Archive for the ‘Taxes’ Category

Charitable donation vs. Political contribution

Thursday, July 14th, 2016

When you donate $100, you don’t always have to donate $100. You can get back a portion of your donation by paying less tax. In order to encourage you to give money to a political party, our leaders will entice you with an even more generous tax cut. Forget the Red Cross and the fight to cure cancer, the fat cats want to keep their seat in the next election, and they get to vote on the tax rules.

My Donation: $
I’m a first time donor (well, I didn’t get a charitable donations tax credit for any year after 2007)

Charity Federal party Provincial party
Federal non-refundable tax credits 0
Provincial non-refundable tax credits 0

If your taxable income in 2016 or later exceeded $200,000, use the CRA calculator.

Further reading:
Donations Tax Credit on
Political Contribution Tax Credits on

The Canadian Election Expenses Act that subsidizes individual political donations originated in 1974. Its purpose was to reduce dependancy on large donors, and encourage small donations by a wider range of private citizens.
State subsidies and political parties by Harold J. Jansen and Lisa Young.

Medical expenses tax credits calculator

Monday, July 11th, 2016

The equations spelled out, the meaning of the variables explained, with a simple calculator.

$ Medical Expenses
$ Net Income (income minus RRSP contribution and other deductions)
$ Spouse net Income
$ Universal Child Care Benefit (UCCB)
$ UCCB repayment
$ Registered Disability Savings Plan (RDSP) income
$ RDSP repayment
$ Disability supports deduction (line 215)
I was a Canadian resident for the tax year
I was 18 or older at tax year end

Federal non-refundable tax credits1: [Medical expenses - min(2 or 3% of net income)] * % = * % = $

Provincial non-refundable tax credits1: [Medical expenses - min(3 or 3% of net income)] * % = $

Refundable medical expense supplement: min(4 or 25% of ) - 5% * (income + spouse income - ) = $0

1 Non-refundable tax credits are credits against taxes you would have had to pay otherwise. If your income is too low to pay taxes, you won't be getting any money back.
2 if your income exceeds $, your federal deductible is less than 3% of your net income.
3 if your income exceeds $, your provincial deductible is less than 3% of your net income.
4 The most you can get is $ for medical expenses of at least $.

Further reading:
Medical Expense Tax Credit Line 330, Provincial Line 5868 on
Line 452 - Refundable medical expense supplement on the CRA website

Should I defer paying my property tax?

Monday, June 27th, 2016

BC property owners who are 55 or older may qualify to defer paying property tax. The interest charges are low, and they're not compounded. While this program is designed to help people with low means keep their home, even if you have the means it may be worth it to invest the money, earn compounded interest, and pay later. Or is it? Lets do the math.


Keeping money in the corporation

Thursday, June 23rd, 2016

You’re a sole, small business owner. Your corporation is making a profit. Should you keep the profits that exceed your living expenses inside the corporation, or pay it to yourself?

If you pay yourself, the money will be immediately taxed according to your personal income tax bracket.

If the money remains in the corporation beyond the end of the tax year, the principal will be taxed at a much lower rate (the Canadian Controlled Private Corporation tax rate). If the money is invested, any interest it may yield will be taxed at a much higher rate (the small business deduction is not applicable on passive income). But since the principal you invested is more substantial, would it be better to defer paying income tax and keep it invested inside the company?

Paying yourself – taxation on salary vs dividends

Wednesday, June 22nd, 2016

You’re the sole owner of a small business. Your business yielded a profit this year. If you pay yourself a salary1, the company will pay no taxes (salaries are deductible as company expense), and the the money paid to you will be taxed according to your personal tax bracket. If you pay yourself dividends, the corporation will be taxed; then, the dividends paid to you will be taxed. Canadian dividends are taxed at a reduced rate, since the company was already taxed on the earnings.

So which method of payment will leave more money in your pocket?

Middle-class tax cut?

Tuesday, December 1st, 2015

Early in their second month in office, the newly elected liberal party of Canada implemented their campaign promise marketed as “the middle-class tax cut”.

The so called middle-class tax cut is a $670 tax savings to anyone making more than 90k and up to 200k. These kind of salaries are over and beyond the salaries earned by the bottom 80% of Canadian.

As it happens, the new MP salaries falls within this range ($170,400; The MPs also awarded themselves a salary increase on March 2016).

Here are the fine details: Starting in the 2016 tax year, the federal tax rate on income between $44,700 and $89,401 will fall from 22% to 20.5%. At the same time, the rate on income $200,000 and over will rise from 29% to 33%.

Any tax savings from a tax cut to any specific income tax bracket trickles up to the higher income tax brackets. To see why, look at Canada Revenue Agency Individual tax rates page.

So this tax cut will save you $670 if you’re making between $89,400 and $200,000. Tax savings will still benefit those with incomes of up to about $217,000. At this point the tax cut of the middle tax bracket will balance the tax rise of the high tax bracket. But if you make $51,366 a year, it will save you merely $100. And if you make $44,700 or less, it won’t save you a penny.

Further reading:

The truth about Trudeau’s tax cuts: How Trudeau’s plan takes from the rich and gives to the almost-as-rich
John Geddes, Maclean’s magazine

How most Canadians will be left out in the cold by Trudeau’s proposed tax cut Jamie Golombek, National Post