With large deficits and the rate of economic recovery still uncertain, Prime Minister Stephen Harper’s Conservatives didn’t have a lot of money to play with in the 2011 pre-election federal budget. But they did introduce several items to benefit individuals and families.
Only three of the proposed measures that affect personal finances have become law in Bill C-3, which received royal assent on June 26: improvements to registered disability savings plans (see page B6); enhancing the guaranteed income support for some low-income seniors; and reducing the interest rate on student loans for part-time students.
Tax experts say the new RDSPs rules, changes to individual pension plans and a review of employer profit-sharing plans are particularly important. (See page B8 for more information on both topics.)
There is less enthusiasm for adding to the myriad tax credits available for specific activities and expenses — such as the children’s arts tax credit introduced in this budget. While helpful for some people, says Jamie Golombek, managing director, tax and estate planning, with Canadian Imperial Bank of Commerce’s private wealth-management division in Toronto, such measures complicate the tax system, cost money to administer and are of marginal value for consumers. Golombek would prefer to see no more of these types of credits. Instead, he says, it would be simpler and more fair to lower the marginal rate on the first $40,000 of taxable income by 1%.
Here’s a look at the various measures:
Children’s Arts Tax Credit. Similar to the children’s fitness tax credit, this new 15% non-refundable tax credit can be claimed against eligible expenses of up to $500 per child, or up to $1,000 if the child is eligible for the disability tax credit. This arts tax credit can be claimed by one parent or shared between them.
Children’s Tax Credit. The previous restriction that only one person within a domestic establishment could claim this 15% non-refundable credit for each child under 18 has been eliminated. So, if two or more families share a home, all parents who could claim this credit may do so.
Family Caregiver Tax Credit. Subject to requirements that the dependent’s income be below certain thresholds, depending on the situation, there will be a new 15% non-refundable tax credit on caregiving expenses of up to $2,000 a year as of 2012. The dependent may be a spouse, common-law partner or a minor child.
GIS Enhancement. This measure provides assistance for low-income seniors. Singles are eligible for up to an additional $600 annually; couples, $840. This enhancement is added automatically to the GIS benefit for eligible seniors.
Medical Expense Tax Credit. The $10,000 ceiling on this tax credit has been eliminated as of the 2011 tax year for caretakers of dependent relatives, which can include a child aged 18 or older, parents, grandparents, siblings, aunts, uncles, nieces or nephews.
Mineral Exploration Tax Credit. This existing credit will be extended for flow-through share agreements entered into on or before Mar. 31 2012.
Pension Plan Windups. Lump sums received by former employees or retirees in lieu of health and dental coverage from employers who become insolvent will not be included in taxable income if the insolvency occurs before 2012.
RESP Asset-Sharing. Transfers are now allowed between RESPs set up for siblings by non-blood relatives, such as aunts and uncles, provided the plans were set up before the beneficiary was 21 years old.
Tuition Tax Credit. This credit has been extended to cover expenses paid to educational institutions, professional associations or provincial ministries to take examinations and other related costs required for professional status. The expenses must exceed $100 to be eligible for the credit. IE