Close X
Friday, November 29, 2024
ADVT 
National

High-Income Earners Urged To Make Changes Now To Avoid Income Tax Increase

The Canadian Press, 08 Dec, 2015 11:26 AM
    OTTAWA — High-income Canadians looking to minimize their federal income tax should look at taking any bonuses they may be due or big capital gains this year to avoid paying more when Ottawa's new top rate kicks in next year.
     
    Tax experts say if you are lucky enough to find yourself in Ottawa's new top bracket — those earning $200,000 or more — you shouldn't defer any income that you can take this year because you'll pay more if you do.
     
    Mariska Loeppky, director of tax and estate planning at Investors Group, said if you're in the top bracket you can save yourself four per cent in federal tax for every dollar you can push into 2015 compared with 2016.
     
    "In a high-income tax rate environment you're going to want to look at all the things that can help you save tax," she said.
     
    Loeppky also suggested people may also want to defer claiming this year's RRSP contribution until the 2016 tax year to maximize the benefit. She estimated that those in the top bracket could save $800 by deferring the deduction on a $20,000 contribution.
     
    "Nothing says you have to take the deduction in 2015," she said, noting that the downside is that people won't see the boost in their tax refund until they file their 2016 taxes if they defer the deduction.
     
    "But if you've got quite a bit of RRSP contribution room, it will save you a little bit more money next year if you decide to claim the deduction then."
     
     
    However, if you're in the middle bracket that is getting a tax cut, the opposite is true. You likely don't want to defer any deductions.
     
    Michelle Munroe, director of tax planning at Fidelity Investments, also said that as long as it won't push you into a higher bracket, you may want to defer any bonus you might be in line to receive until next year.
     
    "It depends on how big the bonus is," she said. "You don't want to push yourself into a higher tax category."
     
    In addition to the tax rate changes, Ottawa is ending the controversial income-splitting plan for families next year.
     
    The government is also rolling back the annual tax-free savings account contribution limit to $5,500 from $10,000 this year.
     
    Loeppky said the TFSA remains an effective tool for investing tax-free, but the amount you will be able to shelter will be less.
     
    The NDP had called on the government to reduce the rate on the lowest income bracket instead of the middle income bracket because that would help the lowest income Canadians.
     
    However, Finance Minister Bill Morneau said the move Monday was only the first step of the government's plan and promised more in the budget.
     
    During the election campaign, the Liberals promised a new child benefit program that would benefit for low-income Canadians that would be gradually reduced as a family's income rises. The program would replace the universal child care benefit that paid a $160 per child per month, regardless of family income.

    MORE National ARTICLES

    Canada's Beef, Pork Sectors Cheer Wto Decision In Meat Labelling Dispute

    Canada's Beef, Pork Sectors Cheer Wto Decision In Meat Labelling Dispute
    OTTAWA — Canada's beef and pork sectors are welcoming a World Trade Organization ruling that allows Canada and Mexico to impose $1 billion in annual tariffs on U.S. products.

    Canada's Beef, Pork Sectors Cheer Wto Decision In Meat Labelling Dispute

    ISIL Are 'Rerrible Terrorists,' But Justin Trudeau Says CF-18s Will Still Come Home

    ISIL Are 'Rerrible Terrorists,' But Justin Trudeau Says CF-18s Will Still Come Home
    Interim Conservative leader Rona Ambrose says the extremists who have overrun vast swaths of Syria and Iraq are part of a death cult that sells women and children into sexual slavery and murders religious minorities.

    ISIL Are 'Rerrible Terrorists,' But Justin Trudeau Says CF-18s Will Still Come Home

    Indigenous Affairs Minister To Address Missing, Murdered Women Inquiry Tuesday

    Indigenous Affairs Minister To Address Missing, Murdered Women Inquiry Tuesday
    OTTAWA — Indigenous Affairs Minister Carolyn Bennett is set to make an announcement Tuesday on the subject of the promised inquiry into missing and murdered aboriginal women.

    Indigenous Affairs Minister To Address Missing, Murdered Women Inquiry Tuesday

    Shelter Project For Indian-Origin Elders In New Zealand Launched

    Shelter Project For Indian-Origin Elders In New Zealand Launched
    A non-profit organisation in New Zealand has launched an emergency shelter project for senior citizens from the Indian and South Asian communities who are at risk of being abused, or in dire need of emergency housing

    Shelter Project For Indian-Origin Elders In New Zealand Launched

    Terminally Ill Boy Who Galvanized An Ontario Town To Give Him An Early Christmas Dies

    Terminally Ill Boy Who Galvanized An Ontario Town To Give Him An Early Christmas Dies
    BRANTFORD, Ont. — A terminally ill Ontario boy whose wish for an early Christmas attracted a heartfelt outpouring of support has died.

    Terminally Ill Boy Who Galvanized An Ontario Town To Give Him An Early Christmas Dies

    Think-Tank Says Provinces Need To Be Better Prepared For Aging Population

    Think-Tank Says Provinces Need To Be Better Prepared For Aging Population
    SASKATOON — A Calgary-based think-tank says the provinces seem to be ill-prepared for the country's aging population, and the financial challenges that will bring.

    Think-Tank Says Provinces Need To Be Better Prepared For Aging Population