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A few days apart, the federal and Québec governments tabled their respective budgets. We have studied these budgets and identified the elements which could be of interest to our professional clients.

FEDERAL BUDGET

On Tuesday, March 19, Ottawa presented its last budget before the next federal election. An examination of the different proposed measures shows that the budget is one of continuity and contains few elements which could have a major impact on the personal or corporate finances of professionals.

 

HBP: increase in the RRSP withdrawal amount

To foster home ownership, the maximum withdrawal you can make from your RRSP under the Home Buyers’ Plan (HBP) rises from $25,000 to $35,000.

  • In the case of spouses buying a home together where both spouses have an RRSP, each can withdraw $35,000 under the HBP, for a total of $70,000.
  • The HBP eligibility and repayment conditions remain the same.
  • The change is effective immediately, for withdrawals made after March 19, 2019.
The HBP is a plan that allows first-time home buyers to make withdrawals from their RRSP tax-free and without penalties. Repayment of the amount withdrawn from the RRSP begins in the second year following the purchase of the home and you have up to 15 years to repay the full amount withdrawn. Know, however, that RRSP repayments are not tax deductible.
First-Time Home Buyer Incentive

To help first-time home buyers, the federal budget also introduces the First-Time Home Buyer Incentive.

  • This measure enables eligible buyers to obtain a loan from the Canada Mortgage and Housing Corporation (CMHC) equal to 10% of the value of a new home or 5% of the value of an existing home, in order to reduce their mortgage payments.
  • No additional payments will be required on this loan, which will be paid back when the home is re-sold.
  • The Incentive will come into effect in September 2019: more details will be available in the coming months.
New: Canada Training Credit

This new refundable tax credit could cover up to half of the tuition fees and other eligible expenses associated with adult training.

1. It enables you to accumulate $250 per year in a notional account over a period of several years, up to a lifetime limit of $5,000, beginning in the 2019 tax year.

2. Starting in 2020, you can receive a tax credit for training fees paid. The amount of the tax credit will be equal to the lesser of:

  • half of the tuition fees and other eligible expenses paid for the tax year,

        or

  • the notional account balance.
  • To be eligible to accumulate this annual amount of $250 in the notional account, you will have to be between 25 and 65 years of age, reside in Canada, file a tax return for the current year and have income between $10,000 and $147,667 (2019).
Sale of your business to one of your children

In its budget, the government announced that it would study the question of intergenerational business transfers in 2019, in order to make tax proposals. At present, the sale of a business to a family member can be costly from a federal tax standpoint. If you wish to sell your business to a member of your family, it may be wise to wait until the end of the year to see what amendments are made to the Income Tax Act.

If you have questions concerning the potential impact of this budget on your wealth, don’t hesitate to contact your advisor. We are closely monitoring all new developments and will keep you informed.

Benoit Chaurette, M. Fisc., Pl. Fin.
Manager, Financial Planning

 

The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. The tax strategies mentioned in this article may not apply in all cases. Please consult your Advisor.

PROVINCIAL BUDGET

On Thursday, March 21, it was the provincial government’s turn to present its first budget since the CAQ took power in fall 2018. This budget is a continuation of the Update on Québec’s Economic and Financial Situation presented on December 3, 2018.

If you have questions concerning the potential impact of this budget on your wealth, don’t hesitate to contact your advisor. We are closely monitoring all new developments and will keep you informed.

Highlights of the economic update

The announcements made by the government of Québec in this update concerned the implementation of a more generous family allowance for a family’s second and third child, as well as the introduction of a tax credit for persons 70 years of age or older.

  • Beginning in April 2019, families with a family income of up to $108,000 will receive an additional family allowance of $500 for a second child and $500 for a third child.
  • A refundable tax credit of $200 will be offered to low-income seniors 70 years of age or older.
Childcare: abolition of the additional contribution

Beginning in 2019, the additional contributions will be gradually reduced over a four-year period. Until now, parents of children attending a subsidized daycare (like a childcare centre) had to make an additional contribution when filing their provincial income tax return. This contribution was calculated on the basis of the parents’ family income.

  • For the year 2019, families with income below $78,320 will no longer have to make this contribution.
  • Ultimately, in 2022, this contribution will be eliminated for all Québec families.
School tax: gradual standardization of rates

Beginning on July 1, 2019, the school tax will be reduced so as to bring it in line with the administrative region that has the lowest tax rate.

  • For the year 2019, the reductions have already been announced and depend on the region where the house is located.
  • For the year 2019-2020, the reduction will represent savings of approximately $200 million for Québec families.
  • For the following years, the reduction amount will be reassessed and announced with the tabling of each budget.
Experienced workers: tax credit increased

The provincial government confirmed the increase in the tax credit for experienced workers.

  • In 2019, persons between the ages of 60 and 65 who are still working can receive an additional tax credit of up to $10,000.
  • Persons 65 years of age or older who are still working can receive a tax credit of $11,000.

If you have questions concerning the potential impact of this budget on your wealth, don’t hesitate to contact your advisor. We are closely monitoring all new developments and will keep you informed.

Benoit Chaurette, M. Fisc., Pl. Fin.
Manager, Financial Planning

 

The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. The tax strategies mentioned in this article may not apply in all cases. Please consult your Advisor.

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