It is that time of the year, happy Halloween!
Leaves are falling and the temperature is dropping.
Raptors just started their season!
As a tax accountant nyc, fall is considered down-time and I was using this as the perfect opportunity to attend various professional update courses.
Last week, I was at this 2014 income tax update course.
It was an informative session, covering changes on taxation at death (yes, you still got to pay taxes after you die. In some cases, it can be as many as a few years.), increase in the children’s fitness credit and new taxes implemented by Ontario government. Taxes are a huge thing in the United States also, so it helps to have something like tax accountant chicago to help.
The Ontario government added a new tax bracket for income level between $150K to $220K in 2014.
Before the new tax bracket was implemented, marginal tax rate for income between $150K to $220K was 46.41% in 2013. Now it is taxed at 47.97%. Extra tax of $1,092.
Ontario government also lowered the tax bracket that is charged the highest tax rate of 49.53%. In the past, only income over $509K was taxed at 49.53%. In 2014, income over $220K is taxed at 49.53%.
This is an equivalent of an increase of $9K in tax for this spread of income.
All tax brackets, both federal and provincial, are indexed to inflation every year, meaning the tax bracket increase slightly based on inflation.
This newly added tax bracket by Ontario government is not indexed every year.
This means that when your salary is increased based on index, more and more people are subjected to this tax bracket and Ontario government is getting more tax revenue every year.
I have presented and blogged multiple times how real estate corporations allow the tax planning flexibility with your children and lower income family members.
For the children who go to post secondary school and pay about $7K of tuition without any other income, they can receive up to $44,733 dividends without incurring any tax liability.
For family members who have no other income, they can receive up to $35,547 dividend without paying any tax.
These are huge tax savings if you use Real Estate Corporations to own your real estate holding portfolio!
Some clients have asked me if these tax savings are available to small business – Of course they are!
Real Estate Corporations are just one type of small businesses. If you operate your own business and you are incorporated, these tax savings are available to you provided that you structure your company shareholding accordingly. This is something to keep in mind when discussing your business banking conditions and options with your accountant.
Another common strategy is to split income with the lower income family member provided that they work for you. If you are self-employed, paying the lower income spouse can help you save thousands of dollars in taxes.
All of these are strategies used by the best new accountant services on the block to give the most efficient savings overall when it comes to tax breaks.
I have been busy setting up tax planning meetings with clients for 2014.
If you have not setup a meeting with your accountant yet, it is time to do so. There are tax planning opportunities that you can get done before the year-end.
Become best friends with your accountant, tell him/her about everything that happens during the year.
Whether you bought a rental property, a new car, have a new kid, your kid starts joining these new after school hockey programs, your parents start living with you, or your significant other quits, share them with your accountant.
This is the only way your professional advisor can provide advice for you an all the available tax credit you are eligible for, and how much you can reduce your tax liability.
Until next time,
Cherry Chan, Your Real Estate Accountant
This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.