Tax

Finance Minister Bill Morneau delivered the government’s 2017 federal budget on March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and forecasts a deficit of $28.5 billion for 2017-2018. Learn what the budget means for small business owners

Finance Minister Bill Morneau delivered the government’s 2017 federal budget on March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and forecasts a deficit of $28.5 billion for 2017-2018. Find out what this means for businesses.

Small Business

  • No changes to income tax rates
  • No changes to capital gains inclusion rate

Tax Planning using private companies

While no specific measures are mentioned, the government will review the use of tax planning strategies involving private corporations “that inappropriately reduce personal taxes of high-income earners.” including:

  • Income Splitting: Reducing taxes by income splitting with family members who are subject to lower personal tax rates.
  • Regular income to Capital Gains: Converting income to capital gains (instead of income being taxed as dividends)
  • Passive income inside Corporation: Since corporate income tax rates are generally lower than personal tax rates, this strategy can facilitate the accumulation of earnings by owners of private corporations.

For Professionals

The government eliminated a tax deferral opportunity for certain professionals. Accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors will no longer be able to elect to exclude the value of work in progress in computing their income. This will be phased-in over two taxation years, starting with taxation years that begin after this budget.

Please don’t hesitate to contact us if you have any questions.

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With the tax filing due April 30, we've included some tax deductions for families to notice for the 2016 taxation year.

With the tax filing due April 30, we’ve included some tax deductions for families to notice for the 2016 taxation year.

  • Canada Child Benefit: The Canada child benefit is a tax free monthly payment to help eligible families with the cost of raising children.
  • Child Care Expenses: If your kids attend a daycare or a child care program, you or your spouse might be able to claim what you spent in 2016.
  • Child Disability Benefit: You can qualify for this tax-free benefit if you care for a child under age 18 who is eligible for the disability tax credit.
  • Children’s art tax credit: For 2016, claim up to $250 eligible fees for your child’s prescribed program of artistic, cultural, recreational or development activity.
  • Children’s fitness tax credit: For 2016, claim up to $500 eligible fees for your child’s prescribed program of physical activity.
  • GST/HST sales tax credit: Receive tax-free payments in January, April, July and October if you are eligible.

 
If you have any questions, please contact us and we can connect you with a tax professional.

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With the tax filing due April 30, we've included new tax highlights for the 2016 taxation year.

This tax-filing season, many important changes and improvements were made to services, benefits and credits for Canadians. Here’s what you need to know:

New and Improved Benefits and Credits

  • Canada Child Benefit: The Canada child benefit is a tax free monthly payment to help eligible families with the cost of raising children.

Other Changes

  • Income Splitting Tax Credit: The family tax cut has been eliminated for the 2016 year and future tax years.
  • Children’s Fitness Tax credit: For 2016, claim up to $500 eligible fees for your child’s prescribed program of physical activity.
  • Children’s Art Tax Credit: For 2016 claim up to $250 eligible fees for your child’s prescribed program of artistic, cultural, recreational or developmental activity.
  • Home Accessibility Tax Credit: For 2017 and subsequent tax years, you can claim a non-refundable tax credit for eligible expenses incurred for work performed for a qualifying renovation of eligible dwelling of a qualifying individual.
  • Reporting the Sale of Your Principal Residence: Starting 2016, you are required to report basic information on your tax return when you sell your principal residence to claim the full principal residence exemption.

If you have any questions, please contact us and we can connect you with a tax professional.

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BC Finance Minister, Michael de Jong delivered the province's 2017 budget on Feb. 21, 2017. Learn what the budget means for small business owners and individuals.

BC Finance Minister Michael de Jong delivered the province’s 2017 budget on Feb. 21, 2017. The budget anticipates a surplus of $295 million for the current year, $244 million in 2018-2019 and $223 million in 2019-2020.

Corporate Income Tax Measures

Reduction in Corporate income Tax Rate from 2.5% to 2.0% effective April 1, 2017

Corporate Income Tax Rates- As of January 1, 2017
British Columbia Combined Federal & BC
  General 11% 28%
  M&P 11% 26%
  Small Business* 2.5%/2.0%** 13.0%/12.5%**
  *on first $500,000 of active business income **effective April 1, 2017

Personal

Increase in the personal tax rate from 40.61% to 40.95% for ineligible dividends effective January 1, 2017.

 Personal Combined Federal/Provincial Top Marginal Rates
2017
  Interest and regular income 47.70%
  Capital gains 23.85%
  Eligible dividends 31.30%
  Non-eligible dividends 40.95%

Medical Services Plan Premiums: Rate will remain at $75/month/adult. Effective Jan 1, 2018: 50% MSP premium reduction for households with annual net incomes up to $120,000.

Firefighter & Search & Rescue Volunteer Tax Credit: Non-refundable tax credit of up to $3,000 for 2017.

Back to School Tax Credit: Non-refundable tax credit of $250 per child (ages 5 to 17) for 2016 to 2018. Effective Jan 1, 2018, the education tax credit will be eliminated.

Electricity- Provincial Sales Tax Act: Effective Oct 1, 2017, the tax rate is reduced to 3.5% of the purchase price.

Property transfer tax: For first time home buyers to save property transfer tax on the purchase of their property the partial exemption has been increased to $500,000 from $475,000.

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Do you have unrealized capital losses? Have you maximized your TESA contribution yet?

Do you have unrealized capital losses? Have you maximized your TESA contribution yet? Have you thought about family income splitting? Can you benefit from the New Canada Child Benefit? Have you maximized your RRSP contributions? Is it time wind up your RRSP? Are you meeting the CRA deadlines for 2016 savings? Have you paid your personal tax instalments?

Your Investments

    • Do you have unrealized capital losses?
      • If you own investments with unrealized capital losses, you could consider selling them before year end to apply it against any net capital gains you’ve realized in this year or the prior 3 years. However, make sure you don’t create a superficial loss, contact us to learn more.
    • Have you maximized TFSA contribution yet?
      • In 2016, you can contribute up to $5,500 to your TFSA (this has decreased from $10,000 TFSA in 2015), if you have never contributed, you may be able to contribute up to a total of $46,500.

Family Tax Considerations

    • Have you thought about family income splitting?
      • There are a variety of ways to income split, with the increase to the top marginal tax rates for 2016, please contact us to learn how valuable family income splitting can be.
    • Can you benefit from the new Canada Child Benefit?
      • The Canada Child Benefit is based on family income from the preceding year, please ensure you have filed your tax returns for 2015.

Retirement and Estate Planning

    • Have you maximized your RRSP contributions?
      • You have until March 1, 2017 to make your 2016 RRSP contribution.
    • Is it time to wind up your RRSP?
      • If you turn 71 and you need to wind up your RRSP in 2016, remember you only have until Dec 31, 2016 to make a contribution to your RRSP for 2016.

Key Tax Deadlines and Administration Considerations

    • Are you meeting the CRA deadlines for 2016 savings?
      • Key payments due by December 31, 2016

          • Charitable gifts
          • Medical Expenses
          • Union and Professional Dues
          • Investment counsel fees, interest and other investment expenses
          • Certain child and spousal support payments
          • Political contributions
          • Deductible legal fees
          • Interest on student loans
          • Contributions to your RRSP if you turned 71 during 2016 (you will also have to wind up your RRSP by this date)
    • Have you paid your personal tax installments?
      • If you are required to pay 2016 personal tax installments, remember that your final installment must be paid by December 15, 2016.

 

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