Questions And Answers - New Income Tax Measures for Individuals

1. What is the Basic Personal Amount?
2. Does the increase to the Basic Personal Amount also apply to the Spouse or Common-Law Partner Amount and the Amount for an Eligible Dependant?
3. What is the lowest federal personal income tax rate?
4. Will the income tax changes for individuals announced in the 2007 Economic Statement be reflected in the 2007 income tax returns and other CRA forms and publications?
5. Do the new measures announced in the 2007 Economic Statement affect provincial or territorial personal income tax rates?
6. Will tax preparation software developed by private companies reflect the tax changes announced in the 2007 Economic Statement for the current tax year?
7. Where can I find out more information about the 2007 Economic Statement?

Q.1 What is the Basic Personal Amount?

A.1 The Basic Personal Amount is one of the elements included in calculating your non-refundable tax credits. Individuals with taxable income up to this amount will not pay income tax.

As announced in the 2007 Economic Statement, the federal Basic Personal Amount will increase from $8,929 to $9,600 for the 2007 and 2008 tax years, to be followed by an additional increase to $10,100 for the 2009 tax year.

Note: The Yukon Basic Personal Amount will also increase to match the revised federal values for the 2007 to 2009 tax years. For all other provinces and territories, the provincial or territorial Basic Personal Amount remains unchanged.

Q.2Does the increase to the Basic Personal Amount also apply to the Spouse or Common-Law Partner Amount and the Amount for an Eligible Dependant?

A.2 Yes. The maximum Spouse or Common-Law Partner Amount and Amount for an Eligible Dependant will also increase from $8,929 to $9,600 for the 2007 and 2008 tax years, to be followed by an additional increase to $10,100 for the 2009 tax year.

Note: For Yukon tax purposes, the maximum Spouse or Common-Law Partner Amount and Amount for an Eligible Dependant will also increase to match the revised federal values for the 2007 to 2009 tax years. For all other provinces and territories, these amounts remain unchanged. 

Q.3 What is the lowest federal personal income tax rate?

A.3 The lowest personal income tax rate is the tax rate that applies on up to the first $37,178 (for 2007), of an individual’s taxable income. This rate is also used in calculating federal non-refundable tax credits and alternative minimum tax.

As announced in the 2007 Economic Statement, the lowest federal personal income tax rate will be lowered from 15.5% to 15% for the 2007 tax year.

Q.4 Will the income tax changes for individuals announced in the 2007 Economic Statement be reflected in the 2007 income tax returns and other CRA forms and publications?

A.4 Yes. The income tax measures for individuals announced in the 2007 Economic Statement will be reflected in the 2007 income tax packages, as well as other relevant forms and publications. As a result, taxpayers will simply have to file their 2007 income tax returns to be able to take advantage of the changes. 

Q.5 Do the new measures announced in the 2007 Economic Statement affect provincial or territorial personal income tax rates?

A.5 No. The 2007 Economic Statement only deals with the federal income tax rate. Provinces and territories determine their own income tax rates.

Q.6 Will tax preparation software developed by private companies reflect the tax changes announced in the 2007 Economic Statement for the current tax year?

A.6 The CRA is working with tax preparation software developers in an effort to ensure that their products for the 2007 tax year will reflect the changes.

Q.7 Where can I find out more information about the 2007 Economic Statement?

A.7 For more information about the 2007 Economic Statement and the related bills, visit the Department of Finance Canada’s Web site at www.fin.gc.ca.