Taxes

Another Tory Tax Cut

January 13, 2006

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The Conservatives released their party platform today and unveiled a significant tax cut on capital gains:

[A Conservative government will] Eliminate the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months. Canadians who invest, or inherit cottages or family heirlooms, should be able to sell those assets and plough their profits back into the economy without taking a tax hit. It is time government rewarded Canadians who reinvest their money and create jobs.

News reports indicate that the plan also applies to stocks and bonds. Since taxes are the enemy of long-term investing (why sell a stock that has good fundamentals, but is overvalued, when 25% of the capital is lost to taxes on selling), the deferral of capital gains is a very significant benefit for investors. Combined with the increase in the dividend tax credit, the Tory plan is likely to reopen the whole debate on saving inside or outside a RRSP.

(As an aside, I found it ironic that the Liberals are calling the Tory fiscal plan “a formula for fudge”, when the same people have underestimated the federal surplus for years.)

PS: I just noticed that Investing Intelligently also has a post on this issue.

Bigger Tax Refunds

January 3, 2006

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This spring, we can expect slightly bigger tax refunds from Revenue Canada, thanks to the fiscal update tabled during the last days of the Liberal government. Some of the tax cuts were made retroactive to January 1, 2005:

  1. The Basic Personal Amount was increased by $500.
  2. The current 16% tax rate was lowered to 15%.

These changes will benefit all Canadian taxpayers to the tune of about $350 for someone earning more than $35,000 per year. It should help a little bit with the shock we are going to receive on opening our heating bills this month.

Tax Cuts in the Fiscal Update

November 14, 2005

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Finance Minister Ralph Goodale presented the 2005 fiscal update in Parliament today. As widely speculated in the press, the update contained plans for significant tax cuts. If you are wondering how much you will potentially save on your personal taxes, check out the Flash presentation of the fiscal update (click on the Tax Saving Calculator on the right).

Some highlights:

  1. The basic personal amount will be increased retroactively by $500 in 2005 and by another $200 in 2006. Note that the 2005 Federal Budget increased the basic amount by only $100 in 2006.
  2. The 16% tax rate applicable to income under $35,595 will be reduced by 1%, also applicable retroactively.

Since, these tax-cuts will benefit all tax payers and the federal government is still posting big surpluses, letting Canadians keep a little bit more of their hard-earned money is very welcome.