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2008 Federal Budget

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Federal Budget -> 2008 Budget

Economic and Fiscal Statement - November 27, 2008

For complete details see the Department of Finance Economic and Fiscal Statement.

Reduction of minimum withdrawals for RRIFs and variable benefits under RPPs.

It is proposed that the minimum annual withdrawal from a Registered Retirement Income Fund (RRIF) would be reduced, on a one-time basis, by 25% for 2008 withdrawals.  For those taxpayers who have already withdrawn more than the reduced minimum amount, the excess (up to the original minimum amount) would be allowed as a contribution to an RRSP or RRIF, and deducted on the 2008 tax return.  The contribution would be required to be made by the later of March 1, 2009, or 30 days after the legislation receives Royal Assent.  Similar rules would apply to variable benefit payments received under a money purchase Registered Pension Plan (RPP).  If an in kind contribution is made to the RRSP or RRIF, do not transfer investments which are in a loss position, as the loss will be disallowed.

Changes have been made to our RRIF Withdrawal Calculators to reduce the 2008 minimum withdrawal by 25%.  Canada Revenue Agency (CRA) announced in a December 11, 2008 news release that the proposed changes can be administered by financial institutions before the law is passed.  However, if a taxpayer withdraws the reduced amount and the proposed reduction is not passed into law, the taxpayer may have to subsequently withdraw the remaining 25%.

See also our article on making in kind withdrawals from a RRIF.

 

Federal 2008 Budget - February 26, 2008

For complete details see the Department of Finance Budget 2008 website, as well as

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Tax measures supplementary information, and

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Notice of Ways and Means Motions

Subsequent motions, bills and explanatory notes:

March 11, 2008Notice of Ways and Means motion tabled to implement most of the Budget 2008 measures.

March 14, 2008 - These measures are now included in Bill C-50.

The Ways and Means motion also contains provisions to "protect the fiscal framework from a private member's bill that risks plunging the federal government back into deficit" (re Bill C-253 which proposed the deductibility of contributions to RESPs).

April 23, 2008 - Explanatory notes relating to this draft legislation were made available.

June 18, 2008 - Bill C-50 received Royal Assent.

 

Personal tax changes

Tax-free savings account (TFSA)

Life income funds (LIF)

The following three provisions are included in Budget 2008, and will apply to federally-regulated LIFs:

  1. Individuals 55 or over with LIF holdings of up to $22,450 will be able to wind up their accounts with the option to convert to a tax-deferred savings vehicle.

  2. Individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawal limits.

  3. All individuals facing financial hardship (low income, high disability or medical-related costs) will be able to unlock up to $22,450.

The threshold of $22,450 in #'s 1 and 3 will increase with the average industrial wage.

See the Department of Finance Budget 2008 item on locked-in pensions.

 

Dividend tax credit (DTC) proposed changes

 

Other changes relating to personal income tax and GST/HST:

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rewording of the Income Tax Act s. 118.2(2)(n) to ensure that the cost of non-prescription medications will not be considered eligible medical expenses after February 26, 2008.  See our article on non-prescription medications.

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Registered Education Savings Plans - the time they remain open will be extended to 35 years from 25 years, and the contribution period will be increased by 10 years.

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Eligible expenses under the medical expense tax credit will be expanded.  See Health-related tax measures on the CRA website.

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The residency component of the northern residents deduction will be increased by 10%.

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GST/HST will no longer be payable on costs of training to help individuals cope with disabilities or disorders, such as autism.

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The list of GST/HST-free medical and assistive devices will be expanded, to include other items, such as service dogs.

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Tax Back Guarantee - $2 billion in annual interest savings by 2009-10 will be dedicated to ongoing personal income tax reductions.

Business tax changes

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Record-keeping requirements for automobile expenses and taxable benefits will be reduced.

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Manufacturing and processing sector - accelerated capital cost allowance (CCA) treatment for investment in machinery and equipment will be extended for three years.  The 50% straight-line accelerated CCA will be extended for one year, and the accelerated treatment will then be provided on a declining basis over a period of 2 years.

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Scientific research and experimental tax development program will be improved.

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Cross-border tax-withholding and return-filing rules will be streamlined.

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Mineral exploration tax credit extended for an additional year.

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CCA rates to be increased for carbon dioxide pipelines.

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Accelerated CCA for clean- energy generation equipment to be expanded to include additional applications involving ground source heat pump and waste-to-energy systems.

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GST/HST relief extended to land leased to situate wind- or solar-power equipment for the generation of electricity.

See Business Income Tax Measures on the governments Budget 2008 website.

Seniors

The Guaranteed Income Supplement (GIS) is an income-tested benefit, and is reduced by 50% of other income received, except for employment earnings.  The exemption for employment earnings is 20% of earned income up to $2,500, providing a maximum exemption of $500.  The budget proposes to increase this exemption, and fully exempt all employment earnings up to $3,500 per year.

 

Students

Canada Student Grant Program

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proposed to take effect in the fall of 2009

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Students from low and middle income families will qualify based on clearly defined income thresholds.

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Program will provide monthly grants of $250 for low-income students and $100 for middle-income students.

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The grant will be paid through all years of an undergraduate or college program.

See the Canada Student Grant Program information on the Department of Finance Budget 2008 website.

Canada Student Loans Program will be streamlined and modernized.  See the Canada Student Loans Program information on the Department of Finance Budget 2008 website.

Canada Graduate Scholarship Program will provide up to 500 annual scholarships worth $50,000 per year each for up to three years.  See the Canada Graduate Scholarship Program information on the Department of Finance Budget 2008 website.

The Canada Millennium Scholarship Program is proposed to be terminated in 2009.  Transitional grants will be provided to ensure that students who receive Canada Millennium Scholarship bursaries in 2008-09 will be unaffected by the wind-down of the program.  See the Students information on the Department of Finance Budget 2008 website.

 

Revised: April 13, 2014

 

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