• Personal tax relief
• New deductions for self-employed
• Reduction of capital gains income inclusion rate to 50%

The “Mini Budget” accelerates several of the federal tax reductions that were announced in the 2000 federal budget. Effective January 1, 2001: 

· The lowest tax rate will be reduced from 17% to 16%. This rate will apply to total incomes up to $30,754 

· The middle tax rate will be reduced from 24% to 22%. This rate will apply to total incomes between $30,754 and $61,509.

· There will be a new “upper middle” tax bracket. The top tax rate will be split into two brackets. For incomes between $61,509 and $100,000 a 26% tax rate will apply. The 29% rate will apply to incomes in excess of $100,000.

· The 5% surtax will be eliminated.

· The following tax credits will be increased:
                                                          2000             2001 
 Disability Tax Credit                          $ 4,293       $6,000
 Caregiver Tax Credit                            2,386         3,500
 Infirm Dependant Credit                       2,386         3,500
 Disability Tax Credit supplement for      2,941         3,500 
 Children with severe disabilities

· The education tax credit will be increased from $200 to $400 per month for full-time students and from $60 to $120 per month for part-time students. Effective July, 2001. 

· Additional enhancements will be made to the Canada Child Tax Benefit.

· To provide relief from higher heating expenses, a one time payment of $125 per individual (or $250 per family) will be paid to lower income Canadians who qualify for the GST tax credit.
 

CPP/QPP deductions for Self-Employed

Self-employed individuals currently get a tax credit for CPP/QPP contributions. This includes an employer and employee premium. To make self-employed individuals more comparable with owner-managers who are employees of their corporations, it is proposed that self-employed persons will be able to claim a tax deduction (rather than a tax credit) for one-half of the contribution. The other half will continue to qualify for a tax credit.

Capital Gains

The capital gains rate drops to 50%, effective immediately. As a result, three different inclusion rates will apply for 2000:

75% for the period January 1 to February 27, 2000
16 2/3% for the period February 28 to October 17, 2000, and
50% for the period October 18 to December 31, 2000.

This means that someone who makes a profit on the sale of a stock would pay tax on only 50% of the gain while nine months ago they would have paid tax on 75% of the gain.

Where a taxpayer has gains or losses in more than one of the three periods, a complicated three-step formula must be followed to determine the effective inclusion rate for the 2000 taxation year.

The new 50%  rate will apply to gains on dispositions of eligible capital property (ECP) for taxation years that end after October 17, 2000. 

The special capital gains rollover for small business investments introduced in the 2000 budget is enhanced.

  As with any budget that is presented by government, the changes do not become law until passed by Parliament. This will likely not occur until after an election.