tax planning

© Bowman & Partners

TAX PLANNING

Bowman & PartnersAssante Capital Management Ltd.(Member CIPF)


CANADA’S TAX SYSTEM

Graduated system - the more you earn, the higher your tax rate

Marginal tax rate (or tax bracket) - the rate you pay on the last dollar you earn


Marginal Tax Rates (2009)

*Federal rates only

Taxable Income Tax Rate

$10,320 - $40,726 15%

$40,727 - $81,452 22%

$81,453 - $126,264 26%

$126,265 or more 29%


Ontario Tax Rates (2009)

Taxable Income Tax Rate

$8,881 - $36,848 6.05%

$36,849 - $73,698 9.15%

$73,699 or more 11.16%

Ontario also has a surtax of 20% of Ontario income tax in excess of $4,257, plus an additional 36% of Ontario income tax in excess of $5,370.


Key Concepts

Total income, net income and taxable income

Deductions and creditsTotal payableRefund or balance owing


Preparing Your Tax Return

Calculate all sources of income– Employment– Business– Investment

Make allowable deductions to arrive at taxable income


Preparing Your Tax Return (continued)

Calculate the basic tax payable on your taxable income

Claim applicable tax credits, and calculate your net tax payable

Determine your refund or balance owing


TAX PLANNING

“… the development and implementation of appropriate strategies to reduce, defer, or eliminate either current or future income tax liabilities.”


Tax Planning Strategies

Splitting incomeUsing tax deferral plansUsing tax-advantaged investmentsMaking all allowable deductionsIncorporating insurance products


Tax Deferral Plans

Retirement Savings Plan (RRSP)– Entire eligible contribution is tax-deductible– Contribution limit based on earned income

Education Savings Plan (RESP)Disability Savings Plan Deferred Annuities


Tax Implications of Accounts

“Open” RRSP TFSA

Deposit Not deductible

Deductible Not deductible

Income Taxed Not taxed Not taxed

Withdrawal Not taxed Taxed Not taxed


Tax-Friendly Investments

Dividend-payingCapital shares or propertyLabour-sponsored fundCorporate class mutual fundFlow-Through Limited Partnership


Eligible Deductions

RPP and RRSP Split-pension amount Union or professional dues Moving expenses Child care expenses Spousal support payments Disability supports Investment management fees Safety deposit box Investment counsel fees

Interest on money borrowed to earn investment income

Exploration and development expenses

Employment expenses, e.g.,– Tradesperson’s tools– Motor vehicle expenses

Capital losses of other years Foreign income exempt under

a tax treaty


Tax Credits*

Eligible dependent Public transit Children’s fitness Adoption expenses Pension income Caregiver Disability Medical expenses

Interest on student loans Tuition, education and

textbook Charitable donations Political contributions Investment tax credit Labour-sponsored fund Property tax or rent

* In the Canadian system, most tax credits are “non-refundable”


Charitable Giving

Calculating your tax credit– On first $200: credit = 15% – Above $200: credit = 29%

Gifts of capital propertyGifts of publicly traded security


Reducing Net Income

What’s affected by your “net income”?– OAS and EI claw-backs– Guaranteed Income Supplement– Certain tax credits– GST credit– Child Tax Benefit


Alternative Minimum Tax

Targets those with high incomes who use certain deductions to substantially reduce or eliminate their taxes in a given year.

May increase the person’s taxable income by disallowing certain deductions and replacing them with a $40,000 exemption.


Estate Taxes

Final tax return– Capital gains and losses– Registered accounts– Medical expenses

Using insurance products


WHAT’S NEW

Canada’s tax laws are constantly changing. Government budgets often introduce new tax measures. Court rulings and CRA reviews of existing tax laws set new guidelines.


Recent Tax Changes

Pension splittingChildren’s fitness creditWorking Income Tax BenefitEligible medical expensesDisallowance of gifting-programs


What’s New in 2009

Basic personal amount - $10,320Age credit increased to $6,408First time home buyers’ creditHome renovation tax creditRegistered plan losses after death


How Can We Help You?

RRSP contributionsRetirement buyout packageEstate taxationTax-advantaged investmentsIntegrated wealth planning


This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a financial advisor for individual financial advice based on your personal circumstances.

Services and products may be provided by an Assante Advisor or through affiliated or non-affiliated third parties.

Leveraging carries its own risks and is not for everyone. Talk to your advisor for advice on properly managing those risks.

tax planning

Documents

ontario income tax

tax bracket

tax treaty

tax rate marginal tax

tax rate taxable income

future income tax liabilities

net tax payable

ontario tax rates