Wednesday, 21 October 2015

The Liberal Win and your Finances

What the Liberal means for your wallet
With the big Liberal win on Monday there is a lot of talk about what this means for the country and for all of us that live in it. There were, of course, a lot of election promises made and it will take some time to see how everything plays out and what is actually put into practice. Here's a look at some of the policies the Liberals put forward that would impact your personal or household finances.

As I've written before, I did vote Liberal in this election and I'm in support of most of the policies listed below but now we'll have to wait and see what/when things get introduced. 

Income Tax Changes
The biggie is changes to the income tax where the wealthiest Canadians would pay more and the middle class would pay less. A new tax bracket would be introduced for those earning more than $200,000/year and the rate on that would be 33%. Right now the highest tax bracket is 29% and is for income over $138.586.

The marginal tax bracket for those with incomes between $44,700 and $89,401 is currently 22% and that would be dropped to 20.5%. This would also help out those earning more than $89,401 as that portion of their income would be taxed at the lower rate. If you need a refresher on marginal tax rates check out this post.

TFSA's
Starting this year the Conservative's increased the annual TFSA contribution limit from $5,500 to $10,000 and the Liberal's have said they would roll this back to the original amount. This would also tend to hurt higher income earners as they are more likely to be maxing out TFSA's each year. As a bit of a side note, it will be interesting to see how this actually plays out as many people have already contributed the $10,000 for 2015. If it is reversed for this year instead of just going forward it will certainly be an annoyance for all of us in my industry ;)

Income Splitting 
The Conservative's also introduced income splitting where families with children under 18 can shift up to $50,000 from the higher income earner to the lower income earner for a maximum tax benefit of $2,000. The Liberal's have said they would also get rid of this.

Child Tax Benefits
The current Universal Child Care Benefit and all other child tax credits/benefits will be halted and a new Canada Child Benefit will be introduced. This will be available for all families with children under 18 who have a household income of less than $150,000. The proposed Liberal plan (compared with Harper's UCCB) would actually give higher payments to those eligible families.

Home Buyer's Plan 
The Liberal's have said they would expand the Home Buyer's Plan to allow additional tax free withdrawals from your RRSP when purchasing a house if a significant event has occurred (divorce, move for a job, having an elderly family member move in). Right now you can only take advantage of this for your first home purchase.

OAS / CPP
The current eligibility age for OAS is 67 Trudeau has said they would bump this back down to age 65. There has also been talk about enhancing CPP but not many details are known about that.

Student Loans
Finally, the terms and conditions for student loans would be lightened up a bit. The available grants would be increased and the income requirements to meet such grants would also increase making them more readily available. Repayment of student loans would also be delayed until an income of $25,000/year was attained.

What the Liberal means for your wallet

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