There was much speculation on what would be coming in the 2023 Federal Budget. Many economists that we follow predicted that tax increases were not possible based on the current tax levels, but the capital gains inclusion rate was on the table as well as several benefits for lower-income Canadians.
So, how did it all pan out? Here is a quick summary of what the budget proposes. Let us know if you have any questions on how this impacts you.
Health and Dental Plan
Minimum Tax
The government has a minimum tax for Canadians, called the Alternative Minimum Tax (AMT). However, the government feels like high income Canadians are still paying too little in tax.
Proposed change:
Inflation Relief Program
To help lower-income Canadians with inflating costs, Canadians eligible for the GST rebate will see their rebate double as soon as the budget passes.
RESP
First semester withdrawal restriction will increase from the current $5,000 to $8,000.
Corporations
Bill C-208 had a loophole which penalized generational family business transfers. Bill C-208 was initially meant to close a tax loophole where companies would convert dividends to capital gains, but it inadvertently affected family businesses genuinely wanting to transfer their business to their kids/grandkids/nieces/nephews.
This is proposed to be fixed for the 2024 tax year.
Multigenerational Home Renovation Tax Credit
If you plan to purchase a home with an ageing parent or are looking to purchase a home with your kids, there may be some tax incentives which apply to these situations. Reach out to your advisor to see if the rules apply to you.
Employee Ownership Trusts (EOT)
The government has proposed allowing Employee Ownership Trusts including proposed rules and guidelines. This will most likely morph before it becomes effective January 1, 2024, but here is a quick summary. The proposed Employee Ownership Trusts:
This will be an interesting tool for small/medium-sized businesses looking to transition the company to employees. Stay tuned!
What We Didn’t See
We didn’t see:
Wrapping up
There seems to be a real focus in the 2023 Federal Budget on helping lower income Canadians. It also includes benefits to post secondary students and small to medium businesses in transition. As the proposed changes are rolled out, we’ll see how these programs work out practically.
If you have questions about any of the budget items and how they may impact your financial plan, feel free to reach out to your advisor.
Financial Difference Makers…
How can I build wealth? How can I save enough for retirement?
As a financial planner I hear these types of questions on a regular basis. People in general want to know, what is the secret to success?
I find that I like to look at clients that we have that are already in retirement to see the traits that have led to their financial success. We can learn a lot from our history, and I find it interesting to hear about people’s lives. Read more
Charitable gifting is about to change. As you may know, currently you can donate cash and receive preferential tax treatment. For every dollar you donate over $200 you would get a tax deduction of $0.437. In 2006, the benefits of donating stocks in-kind became substantial because if you donate the stock in-kind to a charity the capital gains of that stock become non-taxable to you but you still receive the full charitable tax deduction.
Projected to come into effect in 2017, the donation of Real Estate profits and profits from the sale of private companies will receive the same tax benefit that are currently available to public shares. This change could be a game changer for tax planning, strategic gifting and estate planning.
So how does this work? Read more
If you’ve ever gone through the process of researching a new car, you’ve likely considered your options: should I buy or should I lease? Although there are many working parts to both scenarios, it really comes down to personal preference and current situation. Recently I went through this same decision process last fall when we were looking for our next car. How did we make our choice? Let’s first take a deeper look into the main differences between buying versus leasing. Read more
RESP’s – Are They Worth it?