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Tax Changes 2007-2008

GST reduction:
Effective January 1, 2008, GST will be reduced by 1%, bringing the total tax to 5%. This means that someone spending $10,000 to renovate a home will save $100.

Basic Personal Amount increase:
Come tax time in April, Canadians will be able to claim a basic personal amount of $9,600 — up from $8,929. This is retroactive to January 1 of 2007. On January 1, 2009, the basic personal amount will be raised again — this time to $10,100.

Lowest personal income tax rate reduced:
One of the government's pledges is to reduce the lowest personal income tax rate to 15% from 15.5%, retroactive to January 1, 2007. This translates into savings of about $400 for families that make between $45,000 and $60,000. Families earning between $80,000 and $100,000 will pay about $602 less tax in 2008.

Pension Income Splitting:
Legislation was passed in June 2007 permitting seniors to allocate up to 50% of their pension income to their spouse or common-law partner. The new 2007 income tax return will include a new line enabling the pensioner to deduct the allocation as well as a line for the spouse to claim the allocation.

Pension income that would qualify is limited to Registered Pension Plans (RPP) at any age and income from RRSP’s or RRIF’s after age 65. This may provide some couples an opportunity to claim a second pension income tax credit of up to $2000/year.

Employment Insurance rate change:
Beginning January 1, 2008,employers and employees will see a decrease in the rate of Employment Insurance, with employers paying $.10 less per $100 and employees paying $.07 less per $100 of earnings.

LIF Changes:
No longer necessary to purchase an annuity at age 80.

Age limit on keeping a LIRA has been extended to age 71 from age 69.

If Locked in assets are less than 40% of year’s Maximum Pensionable Earnings and you are 55 years of age or older, you will have the option of transferring the funds directly to an RRSP or RRIF.

Owners of a LIF purchased under the new rules will have a one-time opportunity to withdraw up to 25% of the value of the assets transferred into the new LIF in cash or transfer this amount into an RRSP or RRIF.

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