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Seniors and affluent investors who were bracing for a hike in capital gains taxes or other attacks on investment income can breathe easy, at least for a few months as Ottawa monitors developments south of the border. And homeowners will be relieved to know that there was no move to end the capital gains exemption for principal residences.
Bye bye CSBs, hello electronic T-4s
Budget 2017 hikes a few sin taxes, imposes a sales tax on Uber and did eliminate some tax credits. Oh, and they killed Canada Savings Bonds! For full report, read this Globe & Mail summary. Or these 10 things you need to know. And Rob Carrick reviews ten ways the budget may affect our personal finances. (You may not be able to access the link if you’re not a G&M subscriber.) Among the points: the first-time donor’s super credit expires as planned in 2017, and Ottawa will review the use of private corporations by high earners to minimize taxes.Oh, and a 3-year pilot program that starts in 2018-2019 will make it easier for adults to qualify for Canada Student Loans and grants.
Cracking down on tax cheats
The Liberals also plan to crack down more on tax cheats, as the National Post reports here: Liberals double amount of money aimed at cracking down on tax cheats. The paper also carried this Canadian Press summary entitled Federal budget 2017: Liberals hope to get Canada ready for the future with budget aimed at ‘everyday folks.
Over at Maclean’s MoneySense’s Julie Cazzin and another writer provide a good summary of 21 ways the federal budget could hit your wallet. The public transit Tax credit bites the dust, EI premiums will rise, medical costs can now be claimed going back ten years, and a new Caregiver tax credit will replace three previous tax credits.
And for those who are anxiously preparing their 2016 taxes — as I was in the hours before 4 pm — the CRA hopes to introduce electronic T-4 slips for employers with sufficient privacy safeguards, hopefully downloadable to your tax preparation software.
Seniors don’t lose the Age Credit
Good news for seniors. In his pre-budget columns, National Post John Ivison raised the spectre of the budget eliminating the Age Credit, which gives seniors age 65 or over roughly $7,200 more to the tax-free zone that also includes the Basic Personal Amount and the $2,000 pension credit: almost $20K in total. As Ivison recaps in Thursday’s Post, the 5.2 million seniors who receive the Age Credit need not fret, at least yet, as he quipped: “No finance minister wants to be blamed for taking away money that might be the difference between a surf ’n’ turf dinner in Sarasota and the early bird special.” It must be tempting to the Liberals, though, since it costs the treasury $3.4 billion a year.
Tax planning for private corporations
For a more in-depth look into corporate tax measures, PwC Canada has a good summary here. Note in particular the opening section on tax planning for private corporations. While a full review of “tax fairness” has been postponed by the Liberals, an ominous portent is that legitimate income splitting by family members in small businesses may ultimately be attacked next time around: read the Globe & Mail’s article on this: Small businesses wary of new income-splitting rules in 2017 federal budget.
All in all, not a lot to fret about in the Liberals’ second budget. Apart from dodging a bullet on the seniors’ Age Credit, there was no move either up or down to adjusting the current $5,500 TFSA limit. And — while it wasn’t widely expected — the current dividend tax credit regime remains intact, meaning investors in many provinces can still earn $50,000 a year tax-free in dividend income, IF they have no other major sources of income (most do: either employment or pension income).
Mind you, as a wait-and-see-what-Trump-does budget, it’s possible the other shoe will drop before the year’s end but for now, Canadians can resume filing their 2016 taxes and not worry too much about the rules being changed in mid-stream as they plan their 2017 finances.
