The 2009 Federal Budget was presented on January 27, 2009 and subsequently passed by Parliament.  With the tax filing deadline of April 30 (for most of us) now looming on the horizon let’s discuss what’s in this budget that could affect us in 2009.

The tax relief in the budget is aimed at low and middle income taxpayers by indexing the basic personal amount and the two lowest income brackets by 7.5% for fiscal 2009. The impact of these measures:

• The basic personal deduction, spousal and common-law partner amount and the eligible dependant amount increase from $9,600 in 2008 to $10,320 in 2009.
• The upper limit of the first personal income tax bracket (15% income tax rate) increases from $37, 885 in 2008 to $40,726 in 2009.
• The upper limit of the second income tax bracket (22% income tax rate) increases from $75,796 in 2008 to $81,452 in 2009.

This means a federal tax relief for a wage earner making $50,000/yr of approximately $307.

The Age Credit, which is available to those over the age of 65, will increase by $1,000 in 2009 to $6,408. The Age Credit begins to get phased out by a rate of 15% on income over $32,312. The income level at which the Age Credit is fully phased out increases $6,600 from $68,365 to $75,032.  For those with income under $32,312, this translates to $150 in federal tax relief.

Note: any unused portion of the Age Credit can be transferred to an individual’s spouse or common-law partner.

Another measure directed at seniors is to reduce the minimum RRIF withdrawal for 2008 by 25%. This is a one-time relief for the 2008 recognizing the impact of market conditions on retirement savings.

Next week we will look at a number of measures in the budget intended to encourage home ownership and construction. 

The information contained in this article was obtained from sources believed to be reliable; however we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and it should not be considered personal investment or taxation advice.  We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax related matters. The views expressed are those of the author and not necessarily those of Credential Asset Management, Inc.

March 11, 2009