Takeaways from the 2019 Federal Budget

Posted 20 Mar 2019 by Rick Irwin, CFP, CLU

Last night the federal Liberal party unveiled their latest budget and, not surprisingly for an election year, it contained a broad number of new benefits for Canadians. In addition to more far reaching goals such as a Canada-wide Pharmacare program and high-speed internet for every Canadian household, here is a breakdown of some of the new budget initiatives that could benefit your wallet:

First Time Home Buyer Incentive: Canada Mortgage and Housing Corporation (CMHC) will help first-time buyers by providing an interest free loan of 10% for a newly constructed home or 5% for the purchase of an existing home. Families with a household income of more than $120,000 annually won’t qualify, and the value of the home (including CMHC's portion) cannot be more than four times your annual household income. This loan would have to be repaid at the time a home is sold. CHMC would essentially have a stake in the value of your home so it’s not clear if they would be paid back the loan amount or their percentage of the market value at the time the home is sold. 

Enhancements to the First Time Home Buyers’ Plan: The amount that you are able to withdraw (tax free) from your RSPs to purchase your first home has increased, from $25,000 to $35,000 per individual ($70,000 per couple). The budget also proposes that individuals who experience a breakdown of a marriage or common-law partnership be permitted to participate in the plan, even if they do not meet the first-time requirement. This would be available for withdrawals made after March 19, 2019.

Enhancing the Guaranteed Income Supplement: The annual income threshold to receive the Guaranteed Income Supplement (GIS) was raised from $3,500 to $5,000 with an additional allowable $10,000 in self-employed income. This will benefit lower income seniors and not penalize them for working part time.

Tightening stock options: New tax legislation will put a $200,000 cap on employee stock grants that have received tax-preferred treatment in the past from the companies they work for.

Promoting electric cars: Buyers of a zero-emissions vehicle under $45,000 will receive a grant of $5,000.

Canada Student Loans: the interest rate charged on student loans will drop to Prime (from Prime +2.5%) and interest will not accumulate during the six-month grace period after a student loan borrower leaves school.

Canada Training Credit: Every year, eligible workers between the ages of 25 and 64 would accumulate a credit balance of $250 per year, up to a lifetime limit of $5,000, provided they earn less than the top of the third federal tax bracket ($147,667 in 2019). Canadians would be able to apply their accumulated Canada Training Credit balance against up to half the cost of training fees at colleges, universities and eligible institutions providing occupational skills training. There will additionally be an extra 4 weeks of EI available every four years for employees to take time off to upgrade their training.

RDSP improvement: The budget eliminated the requirement to close a Registered Disability Savings Plan when a beneficiary no longer qualifies for the Disability Tax Credit. This change means that grants and bonds that would otherwise be repayable to the Government can remain in the RDSP.

A lot was proposed in the budget last night, and the details on some of the proposals are still not clear. If you would like any further information on the above items, or how they may impact you, do not hesitate to get in touch.