The federal budget was recently introduced and covers a wide range of topics. The problem is that many individuals can’t work their way through the jargon to find out how it will affect them personally, and this is of great concern as the federal budget does work its way down to the average home. Following are some scenarios of average Canadians and what they can expect with the changes that are coming.
A single person with no children who rents rather than owns and makes $55,000 year may benefit from the changes that are upcoming. If he or she puts money into the annual tax free savings account (TFSA), they will benefit from the increases that were just announced. In fact, adding to this account will be of more benefit than contributing to the RRSP. This allows the individual to save their money without being taxed on it. In addition, if money needs to be withdrawn from the TFSA, there are no income-tested clawbacks to be concerned about.
Couples who own property and have a combined income of $100,000, but have no children, will find the budget doesn’t impact them much. They have a pension plan and can use the new TFSA limits to help them. They may use this money to save up for when they have a child or they may opt to put money aside for a new residence. The choice is up to them, but this is basically the only way the budget will have any effect on their lives.
Those in a similar situation who have children may find they currently struggle to make ends meet. This is not uncommon, and last fall’s Family Tax Cut benefited them in a variety of ways. They will find this budget does the same. First and foremost, business owners who fall into this category will find they can save more under the new budget, if they keep the funds in the business. Another option is to incorporate the business and become an employee of the newly founded company. Doing so allows for income splitting and the associated tax credit.
Individuals who retire with money in the bank may find that their savings don’t go as far as they anticipated. Under the new budget, this will be less of a concern, as individuals learn they won’t be required to withdraw as much annually. The amount they are required to withdraw drops from 7.38 percent to 5.21 percent. As most in this situation aren’t earning seven percent interest, having to withdraw this much hurts them. The change can helps them to save thousands of dollars in taxes every year.
Moreover, seniors over the age of 65 find they will benefit from the Home Accessibility Tax Credit that was included in this year’s budget. A senior may now receive a 15 percent tax rebate when they make improvements to their home in order to make it more accessible. This rebate may be used on projects up to $10,000 and may also be used by caregivers who need to make similar improvements to their home and those who currently qualify for a disability tax credit. What makes this so helpful to individuals is the credit may be used in conjunction with the standard medical expenses credit, thus individuals are saving twice on the same project.
These are only a few of the many ways individuals will benefit under the new budget. There are sure to be numerous others. Individuals may find they wish to speak to a tax professional to ensure they aren’t paying more than they absolutely must. With numerous changes being made, saving money has become easier for many.