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Federally,
the recent economic statement announced that the basic
personal amount upon which you pay no federal tax has been
increased to $9,600 retroactive to the beginning of 2007,
an amount that will grow to $10,100 in 2009. At the same
time, it was announced that the lowest tax bracket rate
has been reduced from 15.5 to 15% as of 2007, however that
also becomes the new rate for many federal tax credits.
In
the new year, the level at which the 22% tax bracket
starts will increase from $37,178 to $37,885, while the
26% bracket that started at $74,357 now opens at $75,769,
and the 29% bracket that began at $120,887 now commences
at $123,184.
The
federal $5,177 age-amount credit for people age 65 and
over increases to $5,276, but will start to be clawed back
if a person's net income is more than $30,936 and will be
lost completely if net income exceeds $66,794.
Old
Age Security benefits, eligible for people age 65 and
residents of Canada for at least 10 years, will begin to
be clawed back when net income exceeds $63,511 and will be
totally repayable if income is more than $104,819.
The
goods and services tax credit maximums increase from $237
to $242 for an adult and from $125 to $127 for a child,
but they start being phased out if net family income is
more than $31,524.
The
Canada child tax benefit goes from a base benefit of
$1,283 to $1,307, with phase-out beginning if net family
income is greater than $37,885.
Both
the GST credit and Canada child tax benefit changes take
effect July 1, 2008, based on income reported on 2007 tax
returns.
Federal
tax credits will be applied against a spousal or eligible
dependant amount of $9,600, minus the net income of the
spouse or dependant, and against a disability amount
maximum that's up from $6,890 to $7,021.
People
can claim credit on medical expenses above the lesser
amount of either three per cent of their net income or
$1,962, the latter ceiling being increased from $1,926.
Canadians
will see a number of other changes to their paycheques in
the New Year.
Canada
Pension Plan premiums will be paid on an increase of
maximum pensionable earnings from $43,700 to $44,900, with
an exemption on the first $3,500.
Maximum
contributions rise from $1,989.90 to $2,049.30 for
employers and employees, while for self-employed people
the maximum grows from $3,979.80 to $4,098.60.
Conversely,
employment insurance premiums continue to drop. Instead of
employers paying $2.51 per $100 and employees $1.80 per
$100 on a maximum of $40,000 in insurable earnings, during
2008 the premiums will be $2.42 per $100 for employers and
$1.73 per $100 for employees on a maximum of $41,100 in
insurable earnings.
The
registered retirement savings plan contribution limit goes
from $19,000 for 2007 to $20,000 for 2008. That means your
2008 RRSP contribution room will be 18 per cent of your
2007 earned income from employment, minus your pension
adjustment, to a maximum of $20,000.
If
you are turning 69 or 70 during 2008, you do not yet have
to convert an RRSP to an income stream; you may continue
contributing to an RRSP if you have room, and you do not
have to make minimum RRIF withdrawals.
One
more consideration is for parents to increase registered
education savings plan contributions to $2,500 per child
in 2007, because that's the amount the 20% Canada
Education Savings Grant is now paid on.
Source
:
Financial
Post - Toronto, Ontario, Canada, dated 24/12/2007
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