I did a little research into the Liberal Party’s proposed changes to Federal tax rates.
What seems to have not received much attention is that this tax cut doesn’t have any effect for people with incomes less than $47,700, which is roughly 2.4 million BC residents.
Using the Stats Canada individual income figures from 2013, That means only around 1 million BC residents (27% of the population) will see any tax relief at all.
- Income between $47,702 and $89,401 will see a new, lower federal tax rate of 20.5% (down from 22%) on = $670 reduction.
- Income above $200,000 will see a new higher federal tax rate of 33% (up from 29%).
- The break-even point on this is a taxable income of $216,750. For all income above this, your total tax payable will increase by 4%.
As for timing, I would anticipate this coming into effect for the 2016 tax year.
SOURCE: Liberal Party’s Fairness for the Middle Class
SOURCE: Statistics Canada – BC Individuals by total income level
Starting in 2015, you can contribute up to $10,000 annually to your TFSA (up from $5,500)
What this means is that the total lifetime contribution limit up to 2015 is now $41,000, so if you haven’t already contributed, you could move that much of your investments into a tax free account immediately, and stop paying tax on any investment income from that money.
What better way to avoid a bunch of those little T3 and T5 investment income slips that you get every year, and that make your tax return less… well… taxing?
For more details, click here
Effective for the 2014 tax year, the new Family Tax Cut provides families can reducing the family’s taxes by up to $2,000.
The calculation itself is a little complicated, but if you are a couple with kids under 18, this will almost certainly save you money.
The basic concept is to level the playing field for all families. Thanks to progressive tax rates, when a couple earns two equal incomes, they pay lower taxes than a couple with the same total income, but with one higher income earner. This new policy estimates the tax impact of splitting the income equally between the couple, and directly reduces the taxes of the higher income earner.
Click here to read the government’s announcement.
As always, I’d love to hear from you if you have questions or would like to discuss your personal circumstances.
Planning to buy your first home?
CRA will give you money to help buy a house!
When was the last time anybody else made you that offer?
For example, if you’re currently in a 30% marginal tax rate, $25,000 in RRSP savings could reduce your tax liability by $7,500, then the whole amount can be used towards your down payment.
This article from the Globe and Mail explains this great concept to save that down payment faster, using tax free savings through your RRSP, and the First Time Home Buyer Plan.
Globe and Mail: Millennials with debt face rent-or-buy dilemma
A similar concept is available for going back to post-secondary school too.
Repayment is required over 15 years, and there are some qualifying rules, but overall it can be a very powerful strategy.
As always, I’m happy to answer questions about your own taxes and finances, so feel free to call.