Personal Tax Update - What's New?
With the new year, it’s time to take a look at the
tax changes that may impact you in 2009. The
following is a summary of the more significant
federal tax changes to consider when preparing
your tax return this year as well as other significant
personal tax developments.
New Tax-Free Savings Account
for 2009
New for 2009, eligible individuals can now open up
a tax-free savings account. This new savings plan
was introduced in the 2008 budget and will allow
individuals to save for many purposes. For further
information, refer to our Tax Factor 08-02 article
titled “Answering Your Questions on the New
Tax-Free Savings Account”.
Registered Disability Savings Plans
Now Available
The Registered Disability Savings Plan (RDSP) was
introduced in the 2007 federal budget and became
available on a national basis in December of 2008.
The RDSP is a new plan to help parents and others
save for the long-term financial security of a child
with a disability. The RDSP will allow funds to be
invested tax-free until withdrawal.
In December, the government announced that
the deadline for opening an RDSP, making contributions and applying for the matching
RDSP Grant and income-tested Bond for the
2008 contribution year has been extended to
March 2, 2009 from December 31, 2008. The 2009
RDSP contribution year will begin March 3, 2009.
For further information on the RDSP, refer to our
Tax Factor 08-03 article titled “Tax Breaks for the
Physically and Mentally Challenged”.
2008 Personal T1 Tax Return
No Changes to Federal Tax Rate – The personal
federal tax rate for the lowest tax bracket (income
not exceeding $37,885 for 2008) has fluctuated
in past years. This year, however, there is no rate
change so the lowest tax bracket rate remains at
15% for 2008.
Basic and Spousal/Partner Personal Tax
Credits – The basic personal and the spousal/partner amounts for federal purposes remain at
$9,600 for the 2008 taxation year. A number of
other federal credit amounts have been indexed
by 1.9%. The actual federal tax credit is calculated
by multiplying the applicable amount by 15% for
2008. A number of corresponding provincial credits
have also increased due to inflation or specific tax
changes.
Medical Expense Tax Credit – The federal
medical expense tax credit recognizes the effect of above average specific medical and disability-related
expenses on an individual’s ability to pay
tax by providing relief equal to 15% of the eligible
medical and disability-related expenses in excess
of a threshold. Under changes proposed in the
2008 federal budget, which apply to 2008 and
subsequent years, the list of eligible expenses is
expanded to include amounts paid to purchase,
operate and maintain the following devices
prescribed by a medical practitioner: altered
auditory feedback devices for the treatment of a
speech disorder, electrotherapy devices for the
treatment of a medical condition or a severe
mobility impairment, standing devices for standing
therapy in the treatment of a severe mobility
impairment, and pressure pulse therapy devices
for the treatment of a balance disorder. Also, the
rules are extended to include costs associated with
service animals specially trained to assist
an individual who is severely affected by autism or epilepsy.
Registered Disability Savings Plan – Individuals
who received an income payment from a Registered Disability Savings Plan (RDSP) in
2008 (which is unlikely as RDSPs only became
available late in 2008) will receive a T4A slip and
are to report the income on their tax return. This
income is not included in the calculation for
GST/HST credit, Canadian Child Tax Benefit
payments, social benefits repayment, the
refundable medical expense supplement or
the Working Income Tax Benefit calculations.
Northern Residence Deduction – Individuals
who live in prescribed areas in northern Canada
on a permanent basis for at least six consecutive
months beginning or ending in a taxation year may
claim the northern residence deduction. For 2008
and subsequent years, the residency deduction has
been increased to $8.25 per day for those entitled
to only the basic residency amount, or $16.50 per
day for those entitled to both the basic and the
additional residency amounts.
Capital Gains and Donations – Exchangeable
Securities – When a taxpayer donates certain publicly-traded securities to a registered charity
or other qualified donee, the full value of the
security is eligible for a donation credit and any
gain on the security is exempt from capital gains
tax. This exemption has been extended to capital
gains realized on the exchange of certain unlisted
securities for publicly-traded securities when the
publicly-traded securities are then donated within
30 days of the exchange. This change applies to
donations made on or after February 26, 2008.
This exemption may also apply in cases where the
exchanged property is a partnership interest (other
than certain prescribed interests).
Carry-forward Period for Investment Tax
Credits Extended – The carry-forward period for investment tax credits earned after 1997 and before
2006 was extended to 20 years from 10 years.
New Scientific Research & Experimental
Development (SR&ED) Form – A new SR&ED
form (Form T661) was issued by the CRA in
November. For further details, refer to our Fast Facts
08-04 titled “The New SR&ED Claim Form - A Story
in Words”.
Mineral Exploration Tax Credit – The mineral
exploration tax credit is available to individuals who invest in flow-through shares and is equal to
15% of the specified mineral exploration expenses
incurred in Canada and renounced to individual
investors. This temporary credit was scheduled to
expire at the end of March 2008, but the deadline
was extended in last year’s budget and again this
year.
If you need more information on these changes or have any
questions about how these changes may impact your 2008
tax return, contact your BDO advisor.
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