Unfortunately there is one constant in life, taxes. Therefore we have provided some last minute tips to help reduce your overall tax costs for 2009.
NEW FOR 2009 AND 2010
Home Renovation Tax Credit (HRTC)
The 2009 Budget introduced a non-refundable tax credit for eligible expenses in excess of $1,000, but not more than $10,000 made on eligible dwellings. The maximum credit will be $1,350 ($9,000 x 15%). The credit will be available for expenditures on goods acquired between January 28, 2009 and January 31, 2010. It may be claimed in the taxpayer’s 2009 personal tax return even if qualifying expenses were incurred in 2010.
Home Buyers Plan (HBP)
The HBP permits individuals to make tax-free withdrawals from an RRSP for the purpose of purchasing a home. The 2009 Budget increased the maximum eligible withdrawal after January 27, 2009 to $25,000 (previously $20,000). The maximum withdrawal for each individual must be repaid over fifteen years. To utilize the plan, an individual must be a “first-time home buyer”, defined as an individual who, along with their spouse, has not lived in an owned home at any time in the four calendar years prior to the time of withdrawal. A qualifying home must be purchased prior to October 1 of the year following the year of withdrawal.
First Time Home Buyers' Tax Credit
The 2009 Budget proposed a non-refundable tax credit for first time home buyers who acquire a qualifying home after January 27, 2009. The credit can be claimed in the year in which the home is acquired and equates to $750 for 2009 ($5,000 x 15%). An individual will be considered a first-time home buyer if neither the individual nor the spouse/common-law partner owned and lived in another home in the year of purchase or in any of the prior four years.
RRSP/RRIF Losses After Death
At the time of an annuitant’s death, the fair market value of investments held in an RRSP or RRIF is generally included in the income of the deceased for the year of death in the absence of a spouse or dependant rollover. Any subsequent increase in the value of the investments is generally included in the income of the beneficiaries when the RRSP or RRIF is distributed.
Before the 2009 Budget, there were no provisions to allow for a decrease in the value of RRSP/RRIF investments that occurs after the annuitant’s death and before distribution to beneficiaries.
The 2009 Budget allows for a deduction for such a decrease. This deduction would be carried back and deducted against the RRSP/RRIF income inclusions in the final return of the deceased. This measure applies where the final distribution from the RRSP/RRIF occurs after 2008.