The end of 2022 is quickly approaching – which means it’s time to get your paperwork in order so you’re ready when it comes time to file your taxes!
In this article, we’ve covered four different major types of 2022 personal tax tips:
Investment Considerations
Tax-Free Savings Account (TFSA)-You can contribute up to a maximum of $6000 for 2022. You can carry forward unused contribution room indefinitely. The maximum amount you’re allowed to make in TFSA contributions is $81,500 (including 2022).
Registered Retirement Savings Plan (RRSP)- Contribute to your RRSP or a spousal RRSP. Remember that you can deduct contributions made within the first sixty days of the following calendar year from your 2022 income. You also have the option of carrying forward deductions. Consider the best mix of investments for your RRSP: hold growth investments outside the plan (to benefit from lower tax rates on capital gains and eligible dividends), and hold interest-generating investments inside. We can help if you need advice on how to make the most of your RRSP.
Do you expect to have any capital losses? If you have capital losses, sell securities with accrued losses before year end to offset capital gains realized in the current or previous three years. You must first deduct them against your capital gains in the current year. You can carry back any excess capital losses for up to three years or forward indefinitely.
Interest Deductibility – If possible, repay the debt that has non-deductible interest before other debt (or debt that has interest qualifying for a non-refundable credit, i.e. interest on student loans). Borrow for investment or business purposes and use cash for personal purchases. You can still deduct interest on investment loans if you sell an investment at a loss and reinvest the proceeds from the sale in a new investment.
Individuals
The following list may seem like a lot, but it’s unlikely every single tip will apply to you. It’s essential to make sure you aren’t paying taxes unnecessarily.
COVID-19 federal benefits – If you repay any COVID-19 benefit amounts before 2023, you can deduct from your income the repayment amount in the year in which the benefit amount was received instead of the year it was repaid. (You can also split the deduction between the two years.)
Income Timing – If your marginal personal tax rate is lower in 2023 than in 2022, defer the receipt of certain employment income; if your marginal personal tax rate is higher in 2023 than in 2022, accelerate.
Worked at home in 2022?-You may be able to deduct an income tax deduction for home office expenses. The Canada Revenue Agency (CRA) has extended the availability of the simplified method—claiming a flat rate of $2 per day working at home due to the COVID-19 pandemic—to 2022. Consider what’s more advantageous for you to claim: the simplified or traditional method.
Medical expenses – If you have eligible medical expenses that weren’t paid for by either a provincial or private plan, you can claim them on your tax return. You can even deduct premiums you pay for private coverage! Either spouse can claim qualified medical expenses for themselves and their dependent children in a 12-month period, but it’s generally better for the spouse with the lower income to do so.
Charitable donations – Tax credits for donations are two-tiered, with a more considerable credit available for donations over $200. You and your spouse can pool your donation receipts and carry donations forward donations for up to five years. If you donate items like stocks or mutual funds directly to a charity, you will be eligible for a tax receipt for the fair market value, and the capital gains tax does not apply.
Moving expenses – If you’ve moved to be closer to school or a place of work, you may be able to deduct moving expenses against eligible income. You must have moved a minimum of 40 km.
Families
Childcare Expenses – If you paid someone to take care of your child so you or your spouse could attend school or work, then you can deduct those expenses. A variety of childcare options qualify for this deduction, including boarding school, camp, daycare, and even paying a relative over 18 for babysitting. Be sure to get all your receipts and have the spouse with the lower net income claim the childcare expenses. In addition, some provinces offer additional childcare tax credits on top of the federal ones.
Caregiver – If you are a caregiver, claim the available federal and provincial/territorial tax credits.
Children’s fitness, arts and wellness tax credits – If your child is enrolled in an eligible fitness or arts program, you may claim a provincial or territorial tax credit for fitness and arts programs.
Estate planning arrangements – Review your estate plan annually to ensure it reflects the current tax rules. Review your will to ensure that it will form a valid will. Consider strategies for minimizing probate fees.
Registered Education Savings Plan (RESP) – can be a great way to save for a child’s future education. The Canadian Education Savings Grant (CESG) is only available on the first $2,500 of contributions you make each year per child (to a maximum of $500, with a lifetime maximum of $7,200.) If you have any unused CESG amounts for the current year, you can carry them forward. If the recipient of the RESP is now 16 or 17, they can only receive the CESG if a) at least $2,000 has already been contributed to the RESP and b) a minimum contribution of $100 was made to the RESP in any of the four previous years.
Registered Disability Savings Plan (RDSP) – If you have an RDSP open for yourself or an eligible family member, you may be able to get both the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) paid into the RDSP. The CDSB is based on the beneficiary’s adjusted family net income and does not require any contributions to be made. The CDSG is based on both the beneficiary’s family net income and contribution amounts. In addition, up to 10 years of unused grants and bond entitlements can be carried forward.
Retirees
Registered Retirement Income Fund (RRIF) – Turning 71 this year? If so, you are required to end your RRSP by December 31. You have several choices on what to do with your RRSP, including transferring your RRSP to a registered retirement income fund (RRIF), cashing out your RSSP, or purchasing an annuity. Talk to us about the tax implications of each of these choices!
Pension Income- Are you 65 or older and receiving pension income? If your pension income is eligible, you can deduct a federal tax credit equal to 15% on the first $2,000 of pension income received – plus any provincial tax credits! Don’t currently have any pension income? You may want to think about withdrawing $2,000 from an RRIF each year or using RRSP funds to purchase an annuity that pays at least $2,000 per year.
Canada Pension Plan (CPP) – If you’ve reached the age of 60, you may be considering applying for CPP. Keep in mind that if you do this, the monthly amount you’ll receive will be smaller. Also, you don’t have to have retired to be able to apply for CPP. Talk to us; we can help you figure out what makes the most sense.
Old Age Security – If you’re 65 or older, ensure you’re enrolled for Old Age Security (OAS) benefits. Retroactive OAS payments are only available for up to 11 months plus the month you apply for your OAS benefits. If you’re running into OAS “clawback” issues, consider ways to split or reduce other sources of income to avoid this.
Estate planning arrangements – Review your estate plan annually to ensure that it reflects the current tax rules. Consider strategies for minimizing probate fees. If you’re over 64 and living in a high probate province, consider setting up an inter vivos trust as part of your estate plan.
Students
Education, tuition, and textbook tax credits – If you’re attending post-secondary school, claim these credits where available.
Canada training credit – If you’re between 25 to 65 and enrolled in an eligible educational institution, you can claim a federal tax credit of $250 for 2021. You can claim tuition paid on your taxes, carry the amount forward, or transfer an unused tuition amount to a spouse, parent, or grandparent.
Need some additional guidance?
Reach out to us if you have any questions. We’re here to help.
2022 Personal Year-End Tax Tips
/in 2022 Only, blog, Individuals /by Bryan WilsonThe end of 2022 is quickly approaching – which means it’s time to get your paperwork in order so you’re ready when it comes time to file your taxes!
In this article, we’ve covered four different major types of 2022 personal tax tips:
Investment Considerations
Individuals
Families
Retirees
Students
Investment Considerations
Tax-Free Savings Account (TFSA)-You can contribute up to a maximum of $6000 for 2022. You can carry forward unused contribution room indefinitely. The maximum amount you’re allowed to make in TFSA contributions is $81,500 (including 2022).
Registered Retirement Savings Plan (RRSP)- Contribute to your RRSP or a spousal RRSP. Remember that you can deduct contributions made within the first sixty days of the following calendar year from your 2022 income. You also have the option of carrying forward deductions. Consider the best mix of investments for your RRSP: hold growth investments outside the plan (to benefit from lower tax rates on capital gains and eligible dividends), and hold interest-generating investments inside. We can help if you need advice on how to make the most of your RRSP.
Do you expect to have any capital losses? If you have capital losses, sell securities with accrued losses before year end to offset capital gains realized in the current or previous three years. You must first deduct them against your capital gains in the current year. You can carry back any excess capital losses for up to three years or forward indefinitely.
Interest Deductibility – If possible, repay the debt that has non-deductible interest before other debt (or debt that has interest qualifying for a non-refundable credit, i.e. interest on student loans). Borrow for investment or business purposes and use cash for personal purchases. You can still deduct interest on investment loans if you sell an investment at a loss and reinvest the proceeds from the sale in a new investment.
Individuals
The following list may seem like a lot, but it’s unlikely every single tip will apply to you. It’s essential to make sure you aren’t paying taxes unnecessarily.
COVID-19 federal benefits – If you repay any COVID-19 benefit amounts before 2023, you can deduct from your income the repayment amount in the year in which the benefit amount was received instead of the year it was repaid. (You can also split the deduction between the two years.)
Income Timing – If your marginal personal tax rate is lower in 2023 than in 2022, defer the receipt of certain employment income; if your marginal personal tax rate is higher in 2023 than in 2022, accelerate.
Worked at home in 2022?-You may be able to deduct an income tax deduction for home office expenses. The Canada Revenue Agency (CRA) has extended the availability of the simplified method—claiming a flat rate of $2 per day working at home due to the COVID-19 pandemic—to 2022. Consider what’s more advantageous for you to claim: the simplified or traditional method.
Medical expenses – If you have eligible medical expenses that weren’t paid for by either a provincial or private plan, you can claim them on your tax return. You can even deduct premiums you pay for private coverage! Either spouse can claim qualified medical expenses for themselves and their dependent children in a 12-month period, but it’s generally better for the spouse with the lower income to do so.
Charitable donations – Tax credits for donations are two-tiered, with a more considerable credit available for donations over $200. You and your spouse can pool your donation receipts and carry donations forward donations for up to five years. If you donate items like stocks or mutual funds directly to a charity, you will be eligible for a tax receipt for the fair market value, and the capital gains tax does not apply.
Moving expenses – If you’ve moved to be closer to school or a place of work, you may be able to deduct moving expenses against eligible income. You must have moved a minimum of 40 km.
Families
Childcare Expenses – If you paid someone to take care of your child so you or your spouse could attend school or work, then you can deduct those expenses. A variety of childcare options qualify for this deduction, including boarding school, camp, daycare, and even paying a relative over 18 for babysitting. Be sure to get all your receipts and have the spouse with the lower net income claim the childcare expenses. In addition, some provinces offer additional childcare tax credits on top of the federal ones.
Caregiver – If you are a caregiver, claim the available federal and provincial/territorial tax credits.
Children’s fitness, arts and wellness tax credits – If your child is enrolled in an eligible fitness or arts program, you may claim a provincial or territorial tax credit for fitness and arts programs.
Estate planning arrangements – Review your estate plan annually to ensure it reflects the current tax rules. Review your will to ensure that it will form a valid will. Consider strategies for minimizing probate fees.
Registered Education Savings Plan (RESP) – can be a great way to save for a child’s future education. The Canadian Education Savings Grant (CESG) is only available on the first $2,500 of contributions you make each year per child (to a maximum of $500, with a lifetime maximum of $7,200.) If you have any unused CESG amounts for the current year, you can carry them forward. If the recipient of the RESP is now 16 or 17, they can only receive the CESG if a) at least $2,000 has already been contributed to the RESP and b) a minimum contribution of $100 was made to the RESP in any of the four previous years.
Registered Disability Savings Plan (RDSP) – If you have an RDSP open for yourself or an eligible family member, you may be able to get both the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) paid into the RDSP. The CDSB is based on the beneficiary’s adjusted family net income and does not require any contributions to be made. The CDSG is based on both the beneficiary’s family net income and contribution amounts. In addition, up to 10 years of unused grants and bond entitlements can be carried forward.
Retirees
Registered Retirement Income Fund (RRIF) – Turning 71 this year? If so, you are required to end your RRSP by December 31. You have several choices on what to do with your RRSP, including transferring your RRSP to a registered retirement income fund (RRIF), cashing out your RSSP, or purchasing an annuity. Talk to us about the tax implications of each of these choices!
Pension Income- Are you 65 or older and receiving pension income? If your pension income is eligible, you can deduct a federal tax credit equal to 15% on the first $2,000 of pension income received – plus any provincial tax credits! Don’t currently have any pension income? You may want to think about withdrawing $2,000 from an RRIF each year or using RRSP funds to purchase an annuity that pays at least $2,000 per year.
Canada Pension Plan (CPP) – If you’ve reached the age of 60, you may be considering applying for CPP. Keep in mind that if you do this, the monthly amount you’ll receive will be smaller. Also, you don’t have to have retired to be able to apply for CPP. Talk to us; we can help you figure out what makes the most sense.
Old Age Security – If you’re 65 or older, ensure you’re enrolled for Old Age Security (OAS) benefits. Retroactive OAS payments are only available for up to 11 months plus the month you apply for your OAS benefits. If you’re running into OAS “clawback” issues, consider ways to split or reduce other sources of income to avoid this.
Estate planning arrangements – Review your estate plan annually to ensure that it reflects the current tax rules. Consider strategies for minimizing probate fees. If you’re over 64 and living in a high probate province, consider setting up an inter vivos trust as part of your estate plan.
Students
Education, tuition, and textbook tax credits – If you’re attending post-secondary school, claim these credits where available.
Canada training credit – If you’re between 25 to 65 and enrolled in an eligible educational institution, you can claim a federal tax credit of $250 for 2021. You can claim tuition paid on your taxes, carry the amount forward, or transfer an unused tuition amount to a spouse, parent, or grandparent.
Need some additional guidance?
Reach out to us if you have any questions. We’re here to help.
Insurance Planning for Incorporated Professionals
/in blog, Buy Sell, critical illness insurance, disability insurance, Group Benefits, health benefits, incorporated professionals, Insurance, life insurance, travel insurance /by Bryan WilsonFor incorporated professionals, making sure your practice is financially protected can be overwhelming. Incorporated professionals face a unique set of challenges when it comes to managing risk. Insurance can play an important role when it comes to reducing the financial impact on your practice in the case of uncontrollable events such as disability, or critical illness. This infographic and article address the importance of corporate insurance.
The 4 areas of insurance a incorporated professional should take care of are:
Health
Disability
Critical Illness
Life
Health: We are fortunate in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.
For incorporated professionals, offering employee health benefits make smart business sense because health benefits can form part of a compensation package and can help retain key employees and attract new talent.
For incorporated professionals that are looking to provide alternative health plans in a cost effective manner, you may want to consider a health spending account.
Disability: Most people spend money on protecting their home and car, but many overlook protecting their greatest asset: their ability to earn income. Unfortunately one in three people on average will be disabled for 90 days or more at least once before the age of 65.
Consider the financial impact this would have on your practice if you or a key employee were to suffer from an injury or illness. Disability insurance can provide a monthly income to help keep your practice running.
Business overhead expense insurance can provide monthly reimbursement of expenses during total disability such as rent for commercial space, utilities, employee salaries and benefits, equipment leasing costs, accounting fees, insurance premiums for property and liability, etc.
Key person disability insurance can be used to provide monthly funds for you or key employee while they’re disabled and protect the business from lost revenue while your business finds and trains an appropriate replacement.
Critical Illness: For a lot of us, the idea of experiencing a critical illness such as a heart attack, stroke or cancer can seem unlikely, but almost 3 in 4 (73%) working Canadians know someone who experience a serious illness. Sadly, this can have serious consequences on you, your family and business, with Critical Illness insurance, it provides a lump sum payment so you can focus on your recovery.
Key person critical illness insurance can be used to provide funds to the practice so it can supplement income during time away, cover debt repayment, salary for key employees or fixed overhead expenses.
Buy sell critical illness insurance can provide you with a lump sum payment if your business partner or shareholder were to suffer from a critical illness. These funds can be used to purchase the shares of the partner, fund a buy sell agreement and reassure creditors and suppliers.
Life: For an incorporated professional, not only do your employees depend on you for financial support but your loved ones do too. Life insurance is important because it can protect your practice and also be another form of investment for excess funds.
Key person life insurance can be used to provide a lump sum payment to the practice on death of the insured so it can keep the business going until you an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund inside the insurance policy.
Loan coverage life insurance can help cover off any outstanding business loans and debts.
Reduce taxes & diversify your portfolio, often life insurance is viewed only as protection, however with permanent life insurance, there is an option to deposit excess funds not needed for operations to provide for tax-free growth (within government limits) to diversify your portfolio and reduce taxes on passive investments.
Talk to us to make sure you and your practice are protected.
Essential tips and tricks for paying less tax and keeping more of your retirement income
/in blog, Retirement /by Bryan WilsonEssential tips and tricks for paying less tax and keeping more of your retirement income
Most of your retirement income sources are taxable; Canadian Pension Plan (CPP), your personal pension plan (if you have one) and income from your RRIFs. However, if you’ve set up a TFSA in addition to your RRSPs, then you’re in luck – money you take out of your TFSA isn’t taxable!
We have some tips on combining savvy withdrawal strategies with retirement-related tax deductions to keep more of your retirement income.
Make a Plan
Determine all the different sources of retirement income you’ll have – don’t forget about things like annuities, GICs or income from a rental property if you have one. Once you have a complete list, a professional financial advisor can give you tips on when it’s best to start collecting pension income as well as how much to withdraw from your taxable investments. A strong plan can help reduce the amount of tax you have to pay and extend the life of your retirement income!
Split your pension income
If you have reached the age of 65 and have a pension, you can split up to 50% of the pension income with your spouse. Splitting your pension with a lower-income spouse can add up to savings, as this will cut down on the amount of taxes you’ll have to pay overall.
While rewarding, the process to split your pension income can be complicated, so it’s best to get professional advice before starting this process.
Buy an annuity
Annuities are a financial product that will provide you with a guaranteed regular income – a good choice if you are worried about your retirement savings running out.
These are the most common types of annuities:
Life annuities provide you with a guaranteed lifetime income, with the option for the annuity to be paid to a beneficiary after you die.
Term-certain annuities provide guaranteed income payments for a fixed period. A beneficiary or your estate will receive regular payments if you die before the term ends.
Variable annuities will provide you with both a fixed income and a variable income. The variable income will be based on the return of the annuity provider on the performance of the investments your annuity provider invests your money in.
All types of annuities will spread out the income from your retirement savings to lessen the tax you pay each year.
Take advantage of tax breaks
Now that you’re retired, there are retirement-related tax breaks you need to know about. Here are some of the tax breaks or credits you may be eligible for:
The age amount
The home accessibility tax credit
The medical expense tax credit
The disability tax credit
The pension income tax credit
We can help!
We can put together a plan that helps you keep more of your retirement income – call us today!
The Five Steps to Investment Planning
/in blog, financial planning, Investment /by Bryan WilsonThe Five Steps to Investment Planning
For a long time, there were limited options for most investors. But now, there are hundreds of investments for investors to choose. However, this amount of choice can be overwhelming. Fortunately, an investment advisor can help you figure out what the right investment choices are for you.
Meeting your investment advisor
When you first meet with your investment advisor, they will tell you about their obligations and responsibilities. They should:
Give you general information about your various investment choices (e.g. stocks, bonds, mutual funds)
Tell you how they are compensated for their services
Ask if you have any questions about specific investment vehicles (such as RRSPs or TFSAs)
Determining your goals and expectations
The next step is to for your investment advisor to fill out a “Know Your Client” type of worksheet. The information on this worksheet will help your investment advisor determine the most suitable investment options for you. You’ll need to provide information on your:
Income
Net worth
Investment knowledge
Risk tolerance
Time horizon (how long you want to invest for)
How frequently do you want to invest
Developing your investment plan
Once they have all the information they need, your investment advisor will suggest the investments they think are appropriate for you.
Implementing the plan
Once you approve your investment advisor’s suggestions, you will fill in all the appropriate paperwork to set things in motion. After that, you must provide a way to fund your investments. Your investment advisor can then make any initial purchases and set up any ongoing fund purchases or transfers from other investments.
Monitoring the plan
Your investment advisor should contact you at least once a year to make sure your plan is still suitable for you and discuss any changes you want to make to it. If you have any major life events, such as getting married or changing jobs, you should contact your investment advisor to see if you should revisit your plan.
The sooner you start your investment planning, the sooner you can reach your investment goals! So contact us today!
Don’t lose all your hard-earned money to taxes
/in blog, Tax /by Bryan WilsonDon’t lose all your hard-earned money to taxes
Tax planning is an essential part of managing your money – both while living and after your death. You want to maximize the amount of money to your beneficiaries, not the government. We have three tips to help you reduce taxes on your hard-earned money:
Make the most of the lifetime capital gains exemption
Decrease your end-of-life tax bill
Look into Immediate Financing Arrangements
Lifetime capital gains exemption
The good news is that you can save a lot of money on taxes using the lifetime capital gains exemption. The bad news is that you could lose out on some of those savings unless you follow all the appropriate steps. Having a financial team to guide you through these steps is essential. When it comes to selling all or part of your business, your lawyer, accountant, and financial advisor must be all on the same page.
End-of-life tax bill
As with the lifetime capital gains exemption, working with your financial team to ensure your affairs are in order is crucial. Without the proper paperwork, your hard-earned money may not go to the family members, friends, or charities you want to support. Take the time to ensure that your wishes are properly documented and that you have filled out all essential paperwork.
Consider an Immediate Financing Arrangement
An Immediate Financing Arrangement (IFA) lets your business:
Get a life insurance premium on behalf of a shareholder
Create a tax deduction
Transfer assets tax-free from the business to a shareholder’s estate
Also, you can use an IFA to help increase your business’ cash flow by pledging the life insurance policy as collateral for a loan. The loan can be invested into the business or other investments if the company does not need the additional cash flow.
The Takeaway
While this can all seem overwhelming, it is essential to make sure you take the proper steps to protect your business and minimize your tax bill. But you don’t have to do this alone – contact us today for expert advice and guidance.
Financial Planning For Self-Employed Contractors
/in blog, Business Owners /by Bryan WilsonFinancial Planning for Self-Employed Contractors
Being a self-employed contractor can bring you a large cash flow and the satisfaction of being your own boss – but it can also make financial planning more complicated than being an employee.
When creating a financial plan, Self-employed contractors need to keep the following in mind:
The best way to ensure you’ve got a solid financial plan is to work with a good team who has your best interests in mind. No matter what aspect of financial planning you are interested in – from tax planning to succession planning – we can help you get started. So call us or contact us online today to get started!
Five Ways To Withdraw Money From Your Business In A Tax-Efficient Manner
/in blog, Business Owners, corporate, Tax /by Bryan WilsonFive Ways To Withdraw Money From Your Business In A Tax-Efficient Manner
You have worked long and hard to build up your business, and now you are ready to withdraw money from your business’ bank account. But you don’t want to get hit with a huge tax bill. So here are 5 ways to withdraw money from your business in a tax-efficient manner.
1) Pay Yourself And Your Family Members
You can pay yourself a salary from your business and pay any family members who work in your business. However, the salary you pay family members must not be excessive – it must be in line with what they would receive for doing the same work elsewhere.
You and your family members will be taxed at the regular personal marginal tax rates on your salaries. However, your corporation can make a deduction based on salaries paid when determining taxable income.
2) Pay Out Taxable Dividends
You can use dividends to distribute money from your corporation to both yourself and family members if everyone holds shares in your corporation. However, when distributing dividends to a shareholder, it is critical to consider both the tax on split income (TOSI) rules and the corporate attribution rules before any distribution is made.
TOSI rules – Under the current income tax rules, the TOSI applies the highest marginal tax rate (currently 33%) to “split income” of an individual under the age of 18. In general, an individual’s split income includes certain taxable dividends, taxable capital gains and income from partnerships or trusts. – Canada.ca
Corporate attribution rules – Corporate attribution rules may result in additional tax if a transfer or loan to a corporation is made to shift income to another family member. This can result in additional tax for the individual making the transfer or loan.
3) Pay Out Capital Dividends
Another way to pay out dividends is via your corporation’s capital dividend account (CDA). Money in your corporation’s CDA can be dispersed to Canadian resident shareholders as a tax-free dividend, but be sure you are clear on what can legally be allowed in your CDA before you do this.
4) Adjust Your Salary And Dividend Mix
Keeping the right mix when paying yourself a salary and paying yourself via dividends is essential. You need to consider various factors – such as your cash flow needs, earned income for RRSP contributions, and any impact on taxes and other regulatory requirements – paying out salaries and dividends can have.
5) Repay Any Outstanding Shareholder Loans
If you loaned money to your company in the form of a shareholder loan, now may be the time to have your company repay that loan. Any money you receive to settle your shareholder loan will be paid to you as a tax-free distribution.
The Takeaway
Regardless of why you need to take cash out of your business, it is crucial to plan how to withdraw the money so you can do it in the most tax-efficient manner possible. Unfortunately, there is no one-size-fits-all solution for this, which is why talking to a professional advisor is so important.
We can help design a tax-optimized compensation strategy for you. Contact us to set up a meeting today!
2022 Ontario Budget Highlights
/in 2022, blog /by Bryan WilsonOn April 29, 2022, Ontario’s Minister of Finance delivered the province’s 2022 budget, based on five different pillars.
No Changes To Corporate or Personal Tax Rates
Budget 2022 did not introduce changes to Ontario’s corporate or personal tax rates.
Rebuilding The Economy
Budget 2022 wants to help rebuild the economy as follows:
Almost $1 billion is committed to critical legacy infrastructure, such as all-seasons roads.
Creating good manufacturing jobs. In the past 18 months, 12 billion dollars have been invested in supporting new electric vehicle production and battery manufacturing.
Enable Ontario employers to realize an estimated $8.9 billion in cost savings by cutting taxes and lowering electricity costs.
Better Jobs and Bigger Paycheques
Another focus is on more significant paycheques and better job opportunities. To support this:
The general minimum wage will rise to $15.50 per hour starting October 1, 2022.
$1 billion will be committed annually to employment and training programs for learning new skills or upgrading existing ones.
Over three years, $114.4 million has been committed to the Skilled Trades Strategy, including expanding in-class training.
Ontario is expanding college degree granting. Colleges can start offering new degree programs in various sectors, including the automotive industry and health care.
Building Highways and Key Infrastructure
Budget 2022 commits to:
Investing $158.8 billion in crucial infrastructure over ten years, with $20 billion spent in 2022–23.
$25.1 billion being spent over ten years to support major highways such as the Bradford Bypass, Highway 413, Highway 401 and Highway 7.
$61.6 billion over ten years to support public transit. This includes expanding GO train services to London and Bowmanville and expanding passenger rail service to Northern Ontario.
Keeping Costs Down
Another focus of Budget 2022 is to help people save money:
Tolls will be removed on Highways 412 and 418.
Starting July 1, the gas tax will be cut by 5.7 cents per litre for six months.
License plate renewal fees will be eliminated and refunded, leading to a $120/year savings in Southern Ontario and $60/year savings in Northern Ontario.
$300 in additional tax relief will be available on average for 1.1 million lower-income workers via the proposed Low-income Individuals and Families Tax Credit enhancement.
Supporting the creation of all types of housing.
Working towards an average of $10-a-day child care by September 2025.
Investing in Health Care
Budget 2022 also understands the importance of continuing to invest in health care. Money is committed as follows:
Over $40 billion for hospitals and other health infrastructure over ten years.
$764 million over two years to provide nurses with a retention incentive of up to $5,000.
$42.5 million over two years to expand medical education and training.
$1 billion for in-home care over three years.
We can help!
Wondering how tax changes in this year’s budget may impact personal finances or business affairs? Reach out to us – we’re here to answer any questions you may have!
2021 Income Tax Year Tips
/in blog, Tax /by Bryan WilsonTax Tips You Need To Know Before Filing Your 2021 Taxes
This year’s tax deadline is April 30, 2022. We’ve got a list of tips to help you save on your taxes!
Claiming home office expenses
You can claim up to $500 under the “flat rate” method if you worked at home due to COVID-19. To claim more, you must use the detailed method to claim home office expenses.
Employer-provided benefits
If your employer reimburses you for certain costs (such as commuting costs, parking, and home office equipment) due to COVID-19, the CRA will generally not consider this a taxable benefit.
Repaying Covid-19 support payments
If you repaid COVID-19 benefits, you can deduct the amount on your tax return either for the year you received the benefit or the year you repaid it, or you can split the deduction between both years.
Climate Action incentive can no longer be claimed
As of 2021, this amount can’t be claimed as a refundable credit; instead, you’ll receive quarterly payments via the benefits system.
Disability tax credit (DTC)
If you or a family member are DTC claimants, then you should review the updated criteria for the tax credit in regards to mental functions, life-sustaining therapy and calculating therapy time.
Eligible educator school supply tax credit
This tax credit has been increased to 25 percent for eligible supplies (such as books and games) to a maximum of $1,000.
Tax deduction on interest payments
You can claim a tax deduction for the interest you’ve paid on any money you’ve borrowed to invest. However, you can only do this if you use the money to earn investment income (for example, a rental property).
The digital subscriptions tax credit
You can claim up to $500 as a tax credit if you have a digital subscription to a qualifying Canadian news outlet.
Self-employed? Be sure to set aside enough for personal income tax!
If you’re self-employed, be sure you put aside enough money (we recommend 25% of your income) to pay your tax bill when the time comes. You’re taxed only on your net income (total income minus expenses).
You need to plan ahead for tax changes if you want to retire abroad
Planning to retire abroad? If so, you need to be aware of the tax implications and plan accordingly. If you sell your house and move, you may be considered a “non-resident” and be subject to capital gains taxes on non-registered investments (even if you have not sold them) or have your pension subjected to a withholding tax.
You can stop making CPP contributions if you’re over 65 but plan to keep working
If you’re 65 and already collecting Canada Pension Plan (CPP) benefits but also still working, you may be able to stop making CPP contributions. To do so, you need to fill in the form CPT30.
Need help?
Not sure if you qualify for a credit or deduction? Give us a call – we’re here to save you money on your taxes!
Estate Planning for Business Owners
/in blog, Business Owners, Estate Planning, Family, life insurance /by Bryan WilsonEstate Planning for Business Owners
What happens when the children grow up and they are no longer dependent on their parents? What happens to your other “baby”- the business? Estate planning for business owners deals with the personal and business assets. Business succession planning is different because it deals with your business assets only and can also take place while you’re alive. You need to have an estate plan regardless if you have a succession plan or not. Estate planning for business owners is typically more complicated because the estate plan needs to deal with:
Complex business and personal relationships
Bigger and more intricate estates
Tax issues
Business Succession
When putting an estate plan for a business owner together, one of the most difficult conversations is around fair or equal distribution of assets. What if one of the children are working in the business how do you treat them? Before you begin putting a plan in place, we always encourage open conversation and a family meeting between the parents and children to provide context behind decisions and therefore it minimizes the surprises and provides an opportunity for children to express their concerns.
We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance.
Adult Children
Fair vs Equal (also known as Equitable vs Equal) – like what’s considered to be fair may not necessarily be equal. ex. Should the daughter that’s been working in the family business for 10 years receive the same shares as the son who hasn’t worked in the family business at all?
Are the adult children responsible enough to handle the inheritance? Or would they spend it all?
Who works in the family business? Is it all the kids or just one of them?
Family Meeting
Encourage open conversation with parents and kids so context can be provided behind the decisions, there are no surprises and allows the kids to express their interests and concerns.
Facilitate a family meeting with both generations, this will help promote ongoing family unity after death and decrease the chances of resentment later.
Start looking at considerations for a succession plan for the business. (This needs to be documented separately.)
Assets/Liabilities
What are your assets? Create a detailed list of your assets such as:
Home, Real Estate, Investments- Non registered, TFSA, RRSP, RDSP, RESP, Company Pension Plan, Insurance Policy, Property, Additional revenue sources, etc..
What about shares in your business? How does this need to be addressed?
What are your liabilities? Create a detailed list of your liabilities such as:
Mortgage, Loans (personal, student, car), Line of Credit, Credit card, Other loans (payday, store credit card, utility etc.)
Did you personally guarantee any business loans and how does this need to be addressed?
Understand your assets-the ownership type (joint, tenants in common, sole etc.), list who are the beneficiaries are for your assets
Understand your liabilities- are there any co-signors?
Make sure you have a will that:
Assigns an executor.
Provide specific instructions for distribution of all assets.
Consider a power of attorney for use when you’re incapacitated or otherwise unable to handle your affairs.
Always choose 2 qualified people for each position and communicate with them.
Taxes and Probate
How much are probate and taxes? (Income tax earned from Jan 1 to date of death + Taxes on Non Registered Assets + Taxes on Registered Assets, Taxes on Business Shares)
Are there any outstanding debts to be paid?
You’ve worked your whole life- how much of your hard earned money do you want to give to CRA?
How much money do you want to to give to your kids while you’re living?
Consider the following:
The use of trusts.
The use of an estate freeze if you wish to gift while you’re living.
The use of a holdco for effective tax planning.
Once you determine the amount of taxes, probate, debt, final expenses and gifts required, review your life insurance coverage to see if it meets your needs or if there’s a shortfall.
Execution:It’s good to go through this but you need to do this. Besides doing it yourself, here’s a list of the individuals that can help:
Financial Planner/Advisor (CFP)
Estate Planning Specialist
Insurance Specialist
Lawyer
Accountant/Tax Specialist
Chartered Life Underwriter (CLU)
Certified Executor Advisor (CEA)
Next steps…
Contact us about helping you get your estate planning in order so you can gain peace of mind that your family is taken care of.