2 - Deduction for employment income

The maximum deduction for employment income has been increased from $1,045 to $1,075 for 2012. Consequently, the maximum amount of variables H, H1 and H2 has been increased from $1,045 to $1,075.

Variable K - The constant for adjusting the income tax rate

For 2012, the income tax rates applicable to the three income tax brackets remain at 16%, 20% and 24% and the thresholds for the three tax brackets have been indexed as follows:

  • The 16% rate applies to taxable income of $40,100 or less. (The threshold was previously $39,060.) 
  • The 20% rate applies to taxable income of more than $40,100 but not more than $80,200. (The threshold was previously $78,120.) 
  • The 24% rate applies to taxable income of more than $80,200.

The values of variable K have therefore been increased from $1,562 to $1,604 and $4,687 to $4,812.

Variable M - QPP

The QPP contribution rate has been increased from 9.9% to 10.05% for 2012 which corresponds to a contribution rate of 5.025% for the employee and 5.025% for the employer. In addition, the maximum pensionable earnings for the purposes of the QPP have been increased from $48,300 to $50,100. Variable M has therefore been increased from $2,217.60 to $2,341.65.

Variables N and N1 - QPIP

The maximum insurable earnings subject to QPIP premiums have been increased from $64,000 to $66,000 for 2012. Also, the employee premium rate has been increased from 0.537% to 0.559%, and the employer premium rate has been increased from 0.752% to 0.782%. As a result, variable N is $368.94 (instead of $343.68) and variable N1 is $516.12 (instead of $481.28).

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