2014 B.C. Budget Highlights
The 2014 Federal Budget was announced on Feb 11th and was widely considered a “boring, balanced budget” as it held no shocking revelations or major changes. One week later, the British Columbia government followed suit with a pretty boring budget themselves. There were a few positive notes for young families and home buyers in the budget and I wanted to use this week’s article to fill you in on the most significant changes that may affect you and your financial plans:
First Time Home Buyers
• The budget announced an increase to the threshold for the provincial transfer tax for first time home buyers from $425,000 to $475,000. The previous tax and threshold values were set when property values were very different than they are today and this increase could save first time home buyers up to $7,500.
Home Owner Grants
• Moving in the opposite direction from the first time home buyer’s tax breaks, the threshold for the phase out of the home owner grant is being lowered to $1.1 million from the previous $1.295 million level. For properties valued over $1.1 million, the grant is reduced by $5 for every $1,000 of assessed value.
Medical Service Plan Premiums Increasing
• With plans to increase health care spending by $2.5 billion over the next three years, the premiums for BC MSPs are going up by 4%. This will take the cost for the average family up to $144 per month. By 2016, it’s expected that health care spending will account for 42% of government expenses. On a side note, the budget also increased the BC taxes on a carton of cigarettes by $3.20 which combined with the $4 per carton increase just announced by the federal government will mean a total increase of $7.20 per carton.
Early Childhood Tax Benefit
• This new plan has been in the works for several years and it became a reality with the 2014 BC Budget. This new benefit will not be in place until April 2015 but when it does arrive, it will provide a monthly amount of up to $55 per child for families with children under the age of 6. Benefits from this program will be combined with the federal Canada Child Tax Benefit (CCTB) and the BC family bonus program into a single monthly payment. The $55 per month benefit will be reduced if the family’s net income exceeds $100,000 and will drop to $0 if the family’s net income exceeds $150,000. The CRA will administer the program and those that have applied for the CCTB will be automatically considered for this benefit as well.
Training & Education Savings Grant
• This new grant was first introduced in last year’s budget but it did leave a lot of questions unanswered. The 2014 budget confirmed a few new details including the proposed start date of August 2015. All BC children born on or after January 1st 2007 who have a Registered Education Savings Plan (RESP) open in their name area eligible for this one time, $1,200 grant. When the child turns 6, the family will be notified by the RESP provider that it’s time to apply for the grant and once the application is processed and approved, the money should be deposited into the RESP account within 6-8 weeks. Since first announcing this new grant 1 year ago, the registration rate for RESPs has increase by 10% (and I sincerely hope that anyone else with children born after the Jan 1, 2007 cut-off that has not already opened an account will do so soon).
• There will be no changes to provincial income tax levels for most earners. However, a previously announced tax hike for those who earn over $150,000 will begin this year. B.C. is one of only two provinces in Canada that are posting balanced budgets this year and although light on tax breaks, it will hopefully provide a surplus in the range of $841 million over the next three years.
Please note: the above highlights are a general overview only and neither comprehensive or meant to be used as specific tax advice. There are a number of other items included in the 2014 budget that I simply didn’t have enough room to include. Feel free to contact me with further questions or for clarification on what these changes may mean to you.