On Monday, October 19, 2015, the 78-day marathon election came to an end. The party leaders spent the duration of the campaign trying to sell voters on their vision for Canada in the next four years and beyond. Once the dust had settled and the election results were made official, Justin Trudeau became the new prime minister with a sizable Liberal majority. Here are some of the key issues from Trudeau’s campaign that will likely affect the pocketbooks of Canadians.
Reduce the Tax-Free Savings Account (TFSA) Annual Contribution Limit
Starting in 2016, the Liberals will reduce the annual contribution limit on the TFSA from $10,000 to $5,500. This comes on the heels of the Conservatives increasing the contribution limit to $10,000 in 2015. Those you who made the full $10,000 contribution in 2015 are fine, but remember that next year you won’t be able to contribute as much (only $5,500).
Increase Income Taxes for the 1%, Reduce for the Middle Class
One of Trudeau’s key election promises is to increase income taxes for the highest income earners (also known as the one percent). For those earnings in excess of $200,000 annually, there will be a new tax bracket at33 percent. To help the struggling middle class, Trudeau will reduce the tax bracket to 20.5 percent from 22 percent for those earning from $44,700 to $89,401 annually. This adds up to tax savings of up to $670 a year.
Tax Breaks for Families
The Liberals are going to cancel income splitting for parents and scrap the Universal Child Care Benefit for top income earners introduced by the Conservatives. To help with the cost of raising children, the Liberals will introduce the Canada Child Benefit. Most families will receive up to $2,500 extra tax-free in their pockets annually.
Skyrocketing real estate prices in pricey real estate markets like Toronto and Vancouver has the dream of homeownership out of reach for many Canadians. The Liberals have promised to look into rising home prices and government policy at their disposal to keep housing affordable. The Grits will also loosen the rules on the Home Buyers’ Plan (HBP). Those recently unemployed and divorced will be able to access funds in their RRSP for the purchase of a first home.
Restoring Senior Benefits
The Liberals are putting money back into the pockets of the seniors of tomorrow. The Conservatives had increased the eligible age for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) from 65 years old to 67 for those born in 1958 or after – the Liberals are restoring the eligible age to 65. The Grits are also planning to boost GIS for seniors who are single with low income.
There are plenty of tax goodies for students. Under a Liberal government, students won’t have to repay their student debt until they make at least $25,000 annually. The Grits are also upping the Canada Student Grant to $3,000 annually for full-time students and to $1,800 annually for part-time students. Meanwhile, Trudeau is scraping the textbook tax credits for students across the board.
All these campaign promises look good on paper but “the proof is in the pudding” and it remains unclear how the new government will fund all these promises. As Canadians, we remain optimistic and wish the new Prime Minister all the best as he prepares to take office. In the meantime, it’s even more important to plan ahead for yourself and your family. A good financial plan will help you “take care of the things that matter” to you. Feel free to contact our office should you require assistance.