Thursday, February 4, 2016

Year End Tax Tips 2015

It is that time of year again, tax time. As your financial advisors, and tax payers ourselves, we realize that no one likes to pay too much tax, if any. Luckily, there are many different tax savings strategies that can help both individuals and businesses save. The following outlines some of the suggested tax saving strategies from Grant Thornton LLP. While reading these strategies, compare them to your own financial plan and see if any could benefit you.

Advice for businesses: 

- Salary and bonus are both considered earned income which is used to calculate your RRSP contribution limit for the subsequent year.
- The first $500,000 of federal active business income of CCPCs receives preferential tax treatment by qualifying for the small business deduction.
- The previous tax rate for small businesses was 11% on the first $500,000, but is decreasing to 10.5% in January of 2016.

Advice for employees:
- Does your employer provide you with a vehicle? If so you will have a taxable benefit included in your income related to the personal use of the automobile
- If you are an employed tradesperson, you may be entitled to a tax deduction of up to $500 for the cost of new tools as a condition of your employment.

Advice for investors:
- If it makes sense, consider selling investments with accrued losses.
- If you are concerned about having to pay tax on your investments, consider buying investments that pay interests annually.
- Structure your loans correctly and deduct the interest.
- Analyze your stocks accordingly.

Advice for individuals:
- Consider income splitting through loaning funds.
- Consider all of the possibilities of contributing to your RRSPs.
For example: Consider delaying contributions if you expect to be in a higher tax bracket in the near future or considering withdrawing funds if you are in a year of low income.
- First time home buyer? Don't forget about the Home Buyer's Plan.
- Maximize your tax benefits by giving to charities. Donations over $200 result in tax savings at the highest marginal tax rate.

Sales tax advice:
- Remember to self-asses and remit GST/HST with respect to employee taxable benefits.
- Business owners should make sure they keep all invoices where GST/HST was paid.

 For the full article, download the PDF version here.
(Click: Get a head start on your year-end tax planning)

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