Earlier this week the federal government tabled its budget; here are a few highlights:

Home Buyers Plan (HBP) – Currently the HBP allows first-time homebuyers to withdraw $25000 tax free from their RRSP to purchase or build a home. The withdrawal must be paid back over a 15-year period, or be included in the individual’s income. The new budget increases the allowable withdrawal amount to $35000; and has also been extended to include individuals whom have experienced a breakdown of marriage or common-law partnership. This change is immediate and available now.

First Time Home Buyer Incentive – This incentive is a shared equity mortgage that will give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of purchasing a home with the Canada Mortgage and Housing Corporation. The incentive will provide funding of 5% or 10% of the home purchase price with no ongoing monthly payments. The purchaser will eventually have to repay the incentive, for example, upon selling their home. More details will be available on this program later in the year and it is expected to be accessible by September 2019.

Canada Training Credit – This new non-taxable credit is meant to help Canadians pay for job related training. Every year, eligible workers between the ages of 25 and 64 will accumulate a credit balance of $250 per year up to a lifetime maximum of $5000. Starting in 2020, Canadians will be able to apply their accumulated Canadian Training Credit balance against up to half the cost of training fees at colleges, universities and other eligible institutions providing occupational skills training.

Canada Pension Plan auto-enrolment – The Canada Pension Plan (CPP) is available to Canadians as early as age 60, with most people applying by age 65. However, some Canadians forget to enrol at all, so starting in 2020 the government will auto-enrol anyone who hasn’t applied by the age of 70.

Registered Disability Savings Plan (RDSP) improvements – In order to open a RDSP the individual must be eligible for the Disability Tax Credit (DTC). Currently when a beneficiary no longer qualifies for the DTC, the RDSP must be closed, and the grants and bonds must be paid back to the government. The 2019 budget proposes to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC. This will allow grants and bonds that otherwise would have to be repaid to remain invested in the RDSP.

Future Limits on Stock Option Deduction – For high-income individuals of large, mature firms the government intends to limit the stock option deduction benefit. A $200,000 annual cap on employee stock option grants will be applied. The vast majority of employees of such firms will not be affected. More details will be released later this spring.

These highlights are only some of the many measures contained in the 2019 Federal Budget. Taxpayers should always consult their own tax advisor to assess the impact of the budget on their own situation.

Happy Spring!

Tracey

 

 

 

Sources: Fidelity Investments Canada Budget Team paper 2019 Federal budget highlights, Advisor to Go program by CIBC.