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Archives for Chartered Accountant Firm Oakville

Small Business Accountant in Oakville, Burlington

Successful, happy & wealthy small business owners & their accountants

How do small businesses achieve high profitability?

When small business owners who had achieved substantial success in growing their business either through acquisition, inheritance or as a start-up were asked about the key resource that led to their achievements, mostly pointed out the selection of a good accountant and more specifically accountants with the below-mentioned qualities:

    1. An advisor and a business partner
      Their accountant partnered with them in driving the strategy and plan of the business through well-constructed business plans and monthly face to face sessions supported by valuable data analysis rather than simply recording the transaction and filing taxes once a year.
    2. Monthly Financial Statements.
      Their accountants worked with Accounting systems like QuickBooks Online and processes that enabled them to generate monthly Profit & Loss, Balance Sheet, Cash Flow and Bank Reconciliation statements, and recently providing data in real-time through systems based on cloud computing and assisted by artificial intelligence. Monthly Financial Statements also help a small business to plan proactively towards their profit goals and tax strategy.
    3. Expert planner and strategic mindset
      The accountant had adequate experience and professional background to think strategically and provide long term business plans, structures on pricing, volume analysis, sales channels selection, fixed and variables cost analysis and precise calculation of taxes.
    4. Advance Tax Planning
      A valuable by-product of monthly financial statements and meetings and a strategic mind set enable the business owners to discuss and execute tax strategies fairly in advance and enable substantial savings.
    5. Cash flow focused
      Monitoring and projecting advanced cash flow is like monitoring the lifeblood of the business, profits do not necessarily translate into much-needed cash. Close monitoring of Bank reconciliations monthly if not daily is another key process good accountants and businesses follow.
    6. Analytical
      A most appreciated trait of an accountant leading to good advice and follow up was an analytical mind, trained to generate and interpret pertinent information, backed by timely advise and ability to spot any telling signs of trends that would otherwise escape the layman.
    7. Professionally qualified & knowledgeable
      A professionally qualified and trained accountant such as a Chartered Professional Accountant (CPA) has valuable traits that allow them to maintain high professional standards and ethics, in addition to a deeper understanding of numbers, rules, regulations and laws.
    8. Works with the latest technologies
      Technology is developing at an astonishing rate, with cloud computing, artificial intelligence and blockchain technologies forming a substantial part of the accounting ecosystem, your accountant must be comfortable working with these technologies to help you grow your revenues faster, track costs better, help choose the right inventory systems etc.
    9. Access to other small business service providers
      Small business owners need access to the same professionals that their larger counterparts use to run their business i.e. bankers, foreign exchange traders, lawyers, wealth managers to name a few. Great accountants usually partner with these professionals, especially those catering to small businesses and should be able to refer them to their clients when needed.
    10. Cost management and Investment monitoring
      A good accountant knows the delicate balance that the small business owner must maintain between cutting wastages and investing to boost future revenues when needed. Helping the small business owner to measure the cost of those additional investments or impact of reducing costs.
    11. Succession Planning
      Small business owners at a certain stage of the business life cycle face the decision to go public, name heirs to the business or sell it. A professional accountant helps with the selection of professional valuation firms, the IPO process, or simply transit the business legally and financially to the heirs.
    12. Corporate Structuring
      As a business partner who has access to the market and the inner workings of other successful businesses, the accountant is usually in a position to recommend changes to the business that would further boost the growth of stem any leakages of revenue.
    13. Debt Planning
      At a certain stage of growth, all businesses especially start-up require access to banking channels, debt markets, and other lenders to either enhance capital or borrow short and long terms. A great accountant has connections in the market place to recommend and access these funds.
    14. Acquisition as a growth strategy
      In some instances, the small business hit a plateau in terms of growth where the organic business growth strategy simply is not an option. An accountant has usually during their career worked on acquisition in terms of due diligence, purchase, bedding the acquisition or handled the complete cycle and is therefore in a good position to work with a team of professionals to identify the right fit for their client.

Clearwater Professional Corporation based out of Oakville, Ontario is one such firm that has focused completely to help small businesses generate positive cash flows and achieve above-average profit levels.

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Income tax preparation oakville

The Dividend Series – Dividend, Investment Income & Taxation –…

We will commence with some key definitions for a better understanding of the contents.

Ask any Canadian what a dividend is and, if they don’t know, they’ll at least say it’s something positive. For the most part, they’d be right.

Dividends are distributions of a corporation’s after-tax earnings to its shareholders. They’re optional to distribute, but corporations often use them to entice or pay shareholders.

Dividend taxation can be confusing, but it’s part of our tax system’s theory of integration: the idea that an individual should pay the same amount of tax whether income is earned personally or through a corporation.

Consider that corporations are distributing earnings that they’ve already paid tax on. For the sake of fairness, dividends are subject to a special gross-up and tax credit calculation. When an individual receives a dividend, the amount received is grossed-up to a higher amount, depending on the type of dividend, to approximate the tax the corporation has paid. Personal tax is then calculated on this grossed-up amount. To compensate for this, individuals can claim a dividend tax credit, which reduces their tax otherwise payable.

The theory of integration doesn’t usually work out precisely as intended, with individuals either realizing tax savings or paying a tax cost from corporate earnings paid out as dividends.

Example
Assume Martha is in a 35% tax bracket and invests in shares of Manfco, a public company. Manfco earns $1,000 and pays corporate tax at a rate of 26.5% in Ontario. Martha has received a $735 eligible dividend from Manfco, which nets Martha less than earning $1,000 personally.

Table 1: Dividend income versus regular

Eligible dividend Regular income
Original intended payment $1,000 $1,000
Less: Corporate tax paid @ 26.5% $265 N/A
Proceeds $735 $1,000
Less: Tax owed $355 (35% of grossed-up amount, which is $1,014.30*) $350 (35% of income)
Plus: Dividend tax credit $254 (25.02% of grossed-up amount, as per the Income Tax Act) N/A
Final proceeds $634 $650
Total tax cost $366 ($101 personal** and $265 corporate) $350

*$735 x 1.38, since eligible dividends are grossed up by 38%.
**$101 = $355 – $254

Planning ideas

  • In Ontario, a person can earn up to $35,000 in non-eligible dividends, or $50,000 in eligible dividends and pay no tax (other than health premiums) as long as they have no other income.
  • A shareholder doesn’t have to do anything to receive dividend income other than invest in shares, so a corporation doesn’t have to give the person voting power or management responsibility. By contrast, other income-splitting measures, such as paying a salary to family members, are subject to reasonability tests for tax purposes, which is potentially a disadvantage.
  • Many income-splitting opportunities, such as those involving family trusts, are based upon the payment of dividends to family members with lower income levels.
  • If a person is entitled to a spousal tax credit, dividend income can sometimes be transferred between spouses on their tax returns to minimize tax.

Planning pitfalls

  • For seniors receiving old age security benefits, the dividend gross-up system can cause the loss of benefits if the dividend gross-up causes a senior to have income above the claw back threshold.
  • Dividend income doesn’t create RRSP room.
  • The payment of a dividend by a corporation is not a deductible expense to the corporation, while salary income is.
  • Dividend income isn’t helpful to an individual who wants to claim childcare expenses as a tax deduction, since dividends are not considered earned income for that purpose.
  • Minimum tax (see AE, March 2017) can sometimes be triggered when an individual has significant dividend income, since dividends are taxed at a more preferential rate than other forms of income.
  • Keep in mind that tuition credits must be fully claimed before dividend tax credits, and unused dividend tax credits cannot be carried forward.

Types of dividends

Eligible dividends
Dividends declared from earnings that were taxed at the general tax rate. Shareholders must be notified that a dividend is eligible at the time of payment, whether through website information for a public company or through letters to shareholders for a private company. For the 2016 tax year, eligible dividend income is grossed-up by 38% on an individual’s tax return. The top marginal tax rate on eligible dividends in Ontario is 39.34%.

Non-eligible dividends
Dividends declared from earnings taxed at the small business tax rate. For 2016, non-eligible dividend income is grossed-up by 17% on an individual’s tax return. The top marginal tax rate on non-eligible dividends in Ontario is 45.3%.

Capital gains dividend
A distribution by a Canadian mutual fund of its capital gains. Since the distribution is actually a capital gain, only half of the capital gain distributed will be subject to tax on an individual’s tax return.

Foreign dividend
Dividends from foreign corporations received by Canadian residents are considered to be foreign income, not dividends, for tax purposes. Foreign income is taxed at the same rates as salary or interest

What is Refundable Dividend Tax on Hand (“RDTOH”)?

RDTOH is a mechanism built into the income tax system in order to achieve integration. This concept ensures that income tax payable on investment income is essentially the same whether earned in a corporation and flowed out to its shareholder(s) or earned personally by the shareholder(s), i.e. where in the current environment investments are held in the company name and income is not paid as dividends but reinvested , benefiting the shareholder through deferred payment of taxes at lower small business corporate tax rates.

The RDTOH can be viewed as an account that accumulates refundable tax paid by a private company on its investment and dividend income. Investment income (including interest, rents, royalties, and the taxable portion of capital gains) earned by a Canadian Controlled Private Corporation (“CCPC”) is taxed at approximately 50%. A portion of this tax (calculated as 30.67% of taxable investment income) is added to the RDTOH account. In addition, taxable dividends (often referred to as “portfolio” dividends) received by a CCPC are subject to a refundable tax (Part IV tax) at a rate of 38.33%. The full amount of Part IV tax is also added to the RDTOH account. (Note that dividends received from connected corporations can, in certain instances, also attract Part IV tax.) Amounts in the RDTOH account are refundable to the corporation when a taxable dividend is paid to a shareholder at the rate of $1 of refund for every $2.61 of taxable dividends paid. The refunds are commonly referred to as “dividend refunds” and are deducted from the RDTOH account.

RDTOH should be taken into consideration in any concept comparing an insurance strategy to a corporate owned alternative investment.

The current RDTOH rules

To ensure that there is no advantage for an individual to earn investment income (e.g. interest, dividends, rental income, etc.) in a CCPC, instead of directly, a refundable tax is levied on that corporate investment income, in addition to regular corporate income tax. Accordingly, a corporation’s up front tax paid is approximately equivalent to the taxes that would be paid by an individual earning that income directly.

This refundable tax is tracked in a corporation’s RDTOH account. The refundable tax is recovered by the corporation only when a taxabledividend (eligible or non-eligible) is paid or deemed to be paid to the individual shareholder(s) of the corporation. This refund of tax is referred to as a dividend refund.

Eligible dividends are distributed from a corporation’s general rate income pool (GRIP) and are subject to a lower individual tax rate.

The table below illustrates the tax savings of paying an eligible dividend as opposed to paying a non-eligible dividend in 2019 (based on top combined federal and provincial/territorial dividend tax rates).

General rate income pool (GRIP)

A Canadian-controlled private corporation (CCPC) or a deposit insurance corporation may pay eligible dividends to the extent of its general rate income pool (GRIP) and no excessive eligible dividends were incurred under Part III.1 tax. The GRIP is calculated at the end of the tax year. However, a corporation can pay eligible dividends over the course of the year as long as, at the end of the year, the eligible dividends paid do not exceed its GRIP.
Note
The GRIP is a balance that generally reflects taxable income that has not benefited from the small business deduction or any other special tax rate.

Use Schedule 53, General Rate Income Pool (GRIP) Calculation, to determine the GRIP and file it with your T2 return. You should file this schedule if you paid an eligible dividend in the tax year, or if your GRIP balance changed, to ensure that the GRIP balance on our records is correct.

You can view GRIP balances using the “View return balances” service at:

Coming Next……..What does the Future Hold ?…..Part B of the dividend series

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Business Tax Accountant Oakville

The dividend series – Dividend, Investment Income and Taxes –…

The Federal Dividend Tax Credit in Canada
If you are a shareholder in a Canadian corporation, you may earn dividend income, which should be reported on your tax return. Typically, you also may be eligible to receive the federal dividend tax credit.

This is a non-refundable credit that reduces the amount of tax you owe.The “ dividend tax credit is given to avoid double taxation.”

Eligible and Ineligible Dividends

Corporations designate dividends as eligible or ineligible. The difference is negligible to you, except for tax purposes. As an investor, you’ll be able to note on your T5 statement of investment income whether your dividend is eligible or ineligible.

If you’re an employee who works for the corporation, you’ll receive a T4PS, which is a statement of employee profit sharing plan allocations and payments.

According to the Canada Revenue Agency, other statements that may include dividend income are:

  • T3, statement of trust income allocations and designations;
  • T5013, statement of partnership income;
  • T5013A, statement of partnership income for tax shelters and renounced resource expenses.

Dividend Income and Gross Up
Your dividend income gets added to your taxable income. In addition to reporting the amount you earned in dividend income, you should account for a gross up. Think of a gross up as an increase to account for applicable taxes.

For example, say your job pays $5,000 per week, but your salary is $5,500 per week because your employer wants $5,000 to be your income after taxes. This means your employer has grossed-up your salary.

The CRA has you add in a gross up to account for any tax the corporation has already paid on your dividend income.

Currently, the gross up rate is 38 percent for eligible dividends. Beginning in the tax year 2016, the gross up rate on ineligible dividends is 17 percent. This rate is slated to drop an additional one percent per year for the next two years.

The decrease is due to “corporate taxes going down,”

Calculating Dividend Income With Gross Up

As an example, if you received $200 worth of eligible dividends and $200 worth of ineligible dividends, you would have to gross up you eligible and ineligible dividends by 38 percent and 25 percent, respectively. So, you would claim $526 as dividend income on your return:

  • ($200 X 138 percent) = $276 ($200 X 125 percent) = $250 $276 + $250 = $526

Calculating the Credit

The CRA allows you to calculate the federal dividend tax credit one of two ways:

  1. As a percentage of the grossed up value of your dividend income (15.0198% of eligible dividends, as of 2015);
  2. As a fraction of the gross up portion of your dividend income (6/11 of eligible dividends; as of 2015).

Continuing the example, a $200 eligible dividend had a grossed up value of $276, so either method of calculation would produce the same results:

  • $276 X 15.0198 percent = $41.45 2) $76 X (6/11) = $41.45

Why You Receive Credit

The purpose of the federal dividend tax credit is to balance things out. You receive your share of the corporation’s earnings as a dividend.

You pay a gross up to turn that income back into pretax income — because the corporation has already paid taxes on it — then, you receive a tax credit to make it fair for everyone.

Both you and the corporation aren’t being double-taxed and the CRA subsidizes you for the tax the corporation already paid on your dividends.

Refundable portion of Part I tax
Lines 440, 445, and 450
The refundable portion of Part I tax is part of the refundable dividend tax on hand (RDTOH). More information about RDTOH is in the section that follows.

The refundable portion of Part I tax allows a CCPC that has paid Part I tax on investment income to recover part of that tax when the corporation pays taxable dividends to its shareholders. The refundable portion of Part I tax only applies to corporations that are CCPCs throughout the tax year.

The refundable portion of Part I tax is based on the aggregate investment income and foreign investment income. You have to determine these amounts by completing Parts 1 and 2 of Schedule 7, Aggregate Investment Income and Active Business Income.

Part 1 – Aggregate investment income calculation

The aggregate investment income is the aggregate world source income calculated as follows:

add

  • the eligible portion of the taxable capital gains for the year that is more than the total of:
    • the eligible portion of allowable capital losses for the year
    • the net capital losses from previous years which are applied in the year
  • total income from property (including income from a specified investment business carried on in Canada other than income from a source outside Canada) from which the following amounts have been deducted:
    • exempt income
    • AgriInvest receipts (include the Quebec amount)
    • taxable dividends deductible after deducting related expenses
    • business income from an interest in a trust that is considered property income under paragraph 108(5)(a)

deduct

  • total losses for the year from property (including losses from a specified investment business carried on in Canada other than losses from a source outside Canada)

On line 440 enter the amount of aggregate investment income that you determined on line 092 of Schedule 7.

You can include taxable capital gains and allowable capital losses in a CCPC’s net investment income only if you can attribute the gain or loss to a period of time when a CCPC, an investment corporation, a mortgage investment corporation, or a mutual fund corporation held the disposed property.

Part 2 – Foreign investment income calculation

The foreign investment income is all income from only sources outside of Canada calculated as follows:

add

  • the eligible portion of the taxable capital gains for the year that is more than the eligible portion of allowable capital losses for the year
  • the total income from property from a source outside Canada from which the following amounts have been deducted:
    • exempt income
    • taxable dividends deductible after deducting related expenses
    • business income from an interest in a trust that is considered property income under paragraph 108(5)(a)

deduct

  • the total losses for the year from property from a source outside Canada

On line 445 enter the amount of foreign investment income that you determined on line 079 of Schedule 7.

Calculate the amount of the refundable portion of Part I tax. Enter the amount from line 450 at amount P in the “Refundable dividend tax on hand” area of your return.

References

Subsections 129(3) and 129(4) IT 73, The Small Business Deduction IT 269, Part IV Tax on Taxable Dividends Received by a Private Corporation or a Subject Corporation

Refundable dividend tax on hand

Lines 460, 465, 480, and 485

The RDTOH account only applies to corporations that were private or subject corporations.

A CCPC generates RDTOH on both the Part I tax it pays on investment income, and on the Part IV tax it pays on dividends it receives. For any other type of private corporation, only the Part IV tax it pays generates RDTOH.

For more information on taxable dividends deductible under section 112 or 113, or subsection 138(6), see line 320.

For information on Part IV tax and instructions to complete Schedule 3, see line 712 – Part IV tax payable.

All or part of the RDTOH at the end of the tax year is available as a refund if the corporation pays taxable dividends to the shareholders during the tax year.

You can view refundable dividend tax on hand balances using the “View return balances” service through:

To calculate the RDTOH at the end of the tax year, add the following amounts:

  • the RDTOH balance at the end of the previous tax year (minus any dividend refund issued to the corporation in the previous year)
  • the refundable portion of Part I tax from line 450
  • Part IV tax calculated on line 360 of Schedule 3
  • any balance of RDTOH transferred from a predecessor corporation on amalgamation, or from a wound-up subsidiary corporation

For the first tax year of a new corporation formed as a result of an amalgamation, enter on line 480 all RDTOH balances being transferred from predecessor corporations. Do not include this amount on line 460.

For a parent corporation that wound up a wholly owned subsidiary, enter on line 480 any RDTOH transferred from the subsidiary corporation. On line 460, enter the RDTOH the parent corporation is carrying forward from its previous tax year.

Note

You cannot transfer any RDTOH to a new or parent corporation if, had the predecessor or subsidiary corporation paid a dividend immediately before the amalgamation or wind-up, subsection 129(1.2) would have applied to that dividend.

On line 485, enter the RDTOH at the end of the tax year. Also, enter it at amount T in the “Dividend refund” area of your return.

References
Subsections 129(3) and 186(5)

Dividend refund

A private or subject corporation may be entitled to a dividend refund for dividends it paid while it was a private or subject corporation, regardless of whether it was a private or subject corporation at the end of the tax year.

Note

To claim a dividend refund or to apply the amount to another debit for any tax year, including the same tax year, you have to file your income tax return within three years of the end of the tax year. If your income tax return is not filed within three years of the end of the tax year, the dividend refund becomes statute barred, and will not be issued.

A dividend refund arises if you pay taxable dividends to shareholders, and if there is an amount of refundable dividend tax on hand (RDTOH) at the end of the tax year. To claim a dividend refund, you have to have made an actual payment to the shareholders, unless the dividend is considered paid (a deemed dividend).

For tax years that begin after 2018, a private corporation’s dividend refund will be calculated by reference to two new accounts, the eligible refundable dividend tax on hand (ERDTOH) and the non-eligible refundable dividend tax on hand (NERDTOH). They will replace the existing RDTOH account for those years.

Eligible dividends will generate dividend refunds from ERDTOH, and non-eligible dividends will generate dividend refunds from NERDTOH first, then possibly from ERDTOH. The calculation will effectively require a private corporation to get a refund from its NERDTOH account before it gets a refund from its ERDTOH account, when it pays a non eligible dividend. A transitional rule will preserve the refundability of a corporation’s pre existing RDTOH.

For more information on eligible dividends, go to Eligible dividends or see Line 710 – Part III.1 tax payable.

You can make this payment either in cash, or with some other tangible assets at fair market value, including the following:

  • stock dividends
  • section 84 deemed dividends
  • amounts paid as interest or dividends on income bonds or debentures that are not deductible when calculating income

If you lose your private status following a change in control, a deemed year-end occurs. This allows you to claim a dividend refund for any dividends paid during the deemed short year.

You have to complete Parts 3 and 4 (if they apply) of Schedule 3 to claim a dividend refund. The dividend refund is equal to whichever of the following amounts is less:

  • for tax years that end after 2015, 38 1/3% of taxable dividends that you paid in the year as a private or subject corporation (the previous rate was 33 1/3%). For tax years that end after 2015 and start before 2016, the additional 5% is prorated according to the number of days in the tax year that are after 2015
  • the RDTOH at the end of the tax year

The total of taxable dividends paid for the purpose of the dividend refund is equal to the amount on line 460 of Schedule 3. Refundable dividend tax on hand refers to the amount on line 485 in the “Refundable dividend tax on hand” area of your return.

Parts 3 and 4 of Schedule 3

The following explains how to complete Parts 3 and 4 of Schedule 3. See Parts 1 and 2 of Schedule 3 for explanations on the first two parts of the schedule.

If you paid taxable dividends during the year, complete Part 3 to identify taxable dividends that qualify for the dividend refund.

If the amount of dividends paid includes dividends that do not qualify for the dividend refund, you have to deduct these dividends before completing the calculation in Part 3. In this case, complete Part 4 of Schedule 3 to identify dividends that do not qualify.

Dividends that do not qualify are:

  • dividends paid out of the capital dividend account
  • capital gains dividends
  • dividends paid for shares that do not qualify as taxable dividends, because the main purpose of acquiring the shares was to receive a dividend refund [subsection 129(1.2)]
  • taxable dividends paid to a controlling corporation that was bankrupt at any time in the year

Complete Part 3 of Schedule 3 to identify a connected corporation that received taxable dividends that qualify for the dividend refund.

If the dividend refund is more than the amount of Part I tax payable for the year, we deduct the excess from any other taxes owed under the Income Tax Act. Any balance left over is available for a refund.

If the total dividends paid during the year is different from the total of taxable dividends paid for the purpose of the dividend refund, complete Part 4 of Schedule 3.

References
Section 129
Subsection 186(5)

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Canadian Tax Year 2018

As 2018 draws to a close, it’s a good time to meet with your accountant and have an informed discussion about maximizing tax savings for the past year. Small business owners, in particular, have many opportunities to save on their yearly taxes, so take a few minutes to review your options with an expert before 2018.

In this blog, we’ll take a look at some of the changes in tax provisions that will affect individuals and small businesses below:

Eligible Deductions & Credits

If you pay the following expenses by December 31, 2017, they will be eligible for the deductions of tax credits. In other words, you’ll have to pay less for the past tax year:

  • Childcare expenses
  • Moving expenses
  • Investment council fees
  • Charitable donations
  • Accounting fees
  • Medical expenses
  • Tuition fees
  • Deductible support payments
  • Political donations
  • Interest paid on loans used to purchase investments

Contribute to Your RRSP

The most popular tax tool available to the average person is investing in a Registered Retirement Savings Plan (RRSP). Contributions to RRSPs are tax deductible and the income earned within the RRSP grows until you retire — with taxes deferred. You can claim a contribution of up to 18% of your earned income from 2016 (to a maximum of $26,010).

Earned income includes the following sources:

  • Employment income
  • Business income
  • Net income from rental properties
  • CPP disability pension
  • Certain types of royalties
  • Spousal or child support payments that are included in your income

Remember that your contribution limit may be subject to a pension adjustment reversal from 2016. So if your employer is making contributions to a pension plan, or actuarial commitments to such plans in the year 2016, then these will be reflected in this pension adjustment.

It is also important to remember that the age limit for RRSP contributions is 71. The age limit for converting an RRSP to an annuity or RRIF is also 71.

Finally, don’t overcontribute — a severe penalty will result. If you have any questions about RRSP contributions, talk to a professional accountant today.

Capital Gains Exemption Deduction

The Lifetime Capital Gains Exemption Deduction applies to individuals who dispose of shares in a qualified small business corporation, or in a qualified farm or fishing property. The exemption is $835,716 for small businesses and $1,000,000 for farms or fishing properties.

If you have already claimed the $100,000 Personal Capital Gains Exemption, which ended in 1994, then this will reduce the amount of Lifetime Capital Gains Exemption available to you.

You must also verify whether you have claimed allowable business investment losses (ABIL) in prior years or have cumulative net investment losses (CNIL) as of December 31, 2017. These items will also affect the amount of exemption that can be claimed.

Use Your Capital Losses to Reduce Income Taxes

Did you know that you can use your 2017 capital losses to reduce your current year’s income taxes, by applying such losses against your 2017 capital gains?

This can be an effective strategy for reducing what is owed in a given tax year — but you must be careful of the superficial loss rules, which prevent you from claiming a capital loss on an identical asset that you reacquired 30 days before or after the sale date.

If your capital gains were realized in the years 2014 to 2016, and net capital losses were incurred in 2017, then you can carry these losses back against previous years’ capital gains. You can also carry the unused 2017 losses forward to future capital gains.

The last 2017 transaction date effective for publicly-traded securities is December 22, 2017.

Other Tax Planning Recommendations

There are many other strategies available for individuals and business owners who want to save on their income taxes in 2017. Here are some quick recommendations from our team, which you may want to consider:

  • Consider a Registered Education Savings Plan (RESP) for your children.
  • Set up a Tax-Free Savings Account (TFSA).
  • Review your December income tax instalment.
  • Make a low-interest loan to your spouse.
  • Repay outstanding shareholder loans and pay interest on employee loans.
  • Contribute to your spouse’s or common-law partner’s RRSP to the extent of your RRSP deduction limit for 2017. This doubles the amount a couple can withdraw for the Home Buyer’s plan.
  • Consider a Registered Disability Savings Plan for a child with a severe disability.
  • Claim you personal tax credits.
  • Keep your transit passes (up to June 30, 2017).
  • Pay reasonable salaries to family members in 2017.
  • Convert non-deductible debt to deductible interest.
  • Review your will every 5 years.
  • Split pension income with a spouse.
  • Apply for Home Buyer’s tax credit, if you are a first-time homebuyer.

Got questions about these recommendations or anything else in this article on 2017 taxes? Contact the team of Chartered Professionals Accountants at Clearwater for more advice.

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