In this year of living dangerously, most provinces have tried to use their budgets to cushion some of the recession’s blows on their residents. Typically, these measures take the form of rebates, credits and other supports designed to stimulate spending and assist those struggling with unemployment.

Among these changes, adjusting some provincial tax codes to dovetail with Ottawa’s sales tax regime is the most significant change. “Harmonization is definitely the big thing,” says Paul McVean, regional vice president of wealth planning with United Financial Corp. in Toronto.

A federal/provincial tax on goods and services will launch in both British Columbia and Ontario on July 1, 2010, with a slew of tax breaks taking effect next year to offset its impact. (For more on harmonization, see story on page B4).

This year, however, only New Brunswick residents will benefit from rate cuts. Thanks to that province’s ongoing tax reform (the province is moving toward a two-rate, two-bracket tax system that will take effect in 2012), personal income tax rates are inching downward in all brackets: the highest provincial tax rate — for individuals earning $116,105 or more — drops to 17% from 17.95% this year, and will eventually fall to 12% in 2012. (Alberta’s 10% flat rate for income taxation continues to be the overall lowest provincial rate for high earners.)

Also on the East Coast, New-foundland and Labrador’s dividend tax credit on eligible dividends (in general, those paid from active business income that has already been taxed in the corporation at the general corporate rate) will make a significant jump in 2009, rising to 9.75% from 6.65% and triggering tax savings of $1.3 million. Such a large increase in the credit may make investments in the local economy more attractive — at least, from a tax perspective — than in the past.

“This is very important for advisors, as it affects your whole investment strategy,” says Karen Yull, tax specialist and principal with Grant Thornton LLP in Toronto. She notes that this change will bring the credit more in line with that of other provinces.

Quebec is the only province to mirror the Ottawa’s much talked-about home-renovation credit. “It’s refundable, unlike the federal credit,” says Brenda Lowey, a tax partner with Deloitte & Touche LLP in Toronto, “and the amount is a little more generous.” (The federal credit maxes out at $1,350 for eligible work performed or goods purchased between Jan. 27, 2009, and Feb. 1, 2010, while Quebec residents can receive as much as $2,500 for eligible expenses incurred during 2009.)

Also on the home front, Ontario, Quebec and Manitoba have adopted Ottawa’s amendment to the Homebuyers’ Plan, with withdrawal limits increasing to $25,000 from $20,000. And Nova Scotians can take advantage of a new home-construction rebate, which covers half of the provincial portion of the harmonized sales tax on new homes that began construction on or after Jan. 1, 2009, and will be substantially completed by March 31, 2010. The maximum rebate is $7,000 and is limited to 1,500 homes.

Other changes to provincial 2009 income tax regimes include:

> B.C.’s mining flow-through share tax credit — a non-refundable credit to encourage investment in provincial mining and mineral companies — has been extended to the end of 2010.

> Alberta’s non-refundable income tax credits will be indexed for inflation. The basic personal and spousal amounts, for example, will rise to $16,775 from $16,161.

> Saskatchewan has made the largest education property tax cut in its history, with the overall amount of taxes paid by property owners to fund education to be reduced by 14% in 2009.

> Manitoba has increased the basic amount of its education property tax credit to $650 from $600. The province’s mineral exploration tax credit has also been expanded and increased: the credit has been boosted to 20% on flow-through share agreements entered into from April 1, 2009, until Mar. 31, 2010; and to 30% on flow-through share agreements entered into from April 1, 2010, until March 31, 2012. Finally, Manitoba has also extended its green energy equipment tax credit to include solar thermal energy systems purchased for use in Manitoba on or after Jan. 1, 2009.

> Ontario has mirrored Ottawa’s move to recognize any decreases in the value of RRSPs and registered retirement income funds that occur after the holder’s death but before they are distributed to the beneficiary. “This is one rule change that’s worth noting,” says McVean. The amendment applies to situations in which the final distribution occurs after 2008; the amount of post-death decreases in value will be carried back and deducted against the year-of-death RRSP/RRIF income inclusion.

@page_break@> Quebec has improved its refundable child-care expenses credit, raising the limit on expenses paid for children under the age of seven to $9,000 from $7,000. As well, the cost of child-care services will now be the same for both subsidized daycare centres and unsubsidized private daycare centres for families with incomes of up to $125,000.

> New Brunswick has doubled its tuition rebate credit to $20,000 in 2009 from $10,000, with the maximum yearly rebate moving to $4,000.

> Nova Scotia’s 2009 budget — originally introduced in May but retooled in September as a result of the change in government — removes the provincial portion of the harmonized sales tax from basic home electricity costs.

The province is also implementing a graduate retention rebate, replacing the graduate tax credit, for those students graduating in 2009 and beyond who remain in Nova Scotia. University grads are eligible to receive a tax reduction of up to $15,000 over six years, to a maximum annual reduction of $2,500. College grads are eligible for $7,500 over six years, to a maximum annual reduction of $1,250.

> Newfoundland and Labrador has increased the relief provided by its low-income tax reduction program: the income threshold for individuals has increased to $15,911 from $13,411 and the threshold for families has been increased to $26,625 from $21,825.

As for last year’s big tax story — the tax-free savings account — most provinces have passed or will be passing laws that allow TFSA holders to designate beneficiaries who will receive the funds outside of a will, in the same manner as beneficiaries receive RRSP proceeds.

“This way,” says Yull, “if you had a TFSA and you passed away, it wouldn’t be subject to probate.” IE