Notable Canadian Tax Law Changes
Canada Revenue Agency lists the following major changes for the 2008 tax year, including changes that have been announced but are not yet signed into law.
Tax Free Savings Account (TFSA)
A TFSA was introduced in 2009, allowing individuals to earn investment income tax free. Contributions to a TFSA are not deductible for income tax purposes, however, income earned in such an account (i.e. interest, dividends, or capital gains) is tax-free, even when it is withdrawn.
The TFSA contribution limit is $5,000 in 2009. It will be indexed to inflation and rounded to the nearest $500 in later years. Unused TFSA contribution room can be carried forward to later years, and the total of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year.
For more information, visit CRA's Tax Free Savings Account page, or see Information Sheet RC4466.
Registered Disability Savings Plan (RDSP)
A Registered Disability Savings Plan is a savings plan intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit.
Contributions to an RDSP are not tax deductible. They can be made until the end of the year in which the beneficiary turns 59 years of age, and are not included in the income of the beneficiary when withdrawn. Additional support for the disabled person is provided by the government-sponsored Disability Savings Grant and Disability Savings Bond. Any grant or bond received by the plan, or investment income earned in the plan, is included in the beneficiary's income for tax purposes when paid out of the RDSP.
Taxable Capital Gains
There may be an inclusion rate of zero on a capital gain realized from the exchange of certain other types of capital property donated to a registered charity or other qualified donee. Special tax treatment may also apply in cases where the exchanged property is a partnership interest (other than a prescribed interest in a partnership). For more information, see Pamphlet P113, Gifts and Income Tax.
Northern Residents Deduction
The northern residency deduction has increased to $8.25 per day if you are entitled to only the basic residency amount, or $16.50 per day if you are entitled to both the basic and the additional residency amounts.
Medical expenses
The list of eligible medial expenses has expanded to include amounts paid to purchase, operate, and maintain the following devices, if prescribed by a medical practitioner:
- altered auditory feedback devices for the treatment of a speech disorder;
- electrotherapy devices for the treatment of a medical condition or a severe mobility impairment;
- standing devices for standing therapy in the treatment of a severe mobility impairment; and
- pressure pulse therapy devices for the treatment of a balance disorder.
Also eligible are amounts paid to purchase, care for and maintain a service animal specially trained to assist an individual who is severely affected by autism or epilepsy, plus reasonable travel expenses incurred for the individual to attend a school, institution or other place that trains the individual in the handling of the service animal.
Related Websites
Canada Revenue Agency's What's New page provides links to news releases, updates on programs and services, and upcoming events.