Dateline: 02/23/05
The February 2005 Canadian federal budget includes some measures to leave more money in the pockets of Canadians, through raising the personal income tax deduction, changes to RRSP limits, and changes to the Guaranteed Income Supplement for old age pensioners. The federal government has taken a five-year approach to this budget though, so given the situation of a minority government, much could change before these measures are delivered.
Increase in Personal Income Tax Deduction
The 2005 federal budget raises the basic personal income tax deduction from $8,102 in 2004 to $10,000 by 2009, in the following increments:
- 2006 - $100
- 2007 - $100
- 2008 - $400
- 2009 - $600
The federal government says that when this measure is fully implemented it will remove 860,000 taxpayers from the tax rolls, including about 240,000 seniors.
Increases in RRSP and RPP Limits
Canadians saving for retirement get a boost from the 2005 federal budget.
- The annual contribution limit on registered retirement savings plans (RRSPs) will rise from $18,000 in 2006 to $22,000 by 2010.
- The annual contribution limits on registered pension plans (RPPs) will rise from $18,000 in 2005 to $22,000 in 2009.
- The RPP and RRSP limits will be indexed to average wage growth starting in 2010 and 2011 respectively.
- Effective immediately, the 30 percent foreign content limit on holdings in RRSPs and pension plans has been eliminated.
Guaranteed Income Supplement Increases
The 2005 federal budget will put a little more money into the hands of low-income seniors. Maximum guaranteed income supplement (GIS) benefits will be increased by $36 a month for single seniors and $58 a month for couples. Half of this increase will take effect on January 1, 2006, and the remaining instalment will take effect on January 1, 2007.
Medical and Disability Related Expenses Increase
The 2005 federal budget also puts some attention on families dealing with disabilities or illness.
- The federal government plans to update the list of expenses eligible for the medical income tax credit (METC). Changes will be effective starting with the 2005 income tax year.
- The maximum amount of medical and disability-related expenses that can be claimed by caregivers will be doubled to $10,000 from $5,000, beginning with the 2005 taxation year.
