It’s so challenging to keep up with so much news in the media these days – bank failures, housing market uncertainty, tech companies laying off in massive numbers, AI technology advancement with Chat GBT, inflation still holding up, high interest rates and many more…how do you make sense of all of these? Well, this is why we attend events to keep learning and to stay ahead of the curve. Recently, we were at a few Rock Star Real Estate events to get a deeper dive into the current economic conditions and to make sense of some of the noise in the marketplace. In this issue, I share our offer for personal tax returns, discuss the Canada Dental Benefit and three other topics. It’s tax season and it’s time to be tax-efficient. Enjoy this issue and please remember to share this with everyone in your network:
1. Are You Ready To File Your Personal Tax Returns?
In the recent survey I completed on personal income taxes, 47% of you said you will be filing your taxes yourself, while another 24% plan to use a friend to help file their taxes. As technology continues to improve, we believe that this trend will continue to grow in the coming years. The truth is that filing personal taxes is not the hard part. What may be challenging is getting the appropriate insights from your tax returns that will enable you plan better going forward. As you file your tax returns this year, here are some questions to consider:
- What’s the dollar amount I paid in taxes?
- What’s my average tax rate?
- What’s my marginal tax rate?
- Why did I get a refund? Why did I NOT get a refund?
And when you have answers to these questions following the filing of your tax returns, you want to consider your next action steps. For example, what steps can you take in 2023 to pay less taxes than you did in 2022? This is where insights come in handy. As I’ve said many times, when you don’t get insights, you end up paying more in taxes than you’re required to and a dollar lost in taxes today will not only cost you a dollar today, IT WILL COST YOU A MULTIPLE OF THAT DOLLAR OVER TIME!
If you’re looking for INSIGHTS to help you minimize taxes, then consider the Personal Tax Services we offer. With our services, we can help you minimize taxes, improve cash flow and get ahead financially. Get the details here.
2. Are You Prepared For The New Underused Housing Tax?
If you own a residential rental property in Toronto, you may be aware of the new Toronto vacant property tax as you would have received a letter in the mail. This is an annual tax levied on vacant Toronto residences, payable beginning in 2023. What you may not be aware of if the newly introduced Federal Underused Housing Tax (UHT) which imposes a 1% annual tax on the value of residential real estate considered to be vacant or underused that is owned on December 31 of each year. While the government indicated that the tax would target property owned by non-Canadians, the scope of filing requirements extends to many Canadian corporations and individuals, including Canadian Controlled Private Corporations (CCPCs), trustees of a trust and partners of a partnership. The first filings and taxes are due by May 1, 2023. Penalties for failure to file the return (even where no tax is payable) start at $5,000 for individuals and $10,000 for corporations. In the coming weeks, I will share a short survey or checklist you can complete to help you determine if filing is applicable to you and if you have any tax liabilities owing on this. So, stay tuned.
3. Do You Qualify for the Canada Dental Benefit?
The Canada dental benefit, announced in September 2022, provides up-front tax-free payments to cover dental expenses for children under age 12 without dental coverage. The program began December 1, 2022, with expenses retroactive to October 1, 2022 being covered. The program is available for two periods: December 1, 2022 to
June 30, 2023, and July 1, 2023 to June 30, 2024. While the program expires in mid-2024, the government has stated that it is committed to fully implementing a dental program for all households with income under $90,000 by 2025.
Services that dentists, denturists or dental hygienists are lawfully able to provide, including oral surgery and diagnostic, preventative, endodontic, periodontal, prosthodontic and orthodontic services, are eligible for the benefit.
The amount of payments that are provided annually (per period) per child under age 12 are based on adjusted family net income (AFNI) as follows:
- $650/child if AFNI is under $70,000;
- $390/child if AFNI is between $70,000 and $79,999; and
- $260/child if AFNI is between $80,000 and $89,999.
AFNI for the benefit’s purpose is the same as for the Canada child benefit, with the annual income period ending on December 31, 2021 for the first period and December 31, 2022 for the second period.
To qualify, parents need to meet certain eligibility requirements and all the details on this as well as other tax tips are published in our March 2023 Quarterly Newsletters we provide to our personal income tax return clients. If you’re looking for INSIGHTS to help you minimize taxes, then consider the Personal Tax Services we offer. With our services, we can help you minimize taxes, improve cash flow and get ahead financially. Get the details here.
4. Know Your Marginal Tax Rate and Save On Taxes
Did you know that you could plan your affairs to save on taxes if you know your marginal tax rate? The Canadian tax system is based on marginal tax rates. This simply means that the more money you make, the more taxes you pay. As your income increases, so does your marginal tax rate. Marginal tax is the dollar amount of tax you pay on any additional dollar of taxable income.
For example, based on the rates in the table above for someone that lives in Ontario and earns $50,000 of employment income, you would be in the 29.65% marginal tax bracket and you would pay 29.65% in taxes for every dollar you earn above $48,535. If you earn $100,000 of employment income, you would be in the 43.41% marginal tax bracket and you would pay 43.41% in taxes for every dollar you earn above $97,070. By knowing your marginal tax rate you can save money by intentionally planning to keep your income from being taxed at a higher rate. To read the full article I shared on this, go here.
5. Do You Own A Corporation With A December 31 Year-end?
As some of you may know, we provide a number of services for corporate clients and it’s that time of the year when corporations with a December year-end should start organizing their documents to compile their financial results, estimate taxes, plan their cash flow for the new year and a number of other things. While we obviously help corporations with the tax compliance work of filing their annual corporate tax returns, we do provide other additional value added services such as:
- Streamlining and automating majority of your bookkeeping processes
- Doing a cash flow and budget analysis for your corporation
- Estimating corporate tax liability and developing a plan for installment payment of your taxes
- Corporate tax planning including how to invest corporate dollars and how to properly use insurance within your business to mitigate risk and plan for retirement
- Corporate restructuring to ensure you’re organized in the most tax efficient way
- Remuneration planning to ensure you’re taking money out of your corporation in the most tax efficient manner
- How to use your corporation as a nest egg for your retirement in a tax efficient manner.
- And many more…
If you’re looking for solutions for your corporation consider working with me and my team at GMS Professional Corporation. Check out our standard service offering for corporations here. And when you’re ready to have a chat, book a time with me here.