What you should know about personal income tax for 2009 and 2010

In 2009, there were a number of changes made by the government for personal income tax, credits and tax free savings accounts. There are also changes upcoming in 2010 that you should know about now so you can take advantage of them.

Extremely important

• Temporary Home Renovation Tax Credit (HRTC) only for 2009 taxation year – starting date is from January 28 to January 31, 2010. Items of enduring nature are eligible, but you need to have receipt with details. The maximum amount of non-refundable tax credit is $1,350.00. You need to spend $10,000.00 in order to get the maximum credit depending on your tax bracket.

Effective since 2009

• Tax-Free Savings Account (TFSA) – started in 2009, everybody who is over 18 years of age can open a separate bank account with deposit up to $5,000.00 and continue to do so every year after that. The $5,000.00 can be carried forward to next year if you have not contributed at all or only partially in the previous year. If you withdraw any amount during the year, you do not lose the contribution room. ‘Tax Free’ means you do not have to pay tax on the interest or investment earned from this account.
• New First-Time Home Buyers’ Tax Credit (HBTC) – anyone who is a first time home buyers after January 28, 2009 are eligible to a maximum non refundable tax credit on 15% of $5,000.00, or $750.00.

What’s new for 2010:

• Increase of RRSP contribution amount to $21,000.00 maximum.
• Increase in RRSP withdrawal limit from Home Buyers’ Plan to $25,000.00.
• Canada child tax credit payments to $2,076.00 for the first child, $1,792.00 for the second child and $1,747.00 for each subsequent child.
• Federal increases thresholds in all four federal tax brackets and Provincial increases all three Ontario tax brackets.
• Increases in personal exemption, threshold for lower and middle income tax brackets, and in age tax credit.
• Ontario decides to join other provinces in Canada to adopt the harmonized sales tax (HST) starting July 1, 2010.

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