The Basic Personal Amount (BPA) is a non-refundable tax credit that every Canadian resident can claim. It allows individuals to earn a certain amount of income each year without paying federal income tax.
How It Works
The BPA is applied as a credit against federal income tax. For example, if the BPA is set at $15,000, the first $15,000 of your income is effectively tax-free. Provinces and territories also have their own basic personal amounts for provincial taxes.
Why It Matters
- Fairness: Ensures all Canadians have some income exempt from tax.
- Tax planning: Important for calculating how much tax you actually owe after credits.
Final Thoughts
The Basic Personal Amount is a fundamental tax credit in Canada, reducing taxes for everyone. Combined with other credits, it helps lower-income individuals avoid paying federal tax entirely.