Finance Minister Jim Flaherty said his latest budget aims to stimulate consumer spending. (Canadian Press)

Federal Finance Minister Jim Flaherty used his latest budget to promise Canadians some tax relief mixed with other measures aimed at bolstering the economy.

Tuesday's budget proposes that the basic personal amount — what people can earn before they have to pay federal tax — go from $9,600 in 2008 to $10,320 for 2009.

The government also proposes raising the upper limits on the two lowest income-tax brackets. The upper limit for the 15 per cent bracket would go to $40,726, while the upper income limit for the 22 per cent bracket would rise to $81,452.

"This tax relief will help low- and middle-income Canadians, and it will stimulate consumer spending," Flaherty said in his budget address Tuesday afternoon.

The tax changes would cost about $1.9 billion for the 2009-10 fiscal year and almost $2 billion the following year.

Flaherty said the government also would enhance the Working Income Tax Benefit, introduced in 2007.

Flaherty also promised action to stimulate the country's housing sector.

A home renovation tax credit would give up to $1,350 in tax relief on home improvement projects. Eligible expenses would have to total at least $1,000, but not more than $10,000, and the work would have to be done between Jan. 27, 2009, and Feb. 1, 2010.

The government also said it would change the maximum amount a first-time homebuyer could deduct from a Registered Retirement Savings Plan. The maximum allowable withdrawal under the Home Buyers' Plan would rise to $25,000 from $20,000. The money taken out of an RRSP would have to be repaid over a 15-year period, beginning in the second year after it is withdrawn.

It would mark the first increase in the withdrawal limit since it was introduced in 1992.

Flaherty also pledged to establish a first-time homebuyers tax credit — a $5,000 non-refundable income tax credit on a qualifying home purchased after budget day. The credit could be worth up to $750 in federal tax relief, and would cost the government $355 million over the next two years.

Tax cuts for seniors

Senior citizens would also be in for some tax relief. The government is proposing a $1,000 increase to the old-age credit starting in 2009. The age credit amount would rise to $6,408.

The government said it will also follow through on its plans introduced in the fall economic statement to reduce the required minimum Registered Retirement Income Fund withdrawal for 2008 by 25 per cent.

Ottawa's strategy of small amounts of tax reductions in a wide number of areas makes sense in this type of broad-based budget, experts said.

"None of these things are going to grab anyone's attention. But it is what happens when you are doing broad tax cuts," said Larry Chapman, an expert adviser on tax policy for the Canadian Institute of Chartered Accountants.