Oct
8
By Fin MacDonald, Fin Tax Service
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advise. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.
As I write this article for the October issue of The Beacon, it is September 11. Much has been announced by the four main party leaders since I wrote last month’s column. Much more will come between now and when you, dear readers, actually read this.
The Elephant in the Room
This week Liberal leader Justin Trudeau announced that, like the other leaders, he favoured lowering the Small Business Income Tax Rate from 11% to 9%. He then went on to talk about the structure of most that benefit from this tax break: Incorporated Professionals. Jordan Press, a reporter with the Canadian Press news agency, wrote: “Trudeau said his party would follow through on that promise if elected Oct. 19, but confused business owners with comments in an interview with the CBC, which aired Tuesday night (Sept. 8), that seemed to suggest many were using the reduced tax rate to avoid paying their fair share of taxes. Trudeau seemingly doubled-down on the comments when pressed about them in Edmonton on Wednesday, saying that several studies have shown that more than half of small business owners are "high net worth individuals who incorporate...to avoid paying as high taxes as they otherwise would."
This is an issue I am often asked about by young professionals. More than half of the benefits from the Small Business Tax Rate accrue to high income individuals; these people do not operate more than half of the small businesses. Those who are working in employment relationships realize, when they talk to their old classmates who are self-employed and have incorporated, that they are paying a lot more in taxes every April 30 than their incorporated friends. In my business I do not do corporate tax returns, but, having taken courses in tax planning, I do know when to advise my clients to incorporate. The benefits of incorporation are a topic for another time; let’s look at other tax pledges made in the campaign since my article in the September Beacon.
Child Tax, Day Care and Adoption
The Liberals announced that they would take the Universal Child Tax Benefit and means test it, eliminating it for those with family incomes of over $150,000. They would also increase it and make it non - taxable; and pay for it with their higher taxes on high income people. The NDP re-announced their $15/day Day Care. The Conservatives announced that they would increase the non-refundable credit of $15,000 for Adoptions to $20,000 and make it fully refundable. They also committed to doubling the federal contribution to additional Canada Education Savings Grants — the supplemental grant that low and middle-income families can apply for once they have taken out a Registered Education Savings Plan (RESP).
Housing
The Conservatives announced they would increase the maximum Home Buyers Plan withdrawls to $35,000 from $25,000. This would allow a couple to take up to $50,000 out of their RRSPs for the purchase of a first home. They also announced they were bringing back a scaled down version of the Home Renovation Tax Credit, allowing a credit for $5,000, down from the $10,000 credit that was available in 2009.
Seniors
The NDP announced they would add $400 million to the Guaranteed Income Supplement for poorest seniors. They, along with the Greens and Liberals would also bring the age to collect back down to 65 from 67.
Business
The Conservatives promised to extend and broaden the Mineral Exploration Tax Credit. The also promised to simplify the calculation of home-office expense deductions. The NDP promised a tax credit for investment in innovative research and development as part of their focus on reinvigorating the manufacturing sector.
Employment and Employment Insurance
The Liberals promised a refundable $150 credit for teachers who spend their own money on school supplies. They also announced major changes to the Employment Insurance system including: reducing the waiting period from 2 weeks to 1, lowering the premiums (but not as much as the Conservatives have scheduled), and making EI available to much more of the unemployed. In 2014 only 38.6% of the unemployed qualified for EI, down from an average of 76% from 1976 to 1990.
One other Conservative promise was to make membership fees in Service Organizations such as Rotary, Kiwanis, Royal Canadian Legion and the Knights of Columbus deductible as charitable non-refundable tax credits.
The Green Party released their Platform:
I had planned on also writing about Year End Tax Planning in this issue of The Beacon, but with all the action on the election front there is not room. I will make that the topic for the November issue, with Disability and Medical Tax Credits being the topic for the December-January issue. If any of you have questions or suggestions I may be reached at FinTaxService@hotmail.com .