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Changes in the Federal Government’s January 2009 budget will help a broad cross-section of Canadians keep more money in their pockets. That’s welcome news amidst the market turmoil we’ve felt over the past year, though most of the savings won’t be realized until 2010 when you file your 2009 tax return.

Here are the most important highlights of some of the changes affecting individuals that in 2009 Federal Budget: however, some of these changes have not yet passed into law. If you want to learn more about how any of these changes may apply to your personal situation, contact your financial advisor for advice and guidance.

Increase in the Basic Personal, Spousal, and Eligible Dependant Amounts –These amounts which were $9,600 in 2008, will all increase from the previously announced $10,100 to $10,320 for the 2009 Taxation Year.

Increase in the Income Tax Brackets – The maximum threshold of the two lowest personal income tax brackets for 2009 will be raised. This increases the income levels at which income testing begins for the base benefit under the Canada Child Tax Credit and the National Child Benefit supplement The current and new tax brackets for 2009 are:


Previous 2009 Revised

15% Up to $38,832 Up to $40,726

22% $38,833 to 77,464 $40,727 to 81,452

26% $77,665 to 126,264 $81,453 to 126,264

29% over $126,264 over $126,264

Age Credit Increase – The amount of age credit that can be claimed by individuals over the age of 65 on their 2009 income tax return will increase. More Canadians will also be able to benefit from the credit as, thanks to the increased amount ($6,408), clawback at 15% starts at $32,312, the net income level at which the age credit is fully phased out will also increase from $68,365 to $75,032.

Home Renovation Tax Credit (HRTC) - This temporary credit will provide a 15% non-refundable income tax credit (maximum credit of $1,350) on certain home renovation expenses incurred after January 27, 2009 and before February 1, 2010. The credit may be claimed in the 2009 tax return for the portion of total eligible expenditure that exceeds $1,000 but are less than $10,000. There are a few limitations, so be sure to carefully review the details of the eligible renovations before you start your renovations.

RSP Home Buyers Plan (HBP) – the maximum withdrawal will increase from $20,000 to $25,000. The HBP allows first-time home buyers to make a withdrawal from their RRSP tax-free, provided that it is repaid within 15 years.

First-Time Home Buyers’ Tax Credit – First-time home buyers will be eligible for a new tax credit of up to $750 on homes acquired after January 27, 2009. This new tax credit will also be available to assist individuals eligible for the disability tax credit to purchase a home that is more accessible or better suited to their needs.

Extended Employment Insurance (EI) Benefits – Employee premium rates for 2010 will be frozen at $1.73 per $100 of insurable earnings; the same rate as 2009. Regular EI benefit entitlements will increase by five extra weeks to a maximum of 50 weeks for the next two years.

Re-Contribution of RRIF Minimums – Up to 25% of a RRIF owner’s 2008 RRIF minimum can be re-contributed to a RRIF (or to an RRSP if the RRIF owner has not yet reached the end of the year in which he or she turns 71). The deadline for the re-contribution was Tuesday April 14, 2009.

RRSPs and RRIFs at death – If there is a loss in value in an RRSP/RRIF after death but before the final distribution of the account, and the final distribution occurs in 2009 or later, then the decrease can be carried back to the deceased’s terminal return so that the deceased reports the lesser of the FMV at death and the FMV at distribution.

Small business limit – The small business limit is increased from $400,000 to $500,000 as of January 1, 2009.

RDSP deadline – The deadline for 2008 Registered Disability Savings Plan contribution is officially extended to March 2, 2009.

This information is written for informational purposes only, and a not a solicitation to buy or sell a financial product. Consult your financial advisor on how these tax changes will affect your specific financial situation.