Several of the proposals in April’s Federal Budget spell “GOOD NEWS” for seniors.
Here is a summary of the high points:
Registered Retirement Income Funds – Reduction in Minimum Withdrawal Factors
- Applicable to 2015 and subsequent taxation years
- Pre-age 71 rates are unchanged
- Minimum formula rates are being reduced for ages 71 to 94
- The age 71 rate is almost 30% lower than its pre-2015 counterpart
- The difference shrinks as you get older, topping out at 20%, the same rate under the old rules for those age 94 and older.
- These withdrawal rates are more consistent with long-term historical rates of return on investments and expected inflation.
- The bottom line: RRIF capital won’t be depleted as quickly. In the long term the government isn’t giving up any ground with this change: withdrawals will be taxed sooner or later.
Increase in Tax-Free Savings Account Limit
- Effective immediately for the 2015 taxation year
- Now $10,000. annual limit
- No longer will be indexed – any further increases would have to be legislated
- Total contribution room from inception in 2009 = $41,000.
- The bottom line: opens up more creativity in planning for our clients to pay less tax on withdrawals in retirement.
Charitable Giving Strategies – involving Private Company Shares or Real Estate
- Capital Gains Tax Exemptions are being extended to charitable donations of cash proceeds from the sale of private corporation shares or real estate within 30 days after the disposition
- Previously this benefit was only available on the donation or sale of publicly traded shares
- Effective after 2016.
- The bottom line: A wonderful tax benefit for those with a passion for their charity.
Home Accessibility Tax Credit
- Applies to Seniors or those who cohabit with Seniors, and to those with special needs/disabilities
- Applicable to work performed or goods acquired on or after January 1, 2016
- Maximum of $1,500 in federal tax credit: 15% of $10,000.
- Examples of eligible expenditures: wheelchair ramps, walk-in bathtubs and grab bars
- Is non-refundable, i.e. can only be used to reduce taxes owed, not to receive a refund
- An expense that also qualifies as a medical expense can be claimed as both a home accessibility tax credit and a medical expense tax credit
- For Ontario residents, this is in addition to the Healthy Homes Renovation Tax Credit which is a refundable credit with the same qualifications: 15% of up to $10,000.
- The bottom line: some tax relief to improving the safety, access and functionality of your home; Keep your receipts!
EI Compassionate Care Benefit Period Increased
- Family members caring for terminally ill relatives can qualify for EI benefits
- Extended to 6 months from current 6 weeks.
- Effective January 1, 2016
Want more details? Visit http://www.budget.gc.ca/2015/docs/plan/anx5-1-eng.html