Tax Brackets, Credits Higher
The taxable income thresholds in all four federal tax brackets were increased by 2.5 per cent in 2009 to mirror changes in the consumer-price index (CPI). All indexed non-refundable tax credits also increased by 2.5 per cent in 2009 in order to reflect the CPI adjustment.
Increases in the thresholds for the lower and middle-income tax brackets will positively affect the Canada child tax benefit, child disability benefit, and national child benefit supplement. The 2009 federal budget also increased the basic personal, spousal and eligible dependant amounts beyond to $10,320.
Homebuyers, Owners Win
First-time homebuyers who purchase a qualifying home on or after January 28, 2009 are eligible for a non-refundable tax credit of up to 15 per cent on $5,000, or $750.
First-time homebuyers can also withdraw, without tax consequences, a maximum of $25,000 from their registered retirement savings plan (RRSP). This is an increase from the previous limit of $20,000 commenced on January 28, 2009.
The new Temporary Home Renovation Tax Credit provides a temporary home renovation tax credit to homeowners of 15 per cent on eligible expenditures in excess of $1,000 and up to $10,000. The credit, worth up to a maximum $1,350, applies to work performed or goods acquired in relation to certain home (including cottage) renovations of an enduring nature incurred between January 28, 2009 and January 31, 2010, inclusive.
Savers received a gift in 2009 with the introduction of the new tax-free savings account (TFSA). The TFSA allows Canadians who are 18 and older to save up to $5,000 per year in the TFSA investment vehicle.
The annual RRSP contribution ceiling was also increased in 2009 to $21,000 and is scheduled to rise again in 2010. Registered pension plan (RPP) contribution limits increased in 2009 to $22,000 and will be indexed annually to account for average wage growth.
For more information you can reference the 2009-10 Personal Tax Planning Guide online at www.cga-ontario.org/Publications/Information_Booklets.aspx.