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Spring 2007
Volume 7, Number 2
SPECIAL BUDGET COMMENTARY
March 19, 2007 Federal Budget
Individuals
This is an area of new ideas and returns to earlier eras. To effect equality between the single-income family and the two-income family, the personal tax credit for a spouse has been raised to equal the individual exemption credit. For 2007, this is $8,929. However, income-splitting is still of value due to progressive tax rates so that a two-income earning family still has a tax advantage. For almost a generation, no tax relief has been given to families other than low-income families for dependent children under age 18. Now, at $2,000 per child, the federal tax credit at 15.5% will provide the family with $310 of tax relief per child. A provincial tax saving should also result. This measure yields over half of the total benefit given to Canadians in tax relief by the 2007 Federal Budget. Another flashback: RRSPs may now remain until the individual attains 71 years of age. If a RRIF has already been established and the individual turns 70 or 71 years of age in 2007, then the minimum withdrawal is waived while the individual is aged 71 or under. The registered education savings plan is also returned to its past rules. Effective for 2007, there is no annual maximum contribution, only a lifetime limit of $50,000 (increased from $42,000). This can help the family with a last minute need to fund post secondary education. The federal grant portion has been increased from $400 to $500 per year. To broaden the fairness of exempting scholarships from tax, elementary and secondary school scholarships will also be exempted from 2007 onwards. Qualified investments for RRSP's will be expanded to include most investment grade debt and publicly listed securities. There are no reductions in tax rates, but a continuance of the idea of many different tax credit incentives for such things as municipal transit and child fitness.
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