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:
GST reduction from 6% to 5% effective January 1,
2008
GST credit for low and modest-income Canadians will
be maintained at its current level.
personal income tax reductions retroactive to
January 1, 2007:
basic personal amount, spousal amount, and
equivalent to spouse amount increased to $9,600 for
2007 and 2008, and to $10,100 for 2009
lowest tax rate reduced to 15% from 15.5%
corporate tax changes:
general corporate tax rate reduced to 15% by
2012, starting with 1% reduction in 2008 beyond already scheduled
reductions
reducing small business tax rate to 11% in
2008, one year earlier than scheduled
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
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
child amount tax credit for dependent children under 18 - new
non-refundable tax credit beginning 2007:
based on $2,000 per year per child
where the child lives with both parents, may
be claimed by either spouse, with unused
portion transferable to spouse or common-law
partner
In 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).
spousal 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.
changes to Registered Education Savings Plans
(RESPs) effective for 2007:
annual Canada Education Savings Grant (CESG)
increased from $400 to $500
$4,000 annual limit on contributions has
been eliminated
lifetime contribution limit increased from
$42,000 to $50,000
"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.
maximum CESG receivable for a student
remains at $7,200.
meal expense deductibility for long-haul
truckers will be increased from the current
50% to
60% for expenses incurred March 19 to
December 31, 2007 inclusive
65% for 2008, 70% for 2009, 75% for 2010,
and 80% for years after 2010.
public transit passes - non-refundable
tax credit revised effective January 1, 2007:
weekly 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.
electronic payment cards will qualify for
the tax credit, where
the cost relates to the use of public
transit for at least 32 one-way trips
during an uninterrupted period not
exceeding 31 days, and
that 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.
lifetime 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.
instalment 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
donations to private foundations -
capital gains tax eliminated effective March 19,
2007
Registered Disability Savings Plan (RDSP)
introduced:
lifetime maximum contributions of $200,000,
with contributions permitted to be made until
the end of the year in which the beneficiary
turns 59.
annual contributions will attract Canada
Disability Savings Grants (CDSG) depending on
family income and amount contributed.
Lifetime CDSG limit is $70,000.
Canada 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.