How is the 2015 Federal Budget affecting you?
The last federal budget before the election this fall has drawn the attention of different groups ranging from students to small business owners. As individual taxpayers, the following list summarizes some of the key changes that would likely affect you.Increasing Tax Free Savings Account (TFSA) Limit
- Increasing Tax Free Savings Account (TFSA) Limit.
Since 2009, the TFSA was introduced as a tool to encourage saving on a tax exempt basis. The TFSA limit started at $5,000 and was subject to inflation adjustment in $500 increments. In 2013, the TFSA limit was adjusted to $5,500. The 2015 budget proposes to increase the TFSA annual contribution limit to $10,000 from this year and on. The limit will no long be indexed to inflation. If you have not yet started a TFSA, you should have accumulated $41,000 of TFSA contribution room (assuming your age was 18 in 2009 and you meet other eligibility criteria). With the increased contribution room, you may want to review your saving strategy and utilize the TFSA.
- Increase in Lifetime Capital Gains Exemption on Qualified Farm and Fishing Properties
The current amount of lifetime capital gain exemption that each Canadian taxpayer is entitled to is $813,600, subject to annual indexation. The new budget proposes to increase the exemption to $1 million for capital gain from the sale of qualified farms or fishing property, while the exemption on qualified small business corporation shares will remain the same at $813,600. This will come into effect after Budget Day.
- Minimum RRIF Withdrawals
Currently, all Canadian taxpayers must convert their Registered Retirement Savings Plan (RRSP) into a Registered Retirement Income Fund (RRIF) by the end of the year when he or she reaches 71 years of age. The required minimum withdrawal amount is designed to provide a regular income payment for Canadians between the ages of 71 to 100. The proposed budget lowers the required minimum annual amount and allows taxpayers to preserve more of the RRIF assets as they age. If the new RRIF factors are successfully implemented, those who have already withdrawn more than the proposed reduced 2015 minimum amount will be permitted to re-contribute the excess back to their RRIF. Re-contributions will be permitted until February 29, 2016.
- Home Accessibility Tax Credit
The newly introduced tax credit will provide tax relief of 15% on up to $10,000 of eligible expenditures per calendar year per qualifying individual. A qualifying individual is someone who is age 65 or older at the end of the year and qualified for the Disability Tax Credit at any time during the year. Furthermore, an eligible individual, who is a common law partner, a spouse, or a family member of the qualifying individual and his or her spouse or partner, may also claim the Home Accessibility Tax Credit on behalf of the qualifying individual. More than one person can be making a claim for the eligible dwelling as long as it does not exceed $10,000. In order to be qualified as a Home Accessibility Tax Credit, the expenditure must be related to a renovation or alteration that allows the individual to gain access to or be more mobile or functional within the dwelling, or reduces the risk of harm to the individual in the dwelling. An example would be installing wheelchair ramps.
- Registered Disability Savings Plan – Legal Representation
The government introduced a rule that allowed a “qualified family member” (i.e. only the beneficiary’s parents, spouse or common law partner) to become the plan holder of a Registered Disability Savings Plan (RDSP) for an adult individual who may lack the capacity to enter into a contract in 2012. The measure was set up to be temporary until the end of 2016. The new budget proposes the rule to extend till the end of 2018 and the budget 2012 measure will not otherwise be changed. This is to provide more time for provinces and territories to streamline procedures for appointing a person to manage the affairs of an individual that lacks contractual capacity.
As a Canadian resident, it is very important to understand tax implications that may arise from the Budget. At Tax Doctors Canada we can help. We have extensive experience in handling Canadian and US tax matters.
Contact or call Tax Doctors Canada, an associate company of GTA Wealth Management Inc, toll free at 1 855 TAX DOCS (855 829 3627). For your investments, insurance, mortgage needs contact GTA Wealth Management Inc. Tax Doctors Canada offers a free initial consultation for all our services so do not hesitate in contacting us. Start saving on your income taxes now! We have four locations in Toronto, Mississauga and Markham to serve you.