|Daw: What the federal budget means for you|
Mar 04 James Daw thestar
Ottawa - Say goodbye to annual tax cut announcements from Ottawa, the home renovation tax credit and the medical tax credit for your cosmetic surgery.
Some taxpayers were calling for broad tax cuts, increased contribution room for tax-free savings accounts, incentives for home buyers and for making donations. They are not here yet.
Finance Minister Jim Flaherty has turned his attention to balancing the books without increasing taxes – this year.
Next year will be a different story. Employees and businesses face the first of a series increases in employment insurance deductions.
The expected increase next year would cost up to about $159 a year for an employee with average or higher earnings and his or her employer.
For now, though, Flaherty is trumpeting the savings from previously announced tax reductions, and doing a little fiddling.
He has announced changes to help some parents, the disabled, Canadians receiving U.S. social security benefits and investors in mineral exploration.
Flaherty will pay for the minor concessions for 2010 and beyond with taxes on the vain, the brilliant, the money launderers and those blessed by stock options:
Split families: Parents who share custody of children more or less equally will now also be eligible to share the Child Tax Benefit, Universal Child Tax Benefit and the GST/HST credit.
Single parents: To save on tax on the $100 per month for children under the Universal Child Care Benefit, single parents will be able to report the income on the tax return of a child under the age of 18.
Parents of the disabled: Up to $200,000 of the registered savings of a parent or grandparent who died after 2007 will be eligible for a tax-free transfer to the Registered Disability Savings Plan of a dependent disabled child.
Nancy Belo Gomes of KPMG LLP said a tax-free rollover to an RDSP has an advantage over transferring the money to a registered savings plan or annuity. The capital and income from an RDSP is generally not taken into account for various tax and income support benefits.
Parents who are financially unable to contribute to an RDSP will, starting in 2011, not lose their annual contribution room. They will have up to 10 years to catch up and receive any grants and bonds they would have lost. Scholarship winners: The tax-free status of scholarship income will have some new constraints. The income will only be tax-free to the extent it was paid to support enrolment in an eligible educational program. Part-time students who are not disabled would pay tax on amounts in excess of tuition and program-related materials.
Cosmetic procedures: The medical expense tax credit may not longer be claimed for purely cosmetic procedures –tummy tucks, liposuction, hair replacement, teeth whitening, botox injections—and related expenses such as travel.
U.S. social security: Canadian residents who were receiving social security benefits from the U.S. before 1996 will go back to including in their taxable income only 50 per cent of those benefits, received after Jan. 1, 2010.
Exploration tax credit: A 15 per cent mineral exploration tax credit available to buyers of exploration companies’ flow-through shares will be extended to share agreements entered into on or before March 31, 2011.
Stock options: Employers will no longer be able to claim a deduction when employees cash out stock options, unless the employee includes 100 per cent of any profit in his or her income, said Belo Gomes.
Meanwhile, employees of public companies may no longer put off reporting up to $100,000 of the income benefit for acquiring company shares for less than the market price.
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