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02-25-2009, 02:51 PM
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02-25-2009, 02:59 PM
#6484
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Taxation and what it means to you!!!
On January 27th, 2009, Finance Minister James Flaherty presented the 2009 Federal Budget which contains several measures of interest to Investors Group and its clients. This summary contains highlights of these proposals, which are not yet law. Clients should contact their Investors Group Consultant for information on how these proposals may affect their financial plans.
Changes Impacting Individuals
Personal Tax Measures
Increase to the Basic Personal, Spousal and Eligible Dependant Amounts
The basic personal amount, the spousal and common-law partner amount, and the eligible dependant amount increased from $9,600 in 2008 to $10,100 for 2009. The Budget proposes to further increase these amounts to $10,320 for the 2009 taxation year.
While the basic personal amount is not income tested, the spousal or common-law partner and dependant amounts are reduced by the net income of the spouse, common-law partner or dependant on a dollar for dollar basis.
Increase to Income Tax Brackets
Although no changes were announced to personal tax rates, the Budget proposes to increase the two lowest personal income tax brackets for 2009 beyond previously announced increases (which were based on inflation in 2008). The current and proposed tax brackets for 2009 are:
Tax Rate Tax Brackets
2008
Actual 2009
Current Proposed
15% Up to $37,885 Up to $38,832 Up to $40,726
22% $37,886 - $75,769 $38,833 - $77,664 $40,727 - $81,452
26% $75,770 - $123,184 $77,665 - $126,264 $81,453 - $126,264
29% Over $123,184 Over $126,264 Over $126,264
The bracket thresholds will continue to be indexed to account for inflation for 2010 and future years.
Increase to the Age Credit
The age credit provides a non-refundable tax credit for individuals who are 65 years of age or older. The credit is calculated by multiplying the lowest personal tax rate (currently 15%) by an amount that is indexed on an annual basis. The Budget proposes to increase the amount upon which the age credit is calculated from $5,408 to $6,408 for 2009, with indexation of this amount continuing in future years.
The net income level at which the age credit begins to be phased out at a rate of 15% remains unchanged at $32,312. With the proposed increase in the credit amount, the income level at which the credit will be fully phased out will increase from $68,365 to $75,032.
Home Ownership
Home Renovation Tax Credit
The Budget proposes a temporary Home Renovation Tax Credit (HRTC), which will provide a 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed on the 2009 tax return for the portion of eligible expenditures that exceeds $1,000 but is less than $10,000, and will provide up to $1,350 in tax relief (i.e., 15% multiplied by ($10,000 minus $1,000)).
Family members will be subject to a single limit based on their pooled expenditures. For this purpose, a family will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who were, throughout 2009, under the age of 18 years. Eligible dwellings are generally restricted to personal-use homes including houses, cottages, and condominium units.
Expenditures eligible for the HRTC
The HRTC is generally restricted to enduring renovations and alterations. Individuals will need to keep receipts for all expenditures.
Certain expenditures will generally be considered eligible, including renovating a kitchen, bathroom or basement, purchasing new carpet, hardwood floors, a new furnace or water heater, building an addition, deck, fence or retaining wall, painting the interior or exterior of a house, resurfacing a driveway, or laying new sod. Most costs associated with such projects will be eligible for the credit, including the cost of labour and professional services, permits, building materials, fixtures, equipment rentals and incidental expenses.
However, certain expenditures will generally be considered ineligible, including the cost of routine repairs and maintenance normally performed on an annual or more frequent basis, carpet cleaning, financing costs associated with a renovation (e.g. mortgage interest costs), the purchase of furniture and appliances (e.g. a refrigerator, stove or couch), audio-visual electronics, tools or construction equipment or maintenance contracts such as furnace cleaning, snow removal, lawn care and pool cleaning.
RSP Home Buyers Plan
The Home Buyers Plan (HBP) allows the owner of a registered retirement savings plan (RRSP) to withdraw amounts from their RRSP on a tax-free basis to purchase or build a home. The maximum amount that can currently be withdrawn from an eligible persons RRSP under the HBP is $20,000. The Budget proposes that this withdrawal limit be increased to $25,000 with respect to withdrawals made after January 27, 2009.
In order to be eligible to use the HBP, the RRSP owner must be considered to be a first-time home buyer. You are not considered to be a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence. (Special rules apply where the home is being acquired for the needs of a disabled person.) An HBP participant must repay amounts that were withdrawn under the HBP to his or her RRSP over a 15-year period, or the unpaid amounts will be included in his or her taxable income.
First-Time Home Buyers Tax Credit
The Budget proposes a new non-refundable tax credit for first-time home buyers who acquire a qualifying home after January 27, 2009. (The closing date for the purchase of the home must be after that date in order for the tax credit to be available.) The amount upon which the tax credit is calculated is $5,000, multiplied by the lowest personal income tax rate for the year (15%). The First-Time Home Buyers Tax Credit may be claimed in the year in which the home is acquired.
A qualifying home is a home that is eligible under the Home Buyers Plan, and which the person or the persons spouse or common-law partner intends to occupy as their principal place of residence not later than one year after the acquisition.
This new tax credit will also be available for the acquisition of a home acquired after January 27, 2009 either by an individual who is eligible for the Disability Tax Credit (DTC) or by an individual for the benefit of a relative who is eligible for the DTC. The home must be acquired to enable the DTC-eligible individual to live in a more accessible dwelling or in an environment better suited to the persons needs.
The First-Time Home Buyers Tax Credit may be claimed either by the person who acquired the home or by his or her spouse or common-law partner. If a qualifying home is purchased jointly, the total amounts claimed by the couple cannot exceed the credit that could be claimed if only one individual had acquired the home.
Other Changes Impacting Individuals
National Child Benefit Supplement and Canada Child Tax Benefit
The Budget proposes to increase by $1,894 the amount of income that families may earn before the National Child Benefit Supplement (NCBS) is fully phased out, or before the Canada Child Tax Benefit (CCTB) begins to be phased out. Specifically, for the 200910 benefit year, the income level at which the phase-out of the CCTB begins will increase to $40,726 (based on combined family income), and the income level at which the phase-out of the NCBS begins will increase by $1,894 such that it is completely phased out by $40,726 for the majority of families. This change is proposed to take effect for the 2009-10 benefit year, which begins in July 2009.
RRSP and RRIF Losses after Death
Upon the death of the owner of an RRSP or a RRIF, normally the fair market value of the registered account at the date of death is included in the deceaseds income for the year of death. Any increase in the value of the RRSP or RRIF assets from the date of death to the date that the assets are distributed is taxable to the beneficiaries. However, there is no provision under the Income Tax Act to recognize a decrease in value of the RRSP or RRIF assets that occurs after the date of death to the date the assets are distributed.
The Budget proposes that, upon the final distribution of the RRSP or RRIF assets, the amount of any post-death decrease in the value of the RRSP or RRIF assets may be carried back and deducted against the RRSP or RRIF amount that was reported as income on the final tax return of the deceased. The amount that can be carried back as a deduction is equal to the difference between the fair market value of the RRSP or RRIF at the date of death and the total amounts paid out of the RRSP or RRIF after the death of the RRSP/RRIF owner.
This measure will apply with respect to a deceased persons RRSP or RRIF where the final distribution from the RRSP or RRIF occurs after 2008.
Extended Employment Insurance Benefits
The Budget proposes to:
Freeze Employment Insurance (EI) employee premium rates for 2010 at $1.73, the same rate as 2009; and
Increase all regular EI benefit entitlements by five extra weeks to a maximum of 50 weeks for the next two years.
Confirmation Regarding Re-Contribution of RRIF Minimums
In the November 27, 2008 Economic Statement, the Minister of Finance proposed that the minimum annual payout for 2008 applicable to a RRIF owner would be reduced by 25%. The proposal would allow a RRIF owner who had made a withdrawal from the RRIF in 2008 to re-contribute up to 25% of the "normal" RRIF minimum to a RRIF or to an RRSP (subject to age restrictions) and be able to claim a tax deduction for this re-payment amount. In the 2009 Budget, the federal government has confirmed its intention to proceed with the introduction of legislation to enact these proposals.
Changes Impacting Small Businesses
Small Business Limit
The Budget proposes to increase the small business limit from $400,000 to $500,000 as of January 1, 2009. The increase in the limit will be pro-rated for corporations with taxation years that do not coincide with the calendar year. The small business limit reduces the federal corporate income tax rate on qualifying active business income of a Canadian-controlled private corporation to 11% down from 19%.
Accelerated Capital Cost Allowance
Manufacturing and Processing
The Budget proposes to extend the 50% straight-line accelerated capital cost allowance (CCA) rate for eligible assets for two more years to include 2010 and 2011. The half-year rule will apply to manufacturing and processing assets subject to this measure.
Computers
The Budget proposes a temporary 100% CCA rate for eligible computers and software acquired after January 27, 2009 and before February 2011, an increase from the current rate of 55%. These items will not be subject to the half-year rule, so a business can fully deduct the cost of an eligible computer and the systems software in the first year.
Electronic Filing and Penalties
The Budget proposes that corporations with annual gross revenues in excess of $1 million for a taxation year be required to file their income tax returns for the year in electronic format. This change will apply for taxation years that end after 2009.
The Budget proposes to introduce a penalty for filing a corporate income tax return in an incorrect format, although no penalties will be introduced until 2011.
This report specifically written and published by Investors Group is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal or tax advice. Clients should discuss their situation with their Consultant for advice based on their specific circumstances.
Special Budget Edition: Taxation Update
Changes Impacting Individuals
Personal Tax Measures
Increase to the Basic Personal, Spousal and Eligible Dependant Amounts
The basic personal amount, the spousal and common-law partner amount, and the eligible dependant amount increased from $9,600 in 2008 to $10,100 for 2009. The Budget proposes to further increase these amounts to $10,320 for the 2009 taxation year.
While the basic personal amount is not income tested, the spousal or common-law partner and dependant amounts are reduced by the net income of the spouse, common-law partner or dependant on a dollar for dollar basis.
Increase to Income Tax Brackets
Although no changes were announced to personal tax rates, the Budget proposes to increase the two lowest personal income tax brackets for 2009 beyond previously announced increases (which were based on inflation in 2008). The current and proposed tax brackets for 2009 are:
Tax Rate Tax Brackets
2008
Actual 2009
Current Proposed
15% Up to $37,885 Up to $38,832 Up to $40,726
22% $37,886 - $75,769 $38,833 - $77,664 $40,727 - $81,452
26% $75,770 - $123,184 $77,665 - $126,264 $81,453 - $126,264
29% Over $123,184 Over $126,264 Over $126,264
The bracket thresholds will continue to be indexed to account for inflation for 2010 and future years.
Increase to the Age Credit
The age credit provides a non-refundable tax credit for individuals who are 65 years of age or older. The credit is calculated by multiplying the lowest personal tax rate (currently 15%) by an amount that is indexed on an annual basis. The Budget proposes to increase the amount upon which the age credit is calculated from $5,408 to $6,408 for 2009, with indexation of this amount continuing in future years.
The net income level at which the age credit begins to be phased out at a rate of 15% remains unchanged at $32,312. With the proposed increase in the credit amount, the income level at which the credit will be fully phased out will increase from $68,365 to $75,032.
Home Ownership
Home Renovation Tax Credit
The Budget proposes a temporary Home Renovation Tax Credit (HRTC), which will provide a 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed on the 2009 tax return for the portion of eligible expenditures that exceeds $1,000 but is less than $10,000, and will provide up to $1,350 in tax relief (i.e., 15% multiplied by ($10,000 minus $1,000)).
Family members will be subject to a single limit based on their pooled expenditures. For this purpose, a family will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who were, throughout 2009, under the age of 18 years. Eligible dwellings are generally restricted to personal-use homes including houses, cottages, and condominium units.
Expenditures eligible for the HRTC
The HRTC is generally restricted to enduring renovations and alterations. Individuals will need to keep receipts for all expenditures.
Certain expenditures will generally be considered eligible, including renovating a kitchen, bathroom or basement, purchasing new carpet, hardwood floors, a new furnace or water heater, building an addition, deck, fence or retaining wall, painting the interior or exterior of a house, resurfacing a driveway, or laying new sod. Most costs associated with such projects will be eligible for the credit, including the cost of labour and professional services, permits, building materials, fixtures, equipment rentals and incidental expenses.
However, certain expenditures will generally be considered ineligible, including the cost of routine repairs and maintenance normally performed on an annual or more frequent basis, carpet cleaning, financing costs associated with a renovation (e.g. mortgage interest costs), the purchase of furniture and appliances (e.g. a refrigerator, stove or couch), audio-visual electronics, tools or construction equipment or maintenance contracts such as furnace cleaning, snow removal, lawn care and pool cleaning.
RSP Home Buyers Plan
The Home Buyers Plan (HBP) allows the owner of a registered retirement savings plan (RRSP) to withdraw amounts from their RRSP on a tax-free basis to purchase or build a home. The maximum amount that can currently be withdrawn from an eligible persons RRSP under the HBP is $20,000. The Budget proposes that this withdrawal limit be increased to $25,000 with respect to withdrawals made after January 27, 2009.
In order to be eligible to use the HBP, the RRSP owner must be considered to be a first-time home buyer. You are not considered to be a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence. (Special rules apply where the home is being acquired for the needs of a disabled person.) An HBP participant must repay amounts that were withdrawn under the HBP to his or her RRSP over a 15-year period, or the unpaid amounts will be included in his or her taxable income.
First-Time Home Buyers Tax Credit
The Budget proposes a new non-refundable tax credit for first-time home buyers who acquire a qualifying home after January 27, 2009. (The closing date for the purchase of the home must be after that date in order for the tax credit to be available.) The amount upon which the tax credit is calculated is $5,000, multiplied by the lowest personal income tax rate for the year (15%). The First-Time Home Buyers Tax Credit may be claimed in the year in which the home is acquired.
A qualifying home is a home that is eligible under the Home Buyers Plan, and which the person or the persons spouse or common-law partner intends to occupy as their principal place of residence not later than one year after the acquisition.
This new tax credit will also be available for the acquisition of a home acquired after January 27, 2009 either by an individual who is eligible for the Disability Tax Credit (DTC) or by an individual for the benefit of a relative who is eligible for the DTC. The home must be acquired to enable the DTC-eligible individual to live in a more accessible dwelling or in an environment better suited to the persons needs.
The First-Time Home Buyers Tax Credit may be claimed either by the person who acquired the home or by his or her spouse or common-law partner. If a qualifying home is purchased jointly, the total amounts claimed by the couple cannot exceed the credit that could be claimed if only one individual had acquired the home.
Other Changes Impacting Individuals
National Child Benefit Supplement and Canada Child Tax Benefit
The Budget proposes to increase by $1,894 the amount of income that families may earn before the National Child Benefit Supplement (NCBS) is fully phased out, or before the Canada Child Tax Benefit (CCTB) begins to be phased out. Specifically, for the 200910 benefit year, the income level at which the phase-out of the CCTB begins will increase to $40,726 (based on combined family income), and the income level at which the phase-out of the NCBS begins will increase by $1,894 such that it is completely phased out by $40,726 for the majority of families. This change is proposed to take effect for the 2009-10 benefit year, which begins in July 2009.
RRSP and RRIF Losses after Death
Upon the death of the owner of an RRSP or a RRIF, normally the fair market value of the registered account at the date of death is included in the deceaseds income for the year of death. Any increase in the value of the RRSP or RRIF assets from the date of death to the date that the assets are distributed is taxable to the beneficiaries. However, there is no provision under the Income Tax Act to recognize a decrease in value of the RRSP or RRIF assets that occurs after the date of death to the date the assets are distributed.
The Budget proposes that, upon the final distribution of the RRSP or RRIF assets, the amount of any post-death decrease in the value of the RRSP or RRIF assets may be carried back and deducted against the RRSP or RRIF amount that was reported as income on the final tax return of the deceased. The amount that can be carried back as a deduction is equal to the difference between the fair market value of the RRSP or RRIF at the date of death and the total amounts paid out of the RRSP or RRIF after the death of the RRSP/RRIF owner.
This measure will apply with respect to a deceased persons RRSP or RRIF where the final distribution from the RRSP or RRIF occurs after 2008.
Extended Employment Insurance Benefits
The Budget proposes to:
Freeze Employment Insurance (EI) employee premium rates for 2010 at $1.73, the same rate as 2009; and
Increase all regular EI benefit entitlements by five extra weeks to a maximum of 50 weeks for the next two years.
Confirmation Regarding Re-Contribution of RRIF Minimums
In the November 27, 2008 Economic Statement, the Minister of Finance proposed that the minimum annual payout for 2008 applicable to a RRIF owner would be reduced by 25%. The proposal would allow a RRIF owner who had made a withdrawal from the RRIF in 2008 to re-contribute up to 25% of the "normal" RRIF minimum to a RRIF or to an RRSP (subject to age restrictions) and be able to claim a tax deduction for this re-payment amount. In the 2009 Budget, the federal government has confirmed its intention to proceed with the introduction of legislation to enact these proposals.
Changes Impacting Small Businesses
Small Business Limit
The Budget proposes to increase the small business limit from $400,000 to $500,000 as of January 1, 2009. The increase in the limit will be pro-rated for corporations with taxation years that do not coincide with the calendar year. The small business limit reduces the federal corporate income tax rate on qualifying active business income of a Canadian-controlled private corporation to 11% down from 19%.
Accelerated Capital Cost Allowance
Manufacturing and Processing
The Budget proposes to extend the 50% straight-line accelerated capital cost allowance (CCA) rate for eligible assets for two more years to include 2010 and 2011. The half-year rule will apply to manufacturing and processing assets subject to this measure.
Computers
The Budget proposes a temporary 100% CCA rate for eligible computers and software acquired after January 27, 2009 and before February 2011, an increase from the current rate of 55%. These items will not be subject to the half-year rule, so a business can fully deduct the cost of an eligible computer and the systems software in the first year.
Electronic Filing and Penalties
The Budget proposes that corporations with annual gross revenues in excess of $1 million for a taxation year be required to file their income tax returns for the year in electronic format. This change will apply for taxation years that end after 2009.
The Budget proposes to introduce a penalty for filing a corporate income tax return in an incorrect format, although no penalties will be introduced until 2011.
This report specifically written and published by Investors Group is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal or tax advice. Clients should discuss their situation with their Consultant for advice based on their specific circumstances.
Special Budget Edition: Taxation Update
02-25-2009, 04:14 PM
#6485
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Join Date: 03-01-07
Location: Calgary/Fort McMurray, Alberta, Canada
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"Home Renovation Tax Credit
The Budget proposes a temporary Home Renovation Tax Credit (HRTC), which will provide a 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed on the 2009 tax return for the portion of eligible expenditures that exceeds $1,000 but is less than $10,000, and will provide up to $1,350 in tax relief (i.e., 15% multiplied by ($10,000 minus $1,000)).
Family members will be subject to a single limit based on their pooled expenditures. For this purpose, a family will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who were, throughout 2009, under the age of 18 years. Eligible dwellings are generally restricted to personal-use homes including houses, cottages, and condominium units.
Expenditures eligible for the HRTC
The HRTC is generally restricted to enduring renovations and alterations. Individuals will need to keep receipts for all expenditures.
Certain expenditures will generally be considered eligible, including renovating a kitchen, bathroom or basement, purchasing new carpet, hardwood floors, a new furnace or water heater, building an addition, deck, fence or retaining wall, painting the interior or exterior of a house, resurfacing a driveway, or laying new sod. Most costs associated with such projects will be eligible for the credit, including the cost of labour and professional services, permits, building materials, fixtures, equipment rentals and incidental expenses.
However, certain expenditures will generally be considered ineligible, including the cost of routine repairs and maintenance normally performed on an annual or more frequent basis, carpet cleaning, financing costs associated with a renovation (e.g. mortgage interest costs), the purchase of furniture and appliances (e.g. a refrigerator, stove or couch), audio-visual electronics, tools or construction equipment or maintenance contracts such as furnace cleaning, snow removal, lawn care and pool cleaning."
Looks like I will be getting some extra cash back next year.
The Budget proposes a temporary Home Renovation Tax Credit (HRTC), which will provide a 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed on the 2009 tax return for the portion of eligible expenditures that exceeds $1,000 but is less than $10,000, and will provide up to $1,350 in tax relief (i.e., 15% multiplied by ($10,000 minus $1,000)).
Family members will be subject to a single limit based on their pooled expenditures. For this purpose, a family will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who were, throughout 2009, under the age of 18 years. Eligible dwellings are generally restricted to personal-use homes including houses, cottages, and condominium units.
Expenditures eligible for the HRTC
The HRTC is generally restricted to enduring renovations and alterations. Individuals will need to keep receipts for all expenditures.
Certain expenditures will generally be considered eligible, including renovating a kitchen, bathroom or basement, purchasing new carpet, hardwood floors, a new furnace or water heater, building an addition, deck, fence or retaining wall, painting the interior or exterior of a house, resurfacing a driveway, or laying new sod. Most costs associated with such projects will be eligible for the credit, including the cost of labour and professional services, permits, building materials, fixtures, equipment rentals and incidental expenses.
However, certain expenditures will generally be considered ineligible, including the cost of routine repairs and maintenance normally performed on an annual or more frequent basis, carpet cleaning, financing costs associated with a renovation (e.g. mortgage interest costs), the purchase of furniture and appliances (e.g. a refrigerator, stove or couch), audio-visual electronics, tools or construction equipment or maintenance contracts such as furnace cleaning, snow removal, lawn care and pool cleaning."
Looks like I will be getting some extra cash back next year.
02-25-2009, 08:48 PM
#6490
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02-25-2009, 09:44 PM
#6498
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Bullshit indeed. It was just at the point where I thought spring might show too... Oh well hopefully this is it and then by April we can all put our summer tires back on.
02-25-2009, 09:50 PM
#6499
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02-25-2009, 11:02 PM
#6500
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I would hold off until at least April with putting the summer on. And even it if is just above 0 degrees C during the day, it is still below 0 at night and your summer tires will be useless in the cold weather, even if there is no snow on the ground.
But that is just my opinion.
I don't care about the snow....it is the -36C that bothers me. Damn cold won't go away!!