What Budget 2009 Means for your Wallet

January 28, 2009

…or purse, I suppose, if you’re a woman. Or European. Whatever. While much of the media coverage of yesterday’s Federal Budget has focused on the economic stimulus initiatives and the political wrangling in Ottawa, self-centred Canadians such as myself are wondering exactly what impact the impact will be on our personal finances. Sure, new bridges and debts to pass along to our grandchildren are fine and dandy, but my real concern is this- will Budget 2009 help me get a new LCD television?

The answer? Not unless Future Shop is having one hell of a sale.

The Budget promises tax relief for low- to middle-income Canadians (whatever that means), and claims that these cuts will help stimulate spending. The tax measures being introduced take the form of changes to the federal tax brackets but increasing the top limit for the basic personal exemption (the amount you can make before paying any taxes) and for the two lowest brackets (15% and 22%). In other words, the amount you can make before entering the next bracket goes up, meaning your tax bill will go down.

The numbers presented in Budget 2009 look like this:

Item 2008 2009 Variance Savings
Basic Personal Exemption $9,600 $10,320 $720 $108
15% tax bracket $37,885 $40,726 $2,841 $199
22% tax bracket $75,769 $81,452 $5,683 $227

Not bad, but not enough to make me rush out and buy that Porsche I’ve had my eye on. However, these numbers are a little deceiving- while someone making more than $81,452 will see the maximum savings of $534 over their 2008 tax bill, the basic personal exemption and tax brackets had already been slated to creep upwards (as they do most years). When we compare the Budget 2009 plan to the already slated changes for 2009, we see the actual savings are even less:

Item 2009 (proposed) 2009 (revised) Variance Savings
Basic Personal Exemption $10,100 $10,320 $220 $33
15% tax bracket $38,832 $40,726 $1,894 $133
22% tax bracket $77,664 $81,452 $3,788 $152

Obviously, for those making less than $81,000, the savings will be even less and not on a proportional basis, as the savings don’t kick in until you reach the top of your bracket. An individual earning $60,000 will save $166, and a couple earning $30,000 each will save a total of $66 between them. Not exactly a spending stimulus, but we’ll take what we can get.

There are also a number of other initiatives that may be of value to some- as promised during the last election campaign there will be a tax credit on closing costs for first time home buyers, which could have an ultimate value of up to $750, and there are some changes to benefits for low income seniors. I’m also quite intrigued by the tax credit for certain home renovations that could be worth up to $1,350 if you spend over $10,000. I’m holding judgment on this measure, though- the value of such a program will depend on what exactly is eligible and what strings are attached. I’m particularly interested to see if labour costs will be an eligible expense (for those silk hanky, white shoe, latte sipping types who don’t do their own work), and if so what impact that will have on the number of contractors willing to give that infamous “cash discount”. I can’t help but think that offering tax credits for renovations may pay for itself in increased reported income from contractors. Either way, I’m going to make sure I keep all my receipts from Home Depot, not just the ones I show my wife.

So for our family, Budget 2009 will save us a bit more than $600 in taxes over what we otherwise would have paid in 2009- not quite enough for a new TV, but getting there. If I can write off some of my renovation expenses we’ll be a little bit closer, but probably still not enough. Prime Minister Harper, you’ve failed to stimulate me. Coalition, do your worst!

{ 1 trackback }

fha refi
11.24.09 at 2:52 pm

{ 4 comments… read them below or add one }

RELish 01.28.09 at 3:38 pm

While we got a small tax break, the max EI and CPP amounts have increased, eating up another $90 or so of your $300 savings. Boo-urns.

Davenet 01.28.09 at 4:39 pm

These cuts have been touted as helping low and middle income Canadians, but I’m not sure what planet you’re on if you think that $80k is low or middle income. The average income for an individual in Canada is about $26k, for a family it is under $50k. I’ve got no problems with tax cuts for anybody- those making the most money probably deserve the biggest cuts- just don’t try to pass it off as helping the middle class.

Dillon 01.28.09 at 10:42 pm

Budget 2009 can help you get that new LCD television. Just have Future Shop write it up as a 56″ LCD computer monitor, and set up the monitor as a business asset (you can tell the auditor you have REALLY bad eyesight.) One of the provisions in the new budget is a new temporary capital cost allowance rate of 100% for computer equipment. If you are in the top tax bracket, the Feds are essentially paying for nearly half of your new big screen ‘computer monitor’.

(Just joking of course.)

Fabulously Broke 01.29.09 at 11:22 am

Well. Some money is better than no money.


Fabulously Broke in the City
Just a girl trying to find a balance between being a Shopaholic and a Saver.

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