Budget News

Budget 2006 – What’s in it for you?

The 2006 Federal Budget brings in a mixed bag of goodies for taxpayers. The lowest federal tax was lowered by Librals to 15.0% which the Tories increased to 15.5%. They also brought $100/month for children under 6 years of age as Universal Child Care Benefit and made is taxable. In addition, the government proposed Canada Learning Bond (CLB) to help lower-income taxpayers save for the education of their children. (See details below). There are also Enhancements to the Canada Education Savings Grant. Some of the major changes affecting the individuals are summarized below:

EDUCATION 

(1)  Canada Learning Bonds (CLB) - In order to assist lower-income taxpayers save towards their children's education, the government is introducing a new "Canada Learning Bond" (CLB). This CLB will be paid into the Registered Education Savings Plans (RESPs) of children born in 2004 and later years. If you receive National Child Benefit component of the Child Tax Benefit, the government will pay an initial $500 when your child is born. For each of the following year that you qualify for the supplement, the government will pay an additional $100 annually until your child turn 15.                                                                          

If you are not entitled to the supplement now, but become entitled to it in a future year, you will get the initial $500 at that time. You will also get the additional $100 for every subsequent year that you qualify.                

The government will also pay you an additional $25 with the initial $500 to help with the cost of setting up an RESP.

(2) Enhancement to the Canada Education Savings Grant (CESG) - Currently, the government contributes a matching 20% Canada Education Savings Grant (CESG) up to a maximum of $400 to your child's RESP. Effective January 1, 2005, it will be increased by:

      -  40% on the first $500 of your contribution if your family income is below $35,000;

      -  30% on the first $500 of your contribution if your family income is between $35,000 and $70,000;

      -  The remainder of your contributions will continue to qualify at 20% matching rate.

TheBudget continues full indexation against inflation which started few years ago. Areas affecting individual taxpayers are as follows -  (previous year's numbers are in brackets):

• Basic Personal Amount increased to $8,839 - ($8,648)
• Age Amount increased to $5,066 - ($3,979)  – Transferable to spouse
• Spousal/Eligible Dependent Amount increased to $7,505 - ($7,344)
• Disability Amount increased to $6,741 - ($6,486)
• Caregiver/Infirm dependent amount increased to $3,933 - ($3,784)
• Interest re Student Loan Actual $ paid - No change.

Benefits to individuals in terms of income are: 

• Scholarship, bursary and study grant - 100% exempt from tax.
• Education amount - $400/month for Full-time and $120/month for part-time students.
• Tuition & Education amount transferred - $5,000  (no change)
• Tuition & Text books - $65/month for full-time students ($20/month for part-time students
• Public Transit passes amount can be deducted after July 1, 2006
• Taxable Capital Gains - 50%Pension income amount claimed increased from $1000 to $2000 style="mso-spacerun: yes"> for full year

FEDERAL TAX RATES AND BRACKETS

First  $36,378 taxable income                              -            tax rate is 15.5%

Then  $36,379 to $72,756 taxable income           -            tax rate is  22%

Then  $72,757 to $118,285 taxable income         -            tax rate is 26%

Over  $118,286 taxable income                             -            tax rate is 29%

ONTARIO TAX RATES AND BRACKETS

First  $34,758 taxable income                                -            tax rate is  6.05%

Then $34,759 to $69,516 taxable income             -            tax rate is  9.15%

Over $69,517 taxable income                                 -           tax rate is 11.16%