As you know, Finance Minister Jim Flaherty delivered his federal budget on Tuesday in Ottawa. The budget is aimed at stimulating the Canadian economy in reaction to a deepending global recession and the lack of availability of credit in many parts of the world (though much less so in Canada)
This budget has a few items that could affect your financial plan and present additional opportunities. In case you haven't had a chance to review the media coverage, I thought you would appreciate a quick overview of the federal budget.
For small business owners: The government plans to increase the amount of small business income eligible for a reduced 11% federal tax rate from the current $400,000 to $500,000 retroactive to January 1, 2009.
RRSPs, RRIFs and estate planning: There will income tax provisions to recognize a decrease in the value of RRSP or RRIF investments that occur after the annuitant's death and before they are distributed to beneficiaries.
RRIF withdrawal reductions: There will be a one-time 25% reduction in the mandatory withdrawals of RRIFs for the 2008 taxation year.
Senior age credit increase: The government increased the age credit amount by $1,000 for a total of $6,408.
Home renovation tax credit: Planning to upgrade or retrofit your home? This new credit, effective between January 28, 2009 and February 1, 2010, allows you to claim 15% on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, for a maximum tax credit of $1,350. To encourage home ownership and home construction, the finance minister proposes to increase the amount first-time homebuyers can withdraw from their RRSPs to purchase or build a home — from $20,000 to $25,000. It also proposes to establish a first-time homebuyer's tax credit which could amount to $750 worth of savings on closing costs.
Tax Bracket Changes: Changes to the personal income tax brackets are among the more notable developments announced in Budget 2009. As of January 1, 2009, the two lowest income tax brackets will be raised 7.5% above 2008 limits to $40,726 and $81,452 respectively. The basic personal amount will also be increased to $10,320 in 2009, up from $9,600 in 2008.
I hope you find these highlights useful. I will be posting a more detailed budget summary on my website in the next few days, http://www.assante.com/advisors/cball/ If you'd like to discuss these and other federal budget initiatives and how they affect your financial plan, please don't hesitate to contact me.
Chris
Source: United Financial Corporation, Government of Canada
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