TAX PLANNING CHECKLIST
As we embark on a new year, people tend to turn their attention to planning for the future. While we believe that tax planning should be an integral part of the overall wealth planning process, we also recognize that the beginning of the year is generally a good time to review your tax strategies and identify those strategies that may be implemented in the upcoming year.
We recommend that you review your family’s particular situation regularly to ensure that you have structured your financial affairs to minimize taxes. There are a number of steps that you can take now to ensure optimal tax planning throughout the year. We recommend that you consult with your advisors in helping you to coordinate and implement these strategies as not all of our suggestions may be appropriate for your particular situation.
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What’s new and updates for 2010
Income tax rates
Employee stock options
- Corporate income tax rates – Federal general tax rates decreasing 19% - 2010, 16.5% - 2011 & 15% - 2012; small business rate remains at 11%
- Eligible dividends – marginal tax rates effectively increasing as a result of decreasing corporate income tax rates.
- Effective March 4, 2010
- only the employer or employee (not both) can claim a tax deduction for cashed-out stock options; and
- $100,000 tax deferral eliminated.
Harmonized Sales Tax (HST)
- Effective July 1, 2010
- HST replaced the GST and provincial sales tax in B.C. and Ontario; and
- HST rate in Nova Scotia increased from 13% to 15%.
Canada Pension Plan (CPP)
- Changes have been made to CPP that will be phased in gradually between 2011 and 2016. The first major change is effective January 2011:
- If you apply for CPP after age 65, your monthly CPP retirement pension amount will increase by a larger percentage (gradually from 2011 to 2013).
- You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.
- The changes do not apply to the Quebec Pension Plan (QPP)
Depending on your particular situation, you may want to consider strategies that address the following:
- Choosing the optimal salary/dividend mix from your private company
- Ensuring tax-efficient corporate withdrawals
- Incorporating professional income
- Selling your business in a tax-efficient manner
- Income splitting with low income family members
- Tax efficient investing
- Maximize the efficiency of retirement savings plans
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To receive our complimentary publication “2010-2011 Tax Planning Checklist” outlining these and more tax and estate planning strategies that may be used in conjunction with any recommendations and advice provided by your professional investment, legal and tax advisors, please contact your Richardson GMP Investment Advisor.