Budget Deficit
The Financialist • Issue 101 • April 2009
BY CHRIS EYNON CFP FMA CSA
Finance Minister Jim Flaherty’s federal budget had no real blockbuster initiatives; rather, it featured a range of measures widely anticipated to stimulate economic growth and help Canadians weather the global recession. The proposed initiatives are designed to help strengthen our financial system by stimulating spending, reducing taxes, promoting house purchases and construction, and building Canadian infrastructure.
This will be the first budget to have a deficit in over a decade. Canada has been a global leader in terms of debt reduction and this budget is a drastic change from what we, as Canadians, have become accustomed to. It is predicted that we will have a $1.1 billion deficit for this fiscal year. That will increase to: $33.7 billion for 2009-2010, $29.8 for 2010-2011, $1.3 billion in 2011-2012, and $7.3 billion in 2012-2013. The good news is that the government has the intention of returning to a budget surplus in fiscal 2013-2014.
The 2009 federal budget has some specific initiatives that may affect your financial plan and perhaps present some additional opportunities. The following is a list of proposed items that we think will be of interest to you.
PERSONAL EXEMPTION AMOUNTS
AND INCOME TAX BRACKETS
The budget has proposed an increase in the basic personal amount from $9,600 in 2008 to $10,320 for 2009. The first personal income tax bracket (15% income tax rate) will rise from $37,885 in 2008 to $40,726 in 2009. The second personal income tax bracket (22% income tax rate) will rise from $75,769 in 2008 to $81,425 in 2009. These increased amounts and brackets will be indexed for inflation in 2010 and following years.
AGE CREDIT
In 2009, the senior age credit will be increased by $1,000 to $6,408, which will create potential additional tax relief of $150 per senior.
RRSP/RRIF LOSSES AFTER DEATH
There will be income tax provisions to take into consideration market value losses after the death of the annuitant prior to distribution to the beneficiaries.
FIRST TIME HOME BUYERS’ TAX CREDIT
There will be a new non-refundable $5,000 tax credit for eligible first-time home buyers who purchase or build a home after January 27, 2009.
RRSP HOME BUYERS’ PLAN
Currently, eligible first-time home buyers are each allowed to withdraw up to $20,000 from their RRSP to buy or build a home without having to pay tax on the withdrawal. This budget proposes to raise this limit to $25,000 for homes bought after January 27, 2009.
HOME RENOVATION TAX CREDIT
This is a new credit that is anticipated to be short-lived. If you renovate your home between January 28, 2009 and February 1, 2010, you will be able to apply for a tax credit for the amount of expenditures in excess of $1,000 but not more than $10,000. This will create a maximum tax credit of $1,350 per family.
SMALL BUSINESS LIMIT
In order to direct some tax relief to small businesses in Canada, the budget has proposed that the “small business limit” be increased to $500,000 as of January 1, 2009.
If you have questions about these proposed measures or would like some specific advice on how you can make the most of the proposed changes, please contact your Rogers Group Financial advisor.