Personal Tax Changes 2018

There are numerous personal tax changes for the 2018 filing year. Changes to the Income Tax Act for 2018 were primarily focused on changes to the income sprinkling rules.  The headline was that Corporate Rates were reduced from 10% to 9% but several new concepts were created,  including Tax on Split Income (TOSI) that limited tax savings opportunities.     New for this year was the Carbon Tax Rebate – officially known as the Climate Action Rebate.

Federal Tax Bracket Changes

Federal tax brackets are indexed to inflation which increased the brackets by 1.022% as follows:

  • 15% of the first $46,605
  • 5% on taxable income from $46.605 to $93,208
  • 26% on taxable income from $93,208 to $144,489
  • 29% on taxable income from $144,489 to $205,842
  • 33% on taxable income over $205,842

Split Income 2018

The federal government has significantly changed the Tax on Split Income – TOSI  (sometimes referred to as Income Splitting or Income Sprinkling).    Prior and outmoded strategies may have included issuing shares to adult children and spouse, splitting dividends or salaries.    Factors that need to be considered include labour (work completed), capital (property contributed), risk assumed, amounts paid or payable from the business and other relevant factors.  TOSI and this area of income planning in general is complex and requires careful planning.

Personal Tax Changes 2018: Carbon Tax Rebate

The Carbon tax rebate is here.   Known officially as the Climate Action Incentive the Federal Government has introduced a series of carbon taxes but also provided for a Carbon Tax Rebate for most Canadians.  Additional rebates exist for residents of small and rural communities.    Most urban families will get $231 in additional refunds.

Personal Tax Changes 2018 Affect Home Sales

Did you sell a home, condo or cottage in 2018?    Current tax reporting requires us to report all sales on properties.   The principal residence election captures sales on your home and capital gains/losses capture all other real estate sales.

2019 Tax Tips

Small changes for 2019, the km allowance was increased to 58 and 52 for km under and over 5000 km respectively.

We offer personal strategies that help clients keep more of their income.  We take a personal and individual approach to each client to provide tactics that are focused on you and are achievable. We ensure that you are on top of all personal tax changes that may affect you.

Best 2019 Tax Strategies

The wealthiest (net worth – not income) focus on saving 18%-20% of their incomes.   This strategy is more important that earning more or saving more on taxes.  We regularly see people with modest incomes with 7-figure portfolios without risky investing or speculation. Make sure to pay yourself in by saving every two weeks.

Organize your financial affairs to not pay interest costs on any asset that does not increase in value, it’s fine to pay 4% for an asset that increase by 6% per year but not an asset that depreciates.  Interest paid and interest earned are both snowballs – make a conscious decision to build your earning snowball.

Take care of your mind and body; make time for self care and think of your long-term health.    Exercise, family, friends, pets and experiences are the most important things in life.   Surveys continually show higher levels of happiness and contentment unrelated to income or personal tax changes in your life.

We are tax experts in both personal income tax and corporate income tax issues handling everything from personal filing, to Tax on Split Income for family owned business to corporate tax planning for larger organizations. Lets work together to build a strategy that takes into account the tax changes 2018 brings.

If you’d like to discuss your taxes, the new tax on split income rules, or how these 2018 personal tax changes may affect you, call our Pickering office at 1-905-831-6383 or contact us here.

 

James Abbott, CPA and Associates

1730 McPherson Court, Unit 1
Pickering, Ontario L1W 3E6
Phone: 905-831-6383
Email: james@jacpa.ca

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