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Registered Retirement Savings Plans (RRSP) Contributions
Leave a CommentBasic Rules
The contributions made to your RRSP are fully deductible from your income reported on your tax return. Any income earned on your RRSP is tax deferred. That is, you only pay tax when amounts are withdrawn from your RRSP.
Annual Contribution Limit
Your contribution limit for 2016 is 18% of your 2015 earned income (to a maximum of $25,370) less the value of any benefits accrued to you in 2015 as part of your pension adjustment. Note that any unused RRSP contribution limits from prior years are also added to your contribution limit. To find out your contribution limit for 2016, simply look at your 2015 Notice of Assessment from the CRA and there is a section detailing the calculation of your RRSP limit. You can also find this information online as part of CRA’s “My Account” service.
Spousal RRSPs
Spousal RRSPs are a great method used as part of the tax planning process. Essentially, the higher income spouse makes a contribution to a lower tax rate spouse’s RRSP. The higher income spouse will then receive the deduction benefit for the contribution amount. When the funds are withdrawn from the RRSP, they are taxed on the lower tax rate individual’s return. Note that the contribution made to a spousal RRSP is based on the higher income spouse’s contribution limit, not a combination of the two.
Over-contributions
Note that if you over-contribute to your RRSP, there may be applicable penalties. In order to avoid such penalties, ensure that your over-contributions do not exceed the cumulative limit of $2,000. RRSP over-contributions carry forward indefinitely.
Contribution Deadline
Your RRSP contribution must be made on or before March 1, 2017 in order for your contribution to be deductible in the 2016 tax year.
Federal Budget 2013
Leave a CommentOn March 21, 2013, the Honourable Jim Flaherty tabled the 2013-2014 federal budget which focuses on jobs, growth and long-term prosperity. The deficit for the 2013-2014 year is projected to be $18.7 billion with a balanced budget still planned for 2015-2016.
To increase revenue, the budget closed certain “tax loopholes” – for owners of Canadian-Controlled Private Corporations, the personal tax rate that applies on ineligible dividends will be increased to eliminate a tax preference that existed in most provinces by flowing active business through a corporation. Other changes include making the cost of safety deposit boxes non-deductible for income tax purposes, phasing out the labour-sponsored venture capital corporations tax credit, eliminating leveraged life insurance arrangements, tightening corporate and trust loss trading rules and introducing changes to Form T1135-Foreign Income Verification Statement.
On a positive note for taxpayers, the lifetime capital gains exemption will be increased from $750,000 to $800,000 in 2014 and indexed thereafter. An additional 25% credit for up to $1,000 of monetary donations made on or after March 21, 2013 will be available to those who have not claimed donations since 2007. Manufacturing and processing machinery and equipment acquired before 2016 will continue to be eligible for a temporary accelerated capital cost allowance rate of 50% on a straight-line basis. Small businesses will enjoy the extension of the temporary hiring credit of up to $1,000 for one more year.
Workers Safety Insurance Board (WSIB)
Leave a CommentEffective January 1, 2013 independent operators, sole proprietors, partners and executive officers in the construction industry will no longer be able to opt out of paying WSIB premiums. Certain exceptions exist for partners or executive officers who do not provide any construction work and in circumstances where only home renovation work is done through a direct contract with the homeowner.
If you need assistance determining if this change affects you please contact us or visit www.beregisteredbeready.ca.
