Tax updates from federal budget

By Fin MacDonald, Fin Tax Service

Fin MacDonald has over 20 years’ experience providing retirement and income tax planning advise. Readers are, however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.

Not a lot of surprises in Federal Finance Minister Joe Oliver’s April 21^st budget. Let’s review the major changes.

Tax Free Savings Account (TFSA) Limit Raised

This had been widely expected, it was in the details that it was a little different. It had been thought that the annual contribution room would double to $11,000; Mr Oliver raised it to $10,000. If you have never contributed to a TFSA, and were at least 18 years of age in 2009, you now have total contribution room of $41,000 for 2015; this will grow to $51,000 for 2016.

The raise in TFSA contribution room caused one reporter to ask Mr Oliver if there would come a time when no investments would be taxable. This led to the memorable and flippant response: “ that would be a problem for Prime Minister Harper’s grand-daughter.”

Registered Retirement Income Fund (RRIF) Minimum Withdrawls Slashed

I wrote in the last issue of The Beacon of the campaign to reduce or eliminate the minimum RRIF withdrawls that are required to be made, commencing at age 72. I was skeptical of this because of the large hit this would mean to the Federal Bottom Line; Mr Oliver did make major reductions in the required minimum withdrawls. For example if you have $100,000 in your RRIF and have just turned 72 under the old rules you would have been required to take into your taxable income a minimum of $7,480 – this amount has been lowered to $5,400. As people age, the minimum annual withdrawls increase to reach – at age 95 – the maximum of 20%.

If you had already been paid the then minimum amount from your RRIF before the budget, you may re-deposit that amount before February 29, 2016. To follow from the example above, if you were 72 this year and had withdrawn $7,480. you may now repay up to $2,080 to your RRIF.

Other Changes

For 2016 a “Home Accessibility Tax Credit” of up to $10,000 of renovations to make a dwelling more accessible was bruited. This would allow a senior or a person with the Disability Tax Credit to make major renovations and recover some of the costs – but only if they were taxable.

Reductions in the penalty for repeatedly not reporting income were announced. A look at the final version of what may be passed will tell if this is news. Many older tax-filers lose track of, and are penalized for non-reporting of income. Will this help?

Next Time

Next issue I’m going to look at the proposals for tax change the federal parties may bring forward for the fall election.