On April 21, 2015, Finance Minister Joe Oliver delivered his Federal budget in Ottawa.
While you’ve probably seen plenty of media coverage, we thought you would appreciate an overview of how some of the key budget items relate to investments and taxes.
Tax-Free Savings Account
Foremost is an increase in the Tax-Free Savings Account (TFSA) contribution limit from the current $5,500 to $10,000. The proposed change is retroactive to January 1, 2015, and anyone over age 18 who have not contributed since the TFSA’s creation in 2009 now have $41,000 in contribution room.
TFSA limit increases also have been decoupled from the inflation rate, meaning future increases aren’t automatic and instead will have to be legislated by the government.
Registered Retirement Income Fund
Proposed changes to Registered Retirement Income Fund (RRIF) rules will mean seniors won’t have to withdraw as much money from their retirement savings. The budget cuts the required withdrawal amount at age 71 to 5.28% from the current 7.38%. Required withdrawal rates still increase every year, but instead of topping out at 20% at age 94, the cap isn’t reached until age 95.
Lower required RRIF minimum withdrawals mean more savings remain tax deferred and could reduce the possible claw back of the Guaranteed Income Supplement (GIS), OAS and other income tested benefits and tax credits.
Home Accessibility Tax Credit
Another budget item aimed at seniors and others who qualify for the Disability Tax Credit is a new Home Accessibility Tax Credit. This proposed 15% non-refundable tax credit applies to up to $10,000 of eligible expenditures per year on renovations, such as wheelchair ramps, walk-in bathtubs and wheel-in showers. So a maximum benefit of $1,500 per year.
We hope you find these highlights useful. If you’d like to discuss how these and other Federal budget initiatives affect your financial goals, please don’t hesitate to contact us.