2010 Federal Budget Summary

by Tax Guy - Burlington Accountant on March 5, 2010 Print This Post Print This Post

The Minister of Finance released the annual federal budget on March 4th, 2010. While the budget did not contain any major programs as it had in the past, there were some important changes that will affect individuals across Canada.

Federal Tax Brackets

The federal tax brackets have changed for 2010 as has the basic personal amount. The basic personal amount increased to $10,382 and there has been no talk of indexing the tax brackets.

  • 15% on the first $40,970 of taxable income
  • 22% on the next $40,970 of taxable income
  • 26% on the next $45,081 of taxable income
  • 29% of taxable income over $127,021.

Registered Disability Savings Plans (RDSP’s)

The government is proposing changes that would allow the rollover of a deceased individuals RRSP or RRIF into an RDSP for an infirm financially dependent child or grandchild of the deceased. The rollover rules are similar to the existing rules with RRSP’s and RRIF’s and the RDSP beneficiary will be required to make an election.

The rolled over amount cannot exceed the existing RDSP limit of $200,000.

Carrying Forward RDSP Grants

RDSP contributions attract Canada Disability Savings Grants and Canada Disability Savings Bonds. The amount that may be granted is limited by family income. Recognizing that families with disabled persons may not be able to contribute regularly to RDSP’s, the government will allow the carry forward of these amounts starting in 2011.

Child Tax Benefits (CTB) & Universal Child Care Benefit (UCCB)

Proposed changes will allow both eligible parents in a shared custody situation to share these benefits equally. These will take effect in July 2011.

Single parents will have the option of splitting their UCCB with their dependent child. The UCCB is a taxable receipt and the allocation to the minor child will allow single parents a higher after tax income.

Medial Expense Tax Credit

The government will limit the ability to claim cosmetic procedures as medical expenses. Unless the claim is required for medical or reconstructive purposes, these may no longer be claimed.

Scholarship Exemption and Education Tax Credit

In 2006, the government introduced a full tax exemption for post-secondary scholarships, fellowships and bursaries.

The current budget proposes that post-secondary programs that consist primarily of research will be eligible for the Education Tax Credit and the scholarship exemption, only if it leads to a specified diploma or degree. Under these rules, however, post-doctoral fellowships will be taxable.

If a scholarship, fellowship or bursary provided is in connection with a part-time program, the exemption will be limited to the amount of tuition paid for the program (plus the costs of program-related materials).

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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Matt March 6, 2010 at 1:45 pm

Hi, Thanks. I was told there are some significant changes related to employee stock options. Can you please write a post on that? Can employee stock options be held in TFSA? What are the tax implications of this?


Tax Guy March 8, 2010 at 9:18 am

@Matt: I’ll post something shortly!

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