Further details and guidance on these new rules are expected to be provided in future announcements.
Lifetime Capital Gains Exemption
The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Canadian Entrepreneurs’ Incentive
The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.
Qualifications for the incentive include:
-
Shares must be of a small business corporation directly owned by an individual.
-
For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.
-
The seller needs to be a founding investor who held the shares for at least five years.
-
The seller must have been actively involved in the business continuously for five years.
-
The seller must have owned a significant voting share throughout the subscription period.
-
The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.
-
The shares must have been acquired at their fair market value.
-
The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.
This measure will apply to dispositions after December 31, 2024.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Further proposed changes to the AMT include:
-
Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.
-
Exempting employee ownership trusts (EOTs) entirely from AMT.
-
Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.
These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.
Employee Ownership Trust (EOT) Tax Exemption
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:
-
Sale of shares must be from a non-professional corporation.
-
The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.
-
The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.
-
At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.
-
If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption
-
If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.
-
For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.
-
The normal reassessment period for the exemption is extended by three years.
-
The measure now also covers the sale of shares to a worker cooperative corporation.
This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.
Home Buyers Plan (HBP)
The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:
-
Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.
-
Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments
Interest Deductions and Purpose-Built Rental Housing
The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.
Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing
The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.
Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.
Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets
The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:
-
Class 44- Patents and rights to patented information
-
Class 46- Data network infrastructure and related software
-
Class 50- General electronic data-processing equipment and software
Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.
To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.
Canada Carbon Rebate for Small Businesses
The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:
-
File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.
-
Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.
The amount of the tax credit for each eligible business will depend on:
-
The province where the company had employees during the fuel charge year.
-
The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.
-
The CRA will automatically calculate and issue the tax credit to qualifying businesses.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
The Health Spending Account for Business Owners and Incorporated Professionals
/in Blog, financial advice, Financial Planning, Insurance /by Financial Tech ToolsAre you tired of using your hard-earned after-tax dollars to cover medical expenses? As a business owner, the burden of managing healthcare costs can be overwhelming. However, there’s a little-known solution that can alleviate this financial strain – the Health Spending Account.
Designed specifically for entrepreneurs like you, the Health Spending Account offers a tax-efficient way to manage medical expenses. Say goodbye to paying out of pocket with after-tax dollars for your healthcare needs, and let’s explore the advantages of this specialized account tailored to meet the unique needs of business owners and incorporated professionals.
Who’s eligible?
The Health Spending Account is available to a wide range of businesses, making it an inclusive and flexible solution. Small businesses, professional corporations, and corporations that wish to supplement an existing health plan are all eligible to participate in this program. Whether you run a small family-owned enterprise, a professional practice, or a larger corporate entity, the Health Spending Account can cater to your specific needs and provide valuable healthcare benefits for you and your employees.
What are the benefits?
Tax Deductibility for Corporations
As a business owner or incorporated professional, you know the significance of minimizing tax burdens. The Health Spending Account allows your corporation to make contributions that are 100 percent tax-deductible. By taking advantage of this tax benefit, you can reduce your corporation’s taxable income, resulting in lower overall taxes. This leaves you with more funds to reinvest in your business, expand operations, or reward your hardworking employees.
Tax-Free Benefits for You and Your Employees
The Health Spending Account offers tax-free reimbursements for both you, as the business owner or incorporated professional, and your employees. Any medical expense covered through the account is received as tax-free income. This means you get to retain more of your earnings while providing valuable healthcare benefits to your workforce without increasing their taxable income. It’s a win-win situation that fosters employee satisfaction and loyalty.
No monthly premium to pay and cost-efficient
A Health Spending Account (HSA) offers a highly cost-efficient approach to managing medical expenses, providing individuals and businesses with significant financial advantages. One of the key benefits of an HSA is that there is no monthly premium to pay, unlike traditional health insurance plans. This means that participants can access valuable healthcare benefits without the burden of regular premium payments. With no ongoing costs, the HSA allows individuals and businesses to allocate their funds more strategically, ensuring that their healthcare budget is utilized efficiently. This cost-effective feature makes the Health Spending Account an attractive option for those seeking to optimize their healthcare spending while enjoying comprehensive medical coverage.
How it works
The Health Spending Account simplifies the process of managing healthcare expenses:
1. Employees pay for medical services out of pocket.
2. The employee submits the claim for reimbursement.
3. The claim amount is then reimbursed tax-free through the corporation’s account.
4. The claim is reimbursed to the employee.
This streamlined process eliminates the complexities associated with traditional health insurance plans, saving you time and effort.
To learn more about how a health spending account can benefit you, please reach out today to book a meeting, and we would be happy to help.
Empowering Your Family’s Financial Future: A Comprehensive Guide to Budgeting
/in Blog, Debt, disability, disability insurance, Family, financial advice, Financial Planning, individuals, Insurance, rdsp /by Financial Tech ToolsTaking charge of your family’s financial well-being through effective budgeting is a crucial step in securing a brighter future. We’ll explore the significance of budgeting and provide practical tips to help you manage your money wisely while ensuring the best possible support for your loved ones, including those with disabilities and their Registered Disability Savings Plan (RDSP).
Why Budgeting Matters for Families
Budgeting is a powerful financial tool that holds importance for all families:
Steps to Effective Budgeting for Families
Tips for Successful Budgeting
Budgeting is your family’s pathway to financial security and ensuring a brighter financial future. By budgeting wisely and prioritizing your loved one’s financial well-being, you can control your family’s finances, reduce stress, and work towards a future filled with financial peace of mind. Remember, financial success for families means making informed choices that align with your values and aspirations. Start budgeting today to achieve financial wellness for your entire family, balancing the needs of all family members, including those who rely on the support of the RDSP.
How to Choose and Customize a Group Benefits Plan for Small Businesses
/in Blog, business owners, corporate, critical illness insurance, dental benefits, disability, disability insurance, financial advice, Financial Planning, Group Benefits, health benefits, incorporated professionals, Insurance, life insurance /by Financial Tech ToolsBuilding a Bright and Sustainable Future Together
As a small business owner, you recognize the significance of looking after your team and fostering a nurturing work environment. One method to demonstrate this is by providing a robust group benefits plan. This not only reflects your dedication to your team’s well-being but also is instrumental in drawing and retaining the best talent. Dive into the realm of group benefits and discover how to select and tailor the ideal plan for your small enterprise.
Understanding the Basics of Group Benefits
Group benefits plans are crafted to offer a variety of health, financial, and wellness advantages to your team members. These packages can encompass health and dental insurance, life and disability insurance, retirement savings alternatives, and more. The main benefit of a group benefits plan is its ability to distribute the risk among your team, making coverage more cost-effective and reachable for all.
Step 1: Assess Your Business Needs
Before diving into a group benefits plan, it’s vital to evaluate the requirements of your business and your team. Ponder over these questions:
Step 2: Collaborate with a Benefits Specialist
Teaming up with a benefits specialist is akin to having a navigator on your quest to devise the perfect plan. They will assist you in traversing the intricate landscape of insurance choices, rules, and compliance mandates. They’ll engage closely with you to grasp the distinct needs of your business and craft a plan that matches your budget and principles.
Step 3: Customize Your Plan
Adaptability is paramount when shaping a benefits plan that appeals to your team. Here are some avenues for personalization:
Step 4: Educate Your Employees
The efficacy of a group benefits plan hinges on transparent communication and enlightenment. Ensure your team comprehends the worth of the benefits provided and the methods to utilize them optimally. Arrange seminars, online sessions, or informational meetups to aid them in making knowledgeable choices about their coverage.
Step 5: Regularly Review and Adjust
The dynamics of your business and the needs of your team will transform over time. Hence, it’s crucial to revisit your group benefits plan annually and make requisite modifications. This guarantees that your plan stays in sync with your objectives and consistently delivers value to your team.
Building a Sustainable Future Together
As you embark on the path of picking and personalizing a group benefits plan for your small enterprise, bear in mind that your collaboration with your team is central to the process. By placing their welfare at the forefront and presenting a comprehensive benefits package, you’re not merely paving a brighter path for your team but also cultivating a sustainable work setting that promotes allegiance, efficiency, and expansion.
Stay Ahead in 2024: A Comprehensive Checklist for Federal Tax Updates
/in 2024, Blog, business owners, Family, financial advice, Financial Planning, individuals, Investment, Retirees, retirement /by Financial Tech ToolsWith the upcoming 2024 Canadian tax rule changes, it’s important to review your financial strategies. We’ve identified the key changes that we expect to influence financial decisions for investors, business owners, incorporated professionals, retirees, and individuals with high income or net worth.
Capital Gains Inclusion Rate
Starting on June 25, 2024, the tax on capital gains is changing. Until now, you would only have to include half of your capital gains in your income for tax purposes. But after that date, you’ll have to include two-thirds of any capital gains over $250,000 on your tax return. This is also the case for employee stock options.
Consequently, for corporations and trusts, they will have to include two-thirds of all their capital gains, no matter the amount. This is a significant change.
Lifetime Capital Gains Exemption (LCGE)
The budget proposes increasing the LCGE for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. This change increases tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, suggesting revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Employee Ownership Trust (EOT)
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met.
Canadian Entrepreneurs’ Incentive
This new tax measure offers a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years. However, it’s important to know that not all businesses qualify—this doesn’t apply to businesses in professional services, finance, real estate, hospitality, arts, entertainment, or personal care.
Below is a checklist to help you navigate the tax adjustments and ensure your financial plans are updated and aligned with the new rules.
Investors
Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate.
Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.
Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.
Employee Stock Options: Adjust the timing of exercising stock options to align with the upcoming changes in inclusion rates.
Business Owners:
Corporate Investments: Assess the impact of increased inclusion rates on corporately held assets, exploring the timing of gains realization. Review trust-held investments.
Lifetime Capital Gains Exemption: Maximize the benefits of the increased LCGE for qualifying business assets.
Employee Ownership Trust: Consider the advantages of transferring business ownership via an EOT.
Succession Planning: Update your succession plans to consider the potential impact of capital gains tax changes.
Entrepreneurs Incentive: Check if you are eligible to reduce capital gains taxes.
Incorporated Professionals:
Investments: Assess both personal and corporate investments for the new inclusion rate. Determine the most tax-effective structure for holding and realizing gains from investments.
Succession Planning: Time the potential sale of your professional corporation to capitalize on the current LCGE.
Retirees:
Estate Planning: Update estate plans considering the impending increase in capital gains rates.
Life Insurance Coverage: Ensure life insurance is adequate to cover increased capital gains tax liabilities upon death.
Non-Registered Investments and Retirement Income: Review your strategy for non-registered investments to manage taxes on gains and adjust your retirement income plans to accommodate the upcoming changes in capital gains rates.
Individuals with High Income or Net Worth:
Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate. Review trust-held investments.
Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.
Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.
Charitable Contributions: Align your charitable giving strategies with the new tax benefits and AMT considerations.
Please reach out to us to review your financial strategy together and ensure it aligns with the upcoming changes.
2024 Federal Budget Highlights
/in Blog, business owners, Estate Planning, Family, Financial Planning, incorporated professionals, individuals, Investment, mortgage, personal finances, Professional Corporations, Professionals, Retirees, retirement, tax /by Financial Tech ToolsOn April 16, 2024, Canada’s Deputy Prime Minister and Finance Minister, Chrystia Freeland, presented the federal budget.
While there are no changes to federal personal or corporate tax rates, the budget introduces:
An increase in the portion of capital gains subject to tax, rising from 50% to 66.67%, starting June 25, 2024. However, individual gains up to $250,000 annually will retain the 50% rate.
The lifetime exemption limit for capital gains has been raised to $1.25 million. Additionally, a new one-third inclusion rate is set for up to $2 million in capital gains for entrepreneurs.
The budget confirms the alternative minimum tax changes planned for January 1, 2024 but lessens their impact on charitable contributions.
This year’s budget emphasizes making housing more affordable. It provides incentives for building rental properties specifically designed for long-term tenants.
Introduces new support measures to aid people buying their first homes.
Costs for specific patents and tech equipment and software can now be written off immediately.
Canada carbon rebate for small business.
Capital Gains Inclusion Rate
The budget suggests raising the inclusion rate on capital gains after June 24, 2024:
Corporations and trusts, from 50% to 66.67%.
Individuals, on capital gains over $250,000 annually, also from 50% to 66.67%.
For individuals, the $250,000 annual threshold that applies to net capital gains—the amount remaining after offsetting any capital losses. This includes gains acquired directly by an individual or indirectly through entities such as partnerships or trusts. Essentially, this threshold acts as a deductible, considering various factors to determine the net gains eligible for the increased capital gains tax rate.
Individuals in the highest income bracket, who earn above the top marginal tax rate threshold, will face a higher tax rate on capital gains exceeding $250,000 due to these changes. Furthermore, the budget modifies the tax deduction for employee stock options to align with the updated capital gains taxation rates yet maintains the initial 50% deduction for the first $250,000 in gains. Regarding previously incurred financial losses, the budget plans to adjust the value of these net capital losses from past years so that they are consistent with the current gains, upholding the uniformity with the new inclusion rate.
The budget outlines transitional rules for the upcoming tax year that straddles the implementation date of the new capital gains rates. If the tax year begins before June 25, 2024, but ends afterward, capital gains realized before June 25 will be taxed at the existing rate of 50%. However, gains accrued after June 24, 2024, will be subject to the increased rate of 66.67%. It’s important to note that the new $250,000 threshold for higher tax rates will only apply to gains made after June 24.
Consequently, for individuals earning capital gains beyond the $250,000 threshold and who fall into the highest income tax bracket, new rates will be effective as outlined in the table below. Specifically, this pertains to individuals with taxable incomes exceeding $355,845 in Alberta, $252,752 in British Columbia, $1,103,478 in Newfoundland and Labrador, $500,000 in the Yukon, and $246,752 in all other regions.
Further details and guidance on these new rules are expected to be provided in future announcements.
Lifetime Capital Gains Exemption
The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Canadian Entrepreneurs’ Incentive
The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.
Qualifications for the incentive include:
Shares must be of a small business corporation directly owned by an individual.
For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.
The seller needs to be a founding investor who held the shares for at least five years.
The seller must have been actively involved in the business continuously for five years.
The seller must have owned a significant voting share throughout the subscription period.
The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.
The shares must have been acquired at their fair market value.
The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.
This measure will apply to dispositions after December 31, 2024.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Further proposed changes to the AMT include:
Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.
Exempting employee ownership trusts (EOTs) entirely from AMT.
Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.
These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.
Employee Ownership Trust (EOT) Tax Exemption
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:
Sale of shares must be from a non-professional corporation.
The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.
The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.
At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.
If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption
If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.
For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.
The normal reassessment period for the exemption is extended by three years.
The measure now also covers the sale of shares to a worker cooperative corporation.
This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.
Home Buyers Plan (HBP)
The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:
Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.
Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments
Interest Deductions and Purpose-Built Rental Housing
The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.
Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing
The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.
Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.
Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets
The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:
Class 44- Patents and rights to patented information
Class 46- Data network infrastructure and related software
Class 50- General electronic data-processing equipment and software
Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.
To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.
Canada Carbon Rebate for Small Businesses
The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:
File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.
Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.
The amount of the tax credit for each eligible business will depend on:
The province where the company had employees during the fuel charge year.
The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.
The CRA will automatically calculate and issue the tax credit to qualifying businesses.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
Tax tips to know before filing your 2023 income tax
/in 2024, Blog, corporate, Family, financial advice, Financial Planning, tax /by Financial Tech ToolsThis year’s tax deadline is April 30, 2024. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. We’ve separated this article into 2 sections:
What’s new for 2023
Individuals and Families
What’s New for 2023
Advanced Canada Workers Benefit (ACWB)
Automatic advance payments of the Canada Workers Benefit (CWB) are now seamlessly distributed through the ACWB program to individuals who received the benefit in the last tax year. However, it’s important to note that not everyone who received the CWB in the previous tax year will automatically receive the ACWB payments. Only individuals who filed their 2022 tax return before November 1, 2023, are eligible for the ACWB payments.
Furthermore, it’s worth mentioning that the ACWB program eliminates the need to file Form RC201. Recipients are no longer required to fill out this form. Instead, starting in 2023, individuals should report the amounts from their RC210 slip on Schedule 6, Canada Workers Benefit, of their tax return. Additionally, for eligible spouses, the option to claim the basic amount for the CWB is available regardless of who received the RC210 slip.
Deduction for Tools (Tradespersons and Apprentice Mechanics)
Starting in 2023, the maximum employment deduction for eligible tools of tradespersons has risen from $500 to $1,000. Consequently, the threshold for expenses eligible for the apprentice mechanics tools deduction has also been adjusted.
Temporary Flat Rate Method for Home Office Expenses
For the year 2023, the temporary flat rate method for claiming home office expenses is not applicable. Consequently, taxpayers seeking to claim such expenses for 2023 must utilize the detailed method and obtain a completed Form T2200, Declaration of Conditions of Employment, from their employer.
Federal, Provincial, and Territorial COVID-19 repayments
Repayments of COVID-19 benefits at the federal, provincial, and territorial levels, made after December 31, 2022, can be deducted and claimed.
First Home Savings Account (FHSA)
The FHSA is a registered plan designed to aid individuals in saving for their first home. Starting April 1, 2023, contributions made to an FHSA are typically deductible, and eligible withdrawals made from an FHSA for purchasing a qualifying home are tax-free.
Property Flipping
Starting January 1, 2023, any profit generated from the sale of a housing unit (including rental properties) situated in Canada, or a right to acquire a housing unit in Canada, that you owned or held for less than 365 consecutive days prior to its sale is considered business income rather than a capital gain. This is applicable unless the property was already classified as inventory or the sale occurred due to, or in anticipation of specific life events.
Multigenerational Home Renovation Tax Credit (MHRTC)
The MHRTC is a refundable tax credit designed to enable eligible individuals to seek reimbursement for specific renovation expenses incurred in establishing a secondary unit within an eligible dwelling. This enables a qualifying individual to live with their qualifying relative. If eligible, you can claim up to $50,000 in qualifying expenditures for each renovation project completed, with a maximum credit of $7,500 for each eligible claim.
Fuel Charge Proceeds Return to Farmers Tax Credit
The Fuel Charge Proceeds Return to Farmers Tax Credit is now accessible to self-employed farmers and individuals involved in a partnership operating a farming business with one or more permanent establishments located in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, or Saskatchewan. If eligible, you may be entitled to a refund of a portion of your fuel charge proceeds.
For Individuals and Families
Canada Training Credit (CTC)
The CTC is a refundable tax credit available to help Canadians with the cost of eligible training fees.
To qualify for the CTC, you need to fill out Schedule 11 for the following:
Tuition fees and other applicable fees paid to an eligible educational institution in Canada for courses taken in 2023.
Fees paid to specific organizations for occupational, trade, or professional examinations undertaken in 2023.
To be eligible for the CTC, you must meet all these conditions:
You resided in Canada for the entire year of 2023.
You were at least 26 years old but less than 66 years old at the end of the year.
Your most recent notice of assessment or reassessment for 2022 shows a Canada Training Credit Limit for 2023.
Canada Caregiver Credit (CCC)
The CCC is a non-refundable tax credit aimed at assisting individuals who provide support to a spouse, common-law partner, or dependent with a physical or mental impairment, as outlined by the CRA.
You might be eligible for the CCC if you aid:
Your spouse or common-law partner dealing with a physical or mental impairment.
Dependents such as children, grandchildren, parents, grandparents, siblings, uncles, aunts, nieces, or nephews residing in Canada, who rely on you for consistent provision of basic needs like food, shelter, and clothing.
The amount you can claim varies depending on your relationship to the individual, your circumstances, their net income, and whether other credits are claimed for them.
Child Care Expenses
Child care expenses encompass payments made by you or someone else to arrange care for an eligible child. This care allows you to participate in income-earning activities, pursue education, or conduct research funded by a grant.
If you qualify, you can claim certain childcare expenses as deductions when you file your personal income tax return.
Disability Tax Credit (DTC)
The DTC is a non-refundable tax credit designed to support individuals with disabilities, or their family members who provide support, by reducing their income tax responsibilities.
To be eligible for this credit, individuals must have a significant and enduring impairment. Once approved, they can apply the credit when filing their taxes.
The DTC aims to ease some of the extra costs linked with the disability by lessening the individual’s income tax burden.
Moving
You can claim moving expenses you paid during the year if you meet these conditions
You moved to a new residence for work reasons, to start a business in a different area, or to attend a post-secondary program as a full-time student at a university, college, or other educational institution.
Your new residence must be at least 40 kilometres closer, determined by the shortest public route, to your new work location or educational institution.
Interest Paid on Student Loans
You might qualify to claim an amount for the interest paid on your student loan for post-secondary education if it was obtained under the following acts:
Canada Student Loans Act
Canada Student Financial Assistance Act
Apprentice Loans Act
Provincial or territorial government laws that are similar to the aforementioned acts.
Only you, or a person related to you, can claim the interest paid on the loan within the tax year 2023 or the preceding 5 years.
Donations and Gifts
When you or your spouse/common-law partner donate to eligible institutions, you might be eligible for federal and provincial/territorial non-refundable tax credits when you file your income tax and benefit return.
Normally, you can claim a portion or the full eligible donation amount, capped at 75% of your net income for the tax year.
Seeking guidance?
Wondering if you qualify for valuable tax credits or deductions? Reach out to us – as your financial advisor, we’re here to assist you in optimizing your finances and maximizing your savings.
Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/whats-new.html
Canada Training Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-45350-canada-training-credit.html
Canada Caregiver Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/canada-caregiver-amount.html
Child Care Expense: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21400-child-care-expenses.html
Disability Tax Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/disability-tax-credit.html
Moving: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21900-moving-expenses.html
Interest Paid on Student Loans: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31900-interest-paid-on-your-student-loans.html
Donations and Gifts: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-34900-donations-gifts.html
Saskatchewan’s 2024 Budget Highlights
/in Blog, corporate, tax /by Financial Tech ToolsOn March 20, 2024, the Saskatchewan’s Minister of Finance announced the province’s 2024 budget. This article highlights the most important things you need to know about this budget, broken into 2 sections:
Business Tax
Personal Tax
Personal tax changes
There are no changes to the province’s personal tax rates in Budget 2024.
As a result, the Saskatchewan’s personal income tax rate remains as follows:
1 The top marginal tax rate on non-eligible dividends is scheduled to decrease to 40.37% for 2025 (assuming no further rate or dividend tax credit changes.)
Business tax changes
The budget delays a planned increase in the 1% small business income tax rate until July 1, 2025. This means that instead of going up on July 1, 2024, the small business tax rate will only increase to 2% on July 1, 2025. This change also affects Saskatchewan’s corporate income tax rates, which are set to be as follows:
1 On first $600,000 of active business income.
2 Saskatchewan’s small business tax rate is scheduled to increase to 2% on July 1, 2025.
Also, the total Saskatchewan and federal corporate income tax rates are set to be:
1 Assuming no further changes to federal or Saskatchewan tax rates.
2 Saskatchewan’s small business tax rate is scheduled to increase to 2% on July 1, 2025.
Saskatchewan Technology Start-up Incentive
The budget improves the Saskatchewan Technology Start-up Incentive. This program gives a non-refundable 45% tax credit to specific accredited investors who invest in certain start-up businesses. Now, the budget makes more start-ups eligible for this incentive, especially those working on new technologies in clean energy. Plus, the program will last longer, until March 31, 2027, instead of March 31, 2026. Also, there will be more money available for funding these start-ups.
Saskatchewan Commercial Innovation Incentive
The budget gives more time for businesses to apply for the Saskatchewan Commercial Innovation Incentive, also known as the “patent box.” Now, businesses can apply until June 30, 2025, instead of June 30, 2024. This incentive typically lowers the provincial corporate income tax rate to 6% for ten years for businesses that sell their new ideas in Saskatchewan. Also, the government plans to check how well this program is working in 2024 and will listen to what businesses have to say about it.
Critical Minerals Innovation Incentive
The budget brings in the Saskatchewan Critical Minerals Innovation Incentive, a new program. It’s for certain pilot and growing projects that get transferable Crown royalty and freehold production tax credits. These credits are worth 25% of the costs of the program that qualifies. The budget mentions that this incentive is for projects that use new technologies to improve how minerals are recovered, reduce environmental effects, add value during processing, or sell extra or waste products.
Critical Minerals Processing Investment Incentive
The budget brings in the Critical Minerals Processing Investment Incentive. This program gives transferable Crown royalty and freehold production tax credits. These credits amount to 15% of eligible costs for certain projects. The incentive is for new or expanded projects that add value to minerals in Saskatchewan. It includes opportunities to sell extra products made at current mines and processing plants.
Saskatchewan Petroleum Innovation Incentive
The budget gives more time to apply for the Saskatchewan Petroleum Innovation Incentive, now until March 31, 2029, instead of March 31, 2024. This incentive gives transferable tax credits for certain projects that turn innovative ideas into business reality. The credits amount to 25% of the costs of the project that qualifies. The budget also stops helium and lithium projects from being eligible for this incentive because they can now qualify under the new Saskatchewan Critical Minerals Innovation Incentive.
Oil and Gas Processing Investment Incentive
The budget gives more time for the Oil and Gas Processing Investment Incentive until March 31, 2029, instead of March 31, 2024. Also, there’s more funding available. This incentive offers transferable tax credits for certain projects that add value to the oil and gas industry, whether they’re new projects or improving existing ones. The credits amount to 15% of the costs of the project that qualifies. The budget also stops helium and lithium projects from being eligible for this incentive because they can now qualify under the new Critical Minerals Processing Investment Incentive.
Multi-lateral Well Program
The budget starts the Multi-lateral Well Program, which gives drilling incentives for certain new oil wells. The incentives depend on whether the well is shallow, deep, or for exploring. This program is for new wells drilled from April 1, 2024, to March 31, 2028.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
Source: https://budget.saskatchewan.ca/
The Benefits of Working With An Employee Benefits Specialist
/in Blog, Group Benefits /by Financial Tech ToolsWe understand that when looking for employee benefits, you’re looking to do so cost-effectively. But it’s essential to make sure you work with an employee benefits specialist, no matter what the price tag is on your benefits package.
We’ll explain how an employee benefits specialist differs from a generalist and why working with an employee benefits specialist is so important.
How does an employee benefits specialist differ from a generalist?
You may have approached financial advisors who can handle various tasks, such as selling you insurance products, investments, and employee benefits. However, this kind of financial advisor would be considered a generalist, and they lack in-depth knowledge of how complex employee benefits can be.
An employee benefits specialist is the opposite of a generalist. They are licensed advisors who have dedicated their practice to employee benefits. Employee benefits specialist prides themselves on understanding all the nuances associated with employee benefits. A specialist undergoes further training and acquires in-depth knowledge about employee benefits.
Why is it essential to work with an employee benefits specialist?
Employee benefits plans are complex, and your business could be at risk if your employee benefits program isn’t administered correctly. As you know, employee benefits form a part of an employee’s compensation package.
These are the benefits of working with an employee benefits specialist:
The bottom line is that working with an employee benefits specialist means you’ll have access to a well-designed and administered benefits plan.
How can I get started working with an employee benefits specialist?
Ready to make a move to working with an employee benefits specialist? We’re here to help you get the benefits program to attract and retain employees. Call us today to get started!
Video link: https://vimeo.com/770504723/50ba274537
TFSA vs RRSP – 2024
/in 2024, Blog, business owners, Estate Planning, Family, financial advice, Financial Planning, individuals, Investment, personal finances, Professionals, retirement, rrsp, Tax Free Savings Account /by Financial Tech ToolsTax-Free Savings Account vs Registered Retirement Savings Plan
When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. To assist you in understanding the distinctions, we will compare the following:
The differences in deposits between TFSAs and RRSPs
The differences in withdrawals between TFSAs and RRSPs
TFSA versus RRSP – Difference in deposits
When comparing deposit differences between TFSAs and RRSPs, there are several key considerations:
The amount of contribution room available
The ability to carry forward unused contributions
The tax deductibility of contributions
The tax treatment of growth in the account
How much contribution room do I have?
If you have never contributed to a TFSA, you can contribute up to $95,000 today. This table outlines the contribution amount you are allowed each year since TFSAs were created, including this year:
Regarding RRSPs, the limit for tax deductions is 18% of your pre-tax earned income from the previous year, with a maximum limit of $31,560. To illustrate, if your pre-tax income in 2023 was $60,000, your deduction limit for 2024 would be $10,800 (18% x $60,000). If your pre-tax income was $200,000, the maximum limit of $31,560 would apply.
How much contribution room can I carry forward?
Suppose you opt not to contribute to your TFSA each year or do not contribute the maximum amount. In that case, you can carry forward your unused contribution room indefinitely, provided you are a Canadian resident, over 18 years of age, and have a valid social insurance number. If you make a withdrawal, the amount withdrawn will be added to your annual contribution room for the next calendar year.
In contrast, for an RRSP, you can carry forward your unused contribution room until age 71. Once you reach 71, you are required to convert your RRSP into an RRIF. Withdrawals from an RRSP do not create additional contribution room.
The tax deductibility of contributions
Your TFSA contributions are not tax-deductible and are made with after-tax dollars.
Your RRSP contributions are tax-deductible and made with pre-tax dollars.
Tax Treatment of Growth
It is essential to contribute to both RRSP and TFSA because of the different tax treatment of the growth within them.
A TFSA is ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free. When withdrawing from your TFSA, you will not have to pay any income tax on the amount withdrawn. On the other hand, the growth within an RRSP is tax-deferred. This means you will not pay taxes on your RRSP gains until age 71, at which point you convert the RRSP into an RRIF and start withdrawing money.
RRSPs are more suitable for long-term goals such as retirement because, in retirement, you will have a lower income and be in a lower tax bracket, resulting in less tax on your RRIF income.
TFSA versus RRSP – Differences in withdrawals
There are several areas to focus on when comparing differences in withdrawal:
Conversion Requirements
Tax Treatment
Government Benefits
Contribution Room
Conversion Requirements
For a TFSA, there are never any conversion requirements as there is no maximum age for a TFSA.
For an RRSP, you must convert it to a Registered Retirement Income Fund (RRIF) if you turn 71 by December 31st, 2024.
Tax Treatment of Withdrawals
One of the most attractive things about a TFSA is that all your withdrawals are tax-free! Therefore, they are recommended for short-term goals; you don’t have to worry about taxes when you take money out to pay for a house or a dream vacation.
With an RRSP, if you make a withdrawal, it will be taxed as income except in two cases:
The Home Buyers Plan lets you withdraw up to $35,000 tax-free, but you must pay it back within fifteen years.
The Lifelong Learning Plan lets you withdraw up to $20,000 ($10,000 maximum per year) tax-free, but you must pay it back within ten years.
How will my government benefits be impacted?
If you are withdrawing from your TFSA or RRSP, it’s essential to know how that will affect any benefits you receive from the government.
Since TFSA withdrawals are not considered taxable income, they will not impact your eligibility for income-tested government benefits.
RRSP withdrawals are considered taxable income and can affect the following:
Income-tested tax credits such as Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit, and the Age Credit.
Government benefits including Old Age Security, Guaranteed Income Supplement and Employment Insurance.
How will a withdrawal impact my contribution room?
If you withdraw from your TFSA, the amount you withdrew will be added on top of your annual contribution room for the following calendar year. If you withdraw from your RRSP, you do not open any additional contribution room.
The Takeaway
RRSPs and TFSAs can both be great savings vehicles. However, there are significant differences between them which can affect your finances. If you need help navigating these differences, please do not hesitate to contact us. We’re here to help.
2024 Financial Calendar
/in 2024, Blog, business owners, financial advice, Financial Planning, individuals, personal finances, Professional Corporations, Professionals, Retirees, tax /by Financial Tech Tools2024 Financial Calendar
Welcome to our 2024 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don’t miss any important financial obligations.
If you need help with your taxes, tax packages will be available starting February 2024. Don’t wait until the last minute to get started on your tax return – make an appointment with your accountant to ensure you’re ready to go when tax season arrives.
Important 2024 Dates to Know
On January 1, 2024 the contribution room for your Tax Free Savings Account opens again. The maximum contribution for 2024 is $7,000.
If you qualify, on January 1, 2024 the contribution room for your First Home Savings Account opens. The maximum contribution for 2024 is $8,000.
For your Registered Retirement Savings Plan contributions to be eligible for the 2023 tax year, you must make them by February 29, 2024.
GST/HST credit payments will be issued on:
January 5
April 5
July 5
October 4
Canada Child Benefit payments will be issued on the following dates:
January 19
February 20
March 20
April 19
May 17
June 20
July 19
August 20
September 20
October 18
November 20
December 13
The government will issue Canada Pension Plan and Old Age Security payments on the following dates:
January 29
February 27
March 26
April 26
May 29
June 26
July 29
August 28
September 25
October 29
November 27
December 20
The Bank of Canada will make interest rate announcements on:
January 24
March 6
April 10
June 5
July 24
September 4
October 23
December 11
April 30, 2024 is the last day to file your personal income taxes, and tax payments are due by this date. This is also the filing deadline for final returns if death occurred between January 1 and October 31, 2023.
May 1 to June 30, 2024 would be the filing deadline for final tax returns if death occurred between November 1 and December 31, 2023. The due date for the final return is six months after the date of death.
The tax deadline for all self-employment returns is June 17, 2024. Payments are due April 30, 2024.
The final Tax-Free Savings Account, First Home Savings Account, Registered Education Savings Plan and Registered Disability Savings Plan contributions deadline is December 31.
December 31 is also the deadline for 2024 charitable contributions.
December 31 is also the deadline for individuals who turned 71 in 2024 to finish contributing to their RRSPs and convert them into RRIFs.
Please reach out if you have any questions.
Sources:
https://www.canada.ca/en/services/benefits/calendar.html
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/important-dates-rrsp-rrif-rdsp.html
https://www.bankofcanada.ca/2023/07/2024-schedule-policy-interest-rate-announcements-major-publications/