January 28, 2009

Federal Budget Review 2009

Personal Amounts and Income Tax Brackets
  • The federal basic personal amount (and the spousal, common-law partner and eligible dependant amounts) are scheduled to increase from $9,600 (in 2008) to $10,320.
  • The upper limit on the lowest federal personal income tax bracket (which taxes income at 15%) will increase from $37,885 (in 2008) to $40,726.
  • The upper limit on the second personal income tax bracket (which taxes income at 22%) will increase from $75,769 (in 2008) to $81,452.
Home Renovation Tax Credit
  • Effective after January 27, 2009, the government proposes to introduce a temporary non-refundable Home Renovation Tax Credit (HRTC) equal to 15% of eligible expenditures incurred in excess of $1,000 but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%).
  • The credit will only apply for the 2009 taxation year for work performed or goods acquired after January 27, 2009 and before February 1, 2010 but will not apply to expenditures made pursuant to agreements entered into before January 28, 2009.
  • Eligible expenditures qualify for the credit if they are incurred in relation to a renovation or alteration provided the work is of an enduring nature and is integral to an eligible dwelling.
  • Qualified expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits but would not include regular maintenance and repairs, appliances or financing costs, for example.
Home Buyer’s Plan and the First Time Home Buyers Credit
  • After January 27, 2009, the amount that an eligible first time home buyer will be able to withdraw tax-free from an RRSP to help finance the purchase of a home will increase from $20,000 to $25,000.
  • The budget also proposes a new non-refundable tax credit for first time home buyers who acquire a qualifying home after January 27, 2009. The credit is equal to $5,000 multiplied by the lowest personal income tax rate for the year (15% for a maximum of $750 in 2009) and is claimable for the taxation year in which the home is acquired.
The Working Income Tax Benefit (WITB)
  • The WITB originated in 2007 to provide tax relief for low income individuals and families who have earned income from employment or business. The budget proposes (after further consultations) to enhance the assistance provided by the Working Income Tax Benefit effectively doubling the amount of total tax relief provided. In addition, the budget proposes to increase the levels at which Child Tax Benefits for low income families are phased out.
Age Credit
  • The budget proposed to increase the Age credit (applicable to those aged 65 and over) by $1,000 to $6,408. The income level at which this credit is fully phased out will increase to $75,032 (from $68,365).