There are no major tax cuts to educate clients about in this year’s federal budget—the Liberal government’s last before the upcoming October election—but there are notable niche credits and changes, says Jamie Golombek, managing director of tax and estate planning at CIBC Financial Planning and Advice.
During an interview in lock-up in Ottawa, Golombek said there were “a variety of tax goodies, incentives and credits.”
Here are his highlights:
1. First-Time Home Buyers’ Plan (HBP). While this isn’t a new plan, said Golombek, “the limit has been $25,000 for at least a decade.” Starting March 20, that limit has been bumped to $35,000. “For a couple, it’s $70,000,” he said. “This is something that will help you buy a home if you qualify as a first-time home buyer.” According to a Canada Mortgage and Housing Corporation survey from October 2018, many first-time buyers reported maxing out their budgets. Yet one national index found home prices trended down in January, led by some parts of Western Canada. Read more about how the budget will affect first-time homebuyers.
2. Canada Training Benefit. “This credit is aimed at providing financial support to help cover the cost of tuition associated with retraining,” said Golombek. As of 2019, he added, “you’re going to start to accumulate $250 annually in a notional government account. This can then be accessed in future years to pay for up to 50% of eligible tuition.” The budget document states the benefit was designed to acknowledge that people are changing jobs “many times over the course of their working lives” and that they might need upgraded skills as the economy evolves.
To qualify, Golombek explained, “you have to file a tax return, have to be between the ages of 25 and 65, [must be] a resident of Canada, and have income of at least $10,000 per year.” That income can include parental leave benefits. However, people who make approximately $150,000 per year or more will be ineligible.
Said Golombek: “Each year, your balance is tracked by the CRA in a notional account, [and] you can check it out online. The amount that you can claim is equal to 50% of your tuition and the balance in your account. This starts in 2020, although the room starts in 2019.” As the budget document notes, a typical Canadian worker would have a $1,000 balance after four years.
3. Canadian Pension Plan auto-enrolment. While the Canada Pension Plan (CPP) is available to clients as early as age 60, with most people enrolling at age 65, Golombek explained that “some Canadians delay it so much [that] they forget to apply.” To mitigate this, “the government is going to auto-enrol you in CPP” at age 70, starting in 2020.
4. Giving away cultural property. “There are very generous tax incentives” for donating cultural property, Golombek said. “Not only do you get a donation credit, but if it’s cultural property and designated as of national importance, then you can pay no capital gains tax on the increase in value” of the property. As of March 19, the rules have changed, thanks to a recent court case involving the Montreal-based Heffel Gallery and a 1892 oil painting by Gustave Caillebotte.
That case tested the interpretation of the cultural and national importance of an item, said Golombek, which led to uncertainty over which kinds of artwork would be eligible for the donation credits. The budget has clarified this uncertainty by removing the requirement for an item to be of national importance, meaning more charitable donations can qualify for the tax incentive.
5. Digital subscriptions. Clients with online news subscriptions can claim a 15% credit on up to $500 of subscription costs, starting next year. “That’s worth [up to] $75,” said Golombek.
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