December 31, 2018 is fast approaching. Check out Ross + Sylvestre’s list of 21 Tips for Year-End Tax Planning.
If any of these apply to you, or you have any questions, please contact us for further details or to discuss how we can apply them to improve your individual tax situation.
SOME 2018 YEAR-END TAX PLANNING TIPS INCLUDE:
1) Certain expenditures made by individuals by December 31, 2018 will be eligible for 2018 tax deductions or credits including: moving expenses, child care expenses, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expense. Ensure you keep all receipts that may relate to these expenses.
2) If you own a business or rental property, consider paying a reasonable salary to family members for services rendered. Examples of services include website maintenance, administrative support, and janitorial services. Salary payments require source deductions (such as CPP, EI and payroll taxes) to be remitted to CRA on a timely basis, in addition to T4 filings.
3) If you own a business or rental property, also consider making a capital asset purchase by the end of the year. Although not yet passed into law, the Federal Government has announced that most capital assets purchased after November 20, 2018 will be eligible for accelerated depreciation (generally three times the deduction to which they would normally be entitled in the first year). For example, a piece of equipment normally eligible for a 10% deduction in the first year (Class 8), would be entitled to a 30% deduction. This benefit is available even if purchased just before year-end.
2018 Remuneration Guide
We all know that higher levels of personal income are taxed at higher personal rates, while lower levels are taxed at lower rates. It’s, therefore, important to adjust income out of high income years and into low income years, whenever possible. This is particularly useful if the taxpayer is expecting a large fluctuation in income, due to, for example, an impending:
• maternity/paternity leave;
• large bonus/dividend; or
• sale of a company or investment assets.
In addition to increases in marginal tax rates, individuals should consider other costs of additional income. For example, an individual with a child may receive reduced Canada Child Benefit (CCB) payments. Likewise, excessive personal income may reduce receipts of OAS, GIS, GST/HST credit and other provincial/ territorial programs. There are a variety of different ways to legally smooth income over a number of years to ensure an individual is maximizing access to the lowest marginal tax rates.