Personal Taxation Services
It is axiomatic that all taxpayers want to maximize their after-tax income, while minimizing their personal tax liability. Professional accounting assistance can be invaluable in helping both individual and corporate clients successfully interpret the complexities of the Income Tax Act to achieve those goals.
The issues are varied, such as the decision whether to pay salary or dividends, or a ratio of each, from business or self-employment income, which significantly affects both income and personal tax liability. Payment of salary or bonus, for instance, creates earned income and RRSP contribution room the following year; payment of dividends does not. Dividend payments, on the other hand, may affect the taxation liability balance between the corporation and individual.
Dividends might also reduce an individual's cumulative net investment loss (CNIL) balance, which could enhance their capital gains deduction limit.
Self-employed individuals working in a home office today face decisions with important tax consequences. In addition to the usual deductions available to the self-employed, a portion of the home's expenses, in reasonable proportion to the amount of space being used for the business, are also eligible for deduction.
However, it may or may not be prove beneficial for certain individuals to take one particular deduction - that relating to capital cost allowance on the portion of the principle residence used for business.
Personal tax planning also includes establishing regular payments to a tax sheltered pension, such as a registered retirement savings plan (RRSP), and, if applicable, a spousal retirement plan. Another important component of tax planning is deciding, when the RRSP must be terminated, whether to transfer tax sheltered funds into a registered retirement income fund, or obtain an annuity.
Maximizing federal non-refundable tax credits on an annual basis also plays an important role in effective tax planning. Federal non-refundable tax credits include a personal deduction and, if applicable, age deduction, various dependent deductions, pension credit, medical expenses and disability credits, tuition fee and education credits, and charitable donation credits.
Individuals may also qualify for investment tax credits covering such items as foreign income, dividends received, and, depending on income, for the goods and services tax paid.
Note to users: All information provided is of a general nature. Although we endeavour to ensure its accuracy and timeliness, no one should act upon it without appropriate professional advice after a thorough examination of the facts of the particular situation.