Age Credit rises for seniors
Seniors aged 65 or more will benefit from a $1,000 increase in the Age Credit, which rises from $5,408 to $6,408. That translates into another $150 in tax savings, Ms. O’Hagan says, which is $1,000 multiplied by the 15% lowest tax rate. However, this credit is income tested and begins to be clawed back once $32,312 of income is coming in. The amount at which the credit is totally phased out has been raised to $75,022, up $6,600 from the previous $68,365.
Susan Eng, vice president of advocacy for CARP, says the budget did not give seniors the hoped-for two-year moratorium on minimum withdrawals from Registered Retirement Income Funds (RRIFs), although it does stand by the previously announced 25% reduction in the minimum RRIF withdrawals required for the 2008 tax year.
RRIF losses after death
But CIBC Wealth Management’s managing director of tax Jamie Golombek describes as “huge” a budget measure that concerns RRSP or RRIF losses after death. Budget 2009 proposes that the amount of post-death decreases in value of these plans to be carried back and deducted against the income included in the year of death. Even so, Ms. Eng say, “there is little in this budget to address the anxiety facing Canadians who have watched their retirement savings vaporize in the current market chaos.”
Relief for home buyers and renovators
The other major pieces of tax relief are addressed at prospective and existing home buyers. The budget is raising the amount that first-time home buyers can withdraw from an RRSP to $25,000 from the previous $20,000. And first-time home buyers will also benefit from a new non-refundable tax credit of $5,000 for qualified homes that close after January 27, 2009. That $5,000 equates to $750 in tax savings, Ms. O’Hagan calculates.
Those who already homes will benefit from a temporary Home Renovation Tax Credit (HRTC), worth 15% on home renovation projects between $1,000 and $10,000. O’Hagan says this is worth up to $1,350 on a $10,000 project, which is 15% of $9,000. Note that this is a short-term stimulus that applies on work performed or goods acquired after Budget Day and before Feb. 1, 2010. It’s a non-refundable tax credit, which means it can reduce taxes payable but there is no refund if your taxes are reduced below zero.
