It’s not tax season right now and therefore not many people are thinking about taxes. But while we will all be filing our taxes a few months later, major tax changes are taking place everyday and they are mostly bad news.
The Government of Canada has recently announced new tax measures against income sprinkling. Income sprinkling is the process where a small business owner can distribute the business income with his/her spouse or an adult child. So if the spouse or adult child is in a lower tax bracket, this can result in huge tax savings.
The Government of Ontario has already announced a 15 percent punitive tax on foreign property buyers but this is not all. The Federal Government announced last year that all property sales must be reported with the tax return even if you sold your principle residence. So, in case you missed it, you should be running to your tax accountant’s office as failure to report can result in penalties up to $8000.
The estate planning laws have also gone through major changes in the last year and an estate of a deceased individual can now only reap the benefits of progressive tax rates for 36 months after the death of an individual. In the past, income splitting could be achieved through testamentary trusts for a longer time period.
The opportunities for tax planning are becoming scarce and complicated every single day. The tax credits are getting reduced or completely getting discontinued every single year. Children’s fitness tax credit, arts tax credit, public transit credit are all a thing of the past now.
So, in these changing times, tax planning is more important than ever. It is important to make use of tax saving tools like TFSA and have an estate plan that will allow for passing on your wealth to the beneficiaries in the most efficient way. Poor estate planning often results in huge tax liabilities and time consuming legal complications for the beneficiaries.
The time to plan your taxes is when you are making investments, selling investments or when you are ready to plan your estate. It is when you are finalizing a structure for your business and also when you are saving funds for your retirement. All this just does not happen during the months of March and April.
Tax planning works best when you have a proactive approach. Talk to your tax accountant today if you are taking a big financial decision or it might be too late. Call 905-273-4444 and book an appointment for all tax issues and Softron tax professionals will be happy to help