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Federal Budget -> 2007 Budget

October 2007 Economic Statement and Tax Relief Package

The government announced proposed tax reductions on October 30, 2007.  These tax reductions are included in Bill C-28, which received Royal Assent on December 14, 2007.  Tax changes include:

bullet GST reduction from 6% to 5% effective January 1, 2008
bullet GST credit for low and modest-income Canadians will be maintained at its current level.
bullet personal income tax reductions retroactive to January 1, 2007:
bullet basic personal amount, spousal amount, and equivalent to spouse amount increased to $9,600 for 2007 and 2008, and to $10,100 for 2009
bullet lowest tax rate reduced to 15% from 15.5%
bullet corporate tax changes:
bullet general corporate tax rate reduced to 15% by 2012, starting with 1% reduction in 2008 beyond already scheduled reductions
bullet reducing small business tax rate to 11% in 2008, one year earlier than scheduled

Proposed federal corporate income tax rates:

     2008     19.5%
     2009     19.0%
     2010     18.0%
     2011     16.5%
     2012     15.0%

The Canadian Tax Calculator includes the personal tax rate reductions.

The tax rate tables for all provinces and territories, which are found on the marginal tax rates page, have been updated to reflect the reduced personal federal tax rate.

Federal Budget March 2007

The government presented its 2007 budget on March 19, 2007.  The budget documents are available on the Department of Finance Budget 2007 web page.  The Budget was approved in the House of Commons on March 27, 2007.

Bill C-52, which was created to implement some of the provisions of the Budget, is now law.  It received Royal Assent on June 22, 2007.  The following income tax changes are included in Bill C-52:

    - new tax on income trusts, effective 2007 tax year
    - corporate income tax rate reduction effective Jan 1, 2001
    - age credit increase, effective Jan 1, 2006
    - pension income splitting, effective 2007 tax year
    - new child amount tax credit, effective 2007 tax year
    - spouse and equivalent amounts increased, effective 2007 tax year
    - age limit increased to 71 for maturing RRSPs, RPPs, and deferred profit sharing plans, effective 2007 tax year
    - expand types of investments eligible for RRSPs and other deferred income plans, effective Mar 19, 2007
    - increase contribution limits for RESPs and expand eligible payments for part-time studies, effective 2007 tax year
    - increase maximum grant payable on contributions made to an RESP after 2006

Bill C-52 Explanatory Notes June 2007

On October 2, 2007, the Department of Finance announced proposed legislation to implement the remaining Budget 2007 tax measures.  These tax measures were included in Bill C-28, which received Royal Assent on December 14, 2007.

2007 Budget Personal Tax Changes

bulletchild amount tax credit for dependent children under 18 - new non-refundable tax credit beginning 2007:
bulletbased on $2,000 per year per child
bulletwhere the child lives with both parents, may be claimed by either spouse, with unused portion transferable to spouse or common-law partner
bulletIn other cases, may be claimed by the parent who is eligible to claim the equivalent to spouse credit for the child (or would be eligible, if that child were the parent's only child).
bulletspousal amount non-refundable tax credit increased to same as basic personal amount, starting in 2007.  The credit is reduced for spousal income greater than zero (previously greater than $759 in 2007).  See tables of non-refundable tax credits.
bulletworking income tax benefit (WITB) refundable tax credit, beginning in 2007
bulletage limit for conversion of RRSPs to RRIF increased from 69 to 71, and RRSP contributions can be made up to and including the year in which the contributor turns 71.
bulletchanges to Registered Education Savings Plans (RESPs) effective for 2007:
bulletannual Canada Education Savings Grant (CESG) increased from $400 to $500
bullet$4,000 annual limit on contributions has been eliminated
bulletlifetime contribution limit increased from $42,000 to $50,000
bullet"specified educational program" will now include part time programs of at least three consecutive weeks duration, requiring the student to spend not less than 12 hours per month on courses in the program.  Up to $2,500 of educational assistance payments may be made for each 13-week semester of study.
bulletmaximum CESG receivable for a student remains at $7,200.
bulletmeal expense deductibility for long-haul truckers will be increased from the current 50% to
bullet60% for expenses incurred March 19 to December 31, 2007 inclusive
bullet65% for 2008, 70% for 2009, 75% for 2010, and 80% for years after 2010. 
bulletpublic transit passes - non-refundable tax credit revised effective January 1, 2007:
bulletweekly passes will qualify for the tax credit where the taxpayer purchases them for at least 4 consecutive weeks, and the passes provide the holder with unlimited use of the public transit system for a period of 5 to 7 days.
bulletelectronic payment cards will qualify for the tax credit, where
bulletthe cost relates to the use of public transit for at least 32 one-way trips during an uninterrupted period not exceeding 31 days, and
bulletthat transit usage, and cost of those trips, are recorded and receipted to the purchaser by the relevant transit authority, in sufficient detail as to allow the Canada Revenue Agency to verify eligibility for the credit.
bulletlifetime capital gains exemption for qualified farm property, fishing property, or small business corporation shares increased from $500,000 to $750,000 for dispositions occurring on or after March 19, 2007.
bulletinstalment payment threshold for personal income taxes will be increased from $2,000 to $3,000 (from $1,200 to $1,800 in Québec) beginning in 2008
bulletdonations to private foundations - capital gains tax eliminated effective March 19, 2007
bulletRegistered Disability Savings Plan (RDSP) introduced:
bulletlifetime maximum contributions of $200,000, with contributions permitted to be made until the end of the year in which the beneficiary turns 59.
bulletannual contributions will attract Canada Disability Savings Grants (CDSG) depending on family income and amount contributed.  Lifetime CDSG limit is $70,000.
bulletCanada Disability Savings Bonds (CDSBs) of up to $1,000 per year for RDSPs established by low and modest-income families.  Lifetime maximum CDSB limit is $20,000.
bulletFor more information see our article on registered disability savings plans

2007 Budget Business Tax Changes

bulletIncreased capital cost allowance (CCA) rates for purchases on or after March 19, 2007:
bulletcomputer equipment increased from 45% to 55% (new CCA class 50)
bulletbuildings used for manufacturing or processing increased from 4% to 10%
bulletother non-residential buildings increased from 4% to 6%
bulletnatural gas distribution lines increased from 4% to 6%
bulletliquefied natural gas facilities increased from 4% to 8%
bulletaccelerated CCA for manufacturing and processing equipment purchased before 2009
bullet50% straight-line CCA, which results in CCA of 25% in year of purchase, 50% in year 2, and remaining 25% in year 3.
bulletaccelerated CCA for clean energy generation extended for
bulletwave and tidal energy equipment
bulletactive solar equipment
bulletsmall photovoltaic and fixed-location fuel cell systems
bulletbiogas production equipment
bulletpulp and paper waste fuels
bulletbiomass drying and other fuel upgrading equipment
bulletwaste-fuelled thermal energy systems

Revised: October 26, 2023



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