On March 19, 2019, the federal government tabled its budget, entitled Investing in the Middle Class. The big themes in this pre-election budget were making home ownership more affordable and investments in skills training. There were also a number of tax-related and other items that may be of interest to financial advisors and their clients. Selected items are noted below but to read the full article please click here.
A few key points you may find of interest are:
- Modernizing the Home Buyers’ Plan – Currently, the Plan allows first-time home buyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) to purchase or build a home, without having to pay tax on the withdrawal. The withdrawal must be repaid over a 15-year period, or included in the individual’s income if not repaid. Budget 2019 proposes to increase the Plan withdrawal limit to $35,000. Furthermore, it proposes that individuals who experience a breakdown of a marriage or common-law partnership be permitted to participate in the Plan, even if they do not meet the first-time requirement. This would be available for withdrawals made after March 19, 2019
- Registered Disability Savings Plan (RDSP) improvement – To open an RDSP, an individual must be eligible for the Disability Tax Credit (DTC). When a beneficiary no longer qualifies for the DTC, the RDSP rules can require that the plan be closed, and that grants and bonds be repaid to the Government of Canada. To address concerns that this treatment does not appropriately recognize the financial impact that periods of severe, but episodic, disability can have on individuals, Budget 2019 proposes to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC. Doing so will allow grants and bonds that otherwise would be required to be repaid to the Government to remain in the RDSP.
For further information, please do not hesitate to contact us. We are always happy to help!