Tuesday, January 27, 2009

2009 Federal Budget Highlights

 

January 27, 2009

 

PERSONAL TAX

 

Personal Amount

The basic personal, spouse and eligible dependant amount will be increased from the previous announced amount of $10,100 to $10,320.

Personal Tax Brackets

The lowest two income tax brackets will be increased to the following:

Federal tax rate – 15% taxable income range -          $0 -  $40,726

                               22% taxable income range - $40,727 - $ 81,452

Home Renovation Tax Credit

Individuals will be able to receive a 15% non-refundable tax credit for renovations made on a principal residence.  It will apply to expenditures exceeding $ 1,000 up to a maximum of  $10,000 resulting in a maximum credit of $1,350.  The expenditures must be made after the budget date and before February 1, 2010.

First-Time Home Buyers

The Home Buyer’s Plan allows first-time home buyers to withdraw amounts from their RRSP to purchase a home without paying tax on the withdraw.  The limit for these withdrawls made after the budget date will increase from $20,000 to $ 25,000.  These amounts are required to be repaid within 15 years.

An new non-refundable tax credit of $750 for first-time home buyers to be shared by the couple.

RRSP/RRIF Losses After Death

When the holder of a RRIF or RRSP dies, the entire value of the plan is added to the deceased’s final income tax return, assuming there is no surviving spouse or common-law partner.  If there is a decline in value from the date of death to the time the plan is distributed to the beneficiaries, the budget will now allow the loss to be carried back to the deceased’s final income tax return and deducted against the original RRSP/RRIF income reported. In the past, there was no tax benefit received for the loss.

SMALL BUSINESS TAX

Small Business Limit

The annual amount of active business income eligible for the low rate of income tax of 11% has been increased from $400,000 to $500,000 as of January 1, 2009.  The amount is pro-rated for corporations with taxation years that do not coincide with the calendar year.  As of the budget date the combined Federal and Ontario corporate tax rate is 16.5%.

Computer Equipment

Computer purchases made after budget date and before February 2011 will be subject to a 100% full deduction including the systems software, without any restrictions on a half-year rule.