Finance Minister Jim Flaherty delivered his third federal budget on Tuesday February 26th 2008.

This budget has a few important items that could affect your financial plan. A quick overview of the federal budget is as follows:

Tax-free Savings Account: Beginning in 2009, Canadians over the age of 18 can contribute $5,000 each year to a Tax Free Savings Account (TFSA) and investment income, including capital gains, will accumulate tax-free. Withdrawals will also be, as the name implies, tax-free. Unused contribution room carries forward to subsequent years. FIND OUT MORE

Registered Education Savings Plan (RESP): The RESP contribution period has been extended from 21 years to 31 years. The life of the plan has been extended from 25 to 35 years.

Rules for claiming business use of vehicles will be simplified: Instead of having to log every trip for the entire year, records for a representative period would be sufficient in 2009. The requirement for logbooks has been a major gripe for small business owners.

Guaranteed Income Supplement: The GIS earnings clawback will kick in at $3,500 instead of $2,500.

Registered Disability Savings Plan: New registered disability savings plans announced in last year's budget are to finally become available this year. Federal Locked-in Pension Plans: Of interest to individuals who have transferred funds from a federally regulated registered pension plan into a Life Income Fund (LIF) are proposals to increase the flexibility to withdraw funds from these LIFs.

Dividend Tax Credit: A reduced gross-up and dividend tax credit will reflect lower corporate income tax rates, effective in 2010.

If you'd like to discuss any of the above items in more detail, please don't hesitate to CONTACT US.