Information on the 2005 Canadian Budget

When the major media outlets discuss the release of a government budget, such as the Canadian budget, they all tend to disclose the same information. The details found at Bloomberg, the CBC or CTV news all indicate a few key changes in policy. Over the next five years Canadians can expect:

1. $5 billion dollars towards the implementation of a national daycare program.
2. An increase in RRSP contribution limits to $22,000
3. $12 billion in additional military spending
4. A raise in the personal income tax exemption to $10,000
5. Corporate tax rates cut from 21% to 19%

The problem with newspaper size articles is they do not have the room to describe in full detail the new policies the Canadian government plans to implement. First of all, we are left uncertain about how quickly these "5 year plans" will come into play. Can we expect some of this new spending today, or will most of it be done in the final year or two of the plan? Secondly, there are many policy changes that could impact you and your family but are left out of the story as they do not impact the majority of Canadians.

To find out how the budget may impact you, you need to go to the source: The Canadian Budget Plan 2005. If you're a Canadian, I would suggest skimming through it to see how this budget impacts your family. Depending on your personal situation, it may impact you more than you think. Here are a few examples:

Planning to Adopt a Child?: "Every year thousands of Canadian families adopt a child. These adoptive parents can face substantial costs that are unique to the decision to adopt a child, including adoption agency and legal fees. Adoptive parents do not currently receive tax recognition of these exceptional costs.

Budget 2005 proposes to introduce a non-refundable tax credit to recognize specified adoption expenses, up to a maximum of $10,000."

Own a Small Business?: "A lower tax rate of 12 per cent (13.12 per cent including corporate surtax) applies on qualifying active business income of small businesses of up to $300,000 annually. The 2003 and 2004 budgets increased this limit from $200,000 in 2002 to $300,000 in 2005. This budget’s proposal to eliminate the corporate surtax will reduce corporate taxes for small businesses."

Keep a Large Balance in a Canadian Bank?: As part of our commitment to consumer protection, the Government of Canada is increasing the deposit insurance coverage limit from $60,000 for insurable deposits to $100,000, effective immediately.

Have Dependents with Large Medical Expenses?: "Budget 2005 makes the tax system fairer by... doubling, to $10,000, the maximum amount of medical- and disability-related expenses that caregivers can claim on behalf of their dependants, beginning with the 2005 taxation year."

Those are just a few examples. There are a great deal of policy changes in this most recent budget, so if you're a Canadian taxpayer, I recommend that you check it out.