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CAUT Bulletin Archives

March 2008

2007 Tax Savings

The March 19, 2007 federal budget tabled by the Conservative government introduced numerous income tax changes. Some of these proposals have been enacted into law and other proposals are still making their way through the parliamentary process. In addition, Finance
Minister Jim Flaherty’s economic statement of Oct. 30, 2007 brought in a tax reduction and additional tax changes. Some of the more significant proposed changes of the 2007 budget and economic statement are included in the following outline:

• basic personal amount in­creased to $9,600 for 2007 and 2008, and to $10,100 for 2009;

• spousal amount and equivalent to spouse amount increased to same as basic personal amount, starting in 2007. The credit is reduced for spousal income greater than zero (previously greater than $759 in 2007);

• starting in 2007, weekly transit passes now qualify for the public transit amount if they cover a period of at least 20 days in a 28-day period;

• new child amount of $2,000 beginning in 2007;

• beginning in 2007, new children’s fitness tax credit of up to $500 of eligible fees for extracurricular physical activity programs;

• new working income tax benefit of up to $500 for lower-income taxpayers, for 2007 and subsequent years;

• lowest tax rate reduced to15% from 15.5% for income up to $37,178. The next rate is 22% for income over $37,178 up to $74,357. The lowest tax rate will be indexed for subsequent taxation years;

• RRSPs and RPPs now mature at age 71 (from age 69), meaning individuals can now contribute to RRSPs and RPPs until the year in which they turn 71 to the extent there is available contribution room;

• registered education savings plan annual contribution limit of $4,000 has been eliminated, lifetime plan limit increased to $50,000 (from $42,000), maximum annual contribution qualifying for the 20% Canada Education Savings Grant increased to $2,500 (from $2,000) for 2007 and future years and no change to the lifetime cumulative government credit of $7,200;

• new Registered Disability Savings Plan in 2008;

• exemption from income tax of scholarships, fellowships and bursaries extended to elementary and secondary school students;

• maximum annual employer and employee Canada Pension Plan contributions for 2008 increases to $2,049.30 (from $1,989.90). Same increase for the Quebec Pension Plan;

• 2008 automobile deduction limit increases to $0.52/km for the first 5,000 km driven and $0.46/km for each additional km (2007 rates were $0.50/km for the first 5,000 km and $0.44/km for each additional km);

• RRSPS contribution limits — $19,000 for 2007, $20,000 for 2008, $21,000 for 2009, $22,000 for 2010 and indexed thereafter;

• lifetime capital gains exemption on qualified properties increased to $750,000 (from $500,000) for dispositions on or after March 19, 2007.

It is important to note one of the proposals in the fall 2006 economic statement by the federal government. Effective Jan. 1, 2007 Canadian residents may split up to one half of their eligible pension income with their spouse or common law partner. There is a definition of eligible pension income depending on the age of the individual. This is a tremendous opportunity for couples to split pension income on a tax effective basis.


Expanded income tax information can be found at CAUT’s 2007 Tax Guide, prepared by Roy Williams, Rheaume Williams Kalbfleisch Chartered Accountants, Ottawa, Ontario, can be downloaded (Adobe Acrobat format) from the CAUT website, or obtained by calling 613-820-2270.

Although every reasonable effort has been made to ensure the information contained in the above outline and CAUT’s tax guide is accurate and current, no individual or organization involved in either the preparation or distribution of these materials accepts liability for the content or for any consequences arising from their use. Readers should note that the material presented is for general information purposes only and is not intended to provide specific tax preparation advice. The particular circumstances of any individual’s tax situation must be taken into account. Accordingly, no action should be taken solely on the basis of the information provided. Professional advice should be obtained before embarking on any specific course of action. Although CAUT cannot pay for individual tax or advisory services, individual members seeking professional advice can contact Roy Williams at 613-236-4500 (x. 238) and take advantage of CAUT-negotiated client service rates.