2007 brought 2 Budgets with a mixed bag of goodies for taxpayers.
Lowest Federal tax rate reduced from 15.5% to 15%. Personal amount,
spouse amount and Age credit amount all increased; $2,000 per Child
claim introduced; claim for Public Transit passes improved; Children
Fitness claim introduced. For Seniors, income splitting introduced as
well as age limit to convert RRSP into RRIF increased from 69 to 71.
There were however, no changes in the tax rates other than mentioned
above – but income brackets thresholds have increased and federal
non-refundable credits have changed with indexation to inflation.
Items of general interest are summarized below for your reading
pleasure. For specific information, please discuss with your
accountant or call us. The revised federal tax and income bracket
thresholds are: 15.0% of taxable income up to $37,178; 22% from
$37,179 to $74,356; 26% from $74,357 to $120,886 and 29% exceeding
OHIP premiums which came into effect on July 1, 2004
remains the same for all taxpayers having taxable income above
$20,000 annually. The rates are: taxable income under $20,000 – Nil;
$20,000 to $36,000 - $300; $36,000 to $48,000 - $450; $48,000 to
$72,000 - $600; $72,000 to $200,000 - $750 and over $200,000 - $900.
Basic Property Tax for Seniors has is $625 – while maximum
property/sales tax credit for seniors is $1,125. Ontario income
bracket threshold and rates are: 6.05% of taxable income up to
$35,488; 9.15% from $35,489 to $70,976 and 11.16% exceeding $70,977.
FEDERAL NON-REFUNDABLE CREDITS
2007 budgets have improved them–some are
summarized here-2006 $ in brackets:
Basic Personal Amount - $9,600 ($8,839); Spousal/Eligible Dependent
–$9,600 ($7,505); Age Credit – $5,177 ($5,066); Disability amount –
$6,890 ($6,741); Caregiver Amount – $4,019 ($3,933); Infirm
dependent amount – $4,019 ($3,933).
Lump sum payments such as arbitration awards
(disability payment or spousal support for example) often resulted
in higher taxes paid during the year they were received. Individuals
who receive qualifying amount in excess of $3,000 after 1994,
Revenue Canada (CRA) will use a special method of computing tax if
it is advantageous to the taxpayers.
Refundable medical expense supplement
increased from $1000 to $1,022 for family net Income between
$2,984 and $43,067.
Other items of interest are listed below for
information and reading enjoyment of the taxpayers.
Maximum contribution limit for 2007 is $19,000;
Unused RRSP amount carried forward indefinitely. For other changes,
please contact us. How much to Buy? Call CRA to find
out how much RRSP you can buy; or look at your 2006 Assessment
Notice showing your RRSP Entitlement for the year 2007. Last day to
buy RRSP is (tentative) February 29, 2008 How much you can save
depends on your tax bracket – 4 Federal tax brackets – 15.0%; 22%,
26% & 29%. Do not forget Ontario tax rate also.
As a Rule of Thumb
if your income is under $37,000, RRSP
contributions will save you 20% on taxes. If your income is, for
example, $40,000, then buy at least $3,000 RRSP (assuming you have
the entitlement) to bring your income down to $37,000 to maximize on
tax saving by saving tax @ 31% on $3,000. Any excess RRSP will save
tax @ 20%. Similarly, if your income is $80,000 and your RRSP
entitlement is $20,000, buy only $6,000 to bring your taxable income
down to $74,000 and saving tax @ 39% on $6,000. Any excess RRSP over
$6,000 will save you tax @ 31% (assuming you have the entitlement).
Government has added another tax bracket in the middle of highest
and lowest. Call us for further details. All % numbers are
LABOUR-SPONSORED VENTURE CAPITAL CORPORATIONS
Commonly known as Working Venture Funds. These
investments are normally handled by brokerage firms and not by the
banks. LSVCC / Working Venture Funds (Labour Funds) are RRSP
eligible – RRSP contributions entitle you tax savings at the tax
rate that you are in. In addition, RRSP in working venture funds
entitles you to save another 30% on taxes payable which is offered
by both Federal and Ontario governments @ 15% each.
Holding time – years
8 Federal/Prov tax
credit 15% each = 30% Total
Max. $ Limit W/Venture Funds
$5,000 per year.
Tax Savings – Minimum
2,550 Your cost =
(All numbers are approximate)
- Maximum 3,508 Your cost =
HOME BUYERS’ PLAN/LIFELONG
This plan allows the taxpayers to withdraw from
their RRSP without tax penalty, upto $20,000 for each spouse to make
a down payment for purchase of a home ($40,000 per couple). There
are some conditions like First Home – that you return this money
back to your RRSP plan in equal payments over 15 years. Similarly
RRSP withdrawal for continuing education has to be repaid back into
RRSP plan. Payments are shown on your Assessment Notices. Check with
your real estate agent about waiting period for opening a new RRSP
plan and cashing it for down payment.
CHILD CARE EXPENSES
Childcare expenses allowed for children under 7
years of age is $7,000 and $4,000 for those over 7 years. Claim for
disabled child is up to $10,000. From time to time, CRA may ask you
to provide a receipt for such expenses. If an individual issued this
receipt, then it must contain the name, SIN number and the year
these expenses relate to. If the child attended a Day-Care
Centre, no SIN is required. Claim Child Fitness amount $500
if a child is registered in an approved fitness program.
REGISTERED EDUCATION SAVINGS PLANS – (RESP)
Federal government grant of 20% of contributions
towards an RESP with a revised maximum of $500.00 per year.
This grant, called CANADIAN EDUCATION SAVING GRANT (CESG)
will be invested directly into the Plan. This grant has a
lifetime limit of $7,200. This grant must be repaid to the
government if the student does not use the funds for education.
Federal Budget 2004 has enriched this plan. Effective January
1, 2005, the above will be increased by: 40% on the first $500 of
your contribution if your annual family income is less than $37,178;
or 30% on the first $500 of your contribution if your annual
family income is $37,178 to $74,356. For income over $74,357,
current 20% applies.
IMPROVED SAVINGS FOR CHILDREN’S EDUCATION
To assist lower-income taxpayers save towards
their children’s education, the Federal 2004 Budget
introduced a new “Canada Learning Bonds”. The government will
pay “CLB” of $500 into the RESP of children born in 2004 and
following years. An additional $100 will also be paid into their
RESP each year until the child turns 15. In order to receive this,
you must be entitled to the National Child Benefit component of the
Child Tax Credit.
For 2007, Child Tax Benefit is $1,283 per year for each child under
18. This benefit is reduced @ 2.0% for family net income in excess
of $37,178. In addition, National Child Benefit (NCB) of $1,988
annually is also available to low-income families. Ont. Govt. also
pitches in for Child Care Expenses for kids > 7 years.
PUBLIC TRANSIT PASSES (monthly/weekly)
amount can now be claimed on line 364 of your tax return.
EDUCATION – TUITION & BOOKS
Education amount to claim is $400 per month
($120/month for part-timers) in 2007 while claim for books is $65
per month ($20/month for part-timers). The maximum amount of Tuition
& Education amount transferable to spouse, parents or grandparents
is $5,000. Students are allowed to carryover unused amount to be
used in future years (Sorry Mom & Dad). Remember - Interest
paid on student loans is also deductible.
Scholarship/Bursaries are now tax-exempt.
From time to time, Revenue Canada will ask for
certain documentary evidence for payment of an expense you claimed
on your income tax return? Don’t panic. Number of such
requests has been increasing substantially. Don’t worry.
When you receive such a notice in a brown envelope, first thing
you do is Sit Down and Take 3 Deep Breaths – then read it
Twice and try to understand what they are requesting. Send
them the receipts they are requesting, returning with the letter
from Revenue Canada. DO NOT DELAY. If you have
difficulty understanding these letters, contact us immediately. You
must respond within 30 days normally, otherwise they will disallow
the expense, re-assess you and ask you to pay more tax.
NO INCOME - STUDENTS - NEW IMMIGRANTS - FIRST RETURN:
People included in this group should call to find
out how they can get refund for the first return and/or if you had
No income during the year. You must file to get benefits.
We service only these 3 categories. Call us
to find out how we can help you save taxes. Do you have any problem
with prior years’ returns or audits or missed a claim? We can help.
Just call us. Special service to businesses such as Doctors,
Dentists, Health Clinics, Pharmacies, Real Estate Reps, Commission
Salespersons, Taxi & Limo Operators, Contract workers, Donuts &
Pizza, Courier, Printing, Grocery or any other Businesses.
CIVIL PENALTIES FOR MISREPRESENTATION
There are civil penalties against third parties
who knowingly, or under gross negligence, make false statements or
omissions in respect of another person’s tax matters.