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2018 Tax Tips and Reminders

Proposed changes to private corporation taxation in Canada – July 18, 2017 and subsequent amendments October 2017 and December 2017

On July 18th, 2017, the federal Department of Finance released draft legislation, explanatory notes and a consultation paper on the system of taxation for private corporations and shareholders. Subsequently, on October 16, 2017, finance announced that it would not be moving forward with proposed measures to limit access to the Lifetime Capital Gains Exemption. The same week, on October 18, 2017, finance announced a modification of the corporate investment savings rules that will be further clarified in the 2018 Federal budget. Finally, on December 13, 2017, finance released its revised simplified measures to restrict income sprinkling. For further information, see our Newsletter section.

2018 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit was $5,500 for 2017, $5,500 for 2016, $10,000 for 2015, $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. The total room available in 2018 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $57,500.

Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2018 RRSP Limit
The RRSP contribution limit is $26,230 in 2018 ($26,010 in 2017). The limit will increase to $26,500 in 2019. If you or your employer do not contribute to a pension plan, your 2018 “earned income” for RRSP purposes must be at least $147,222 to create RRSP contribution room of $26,500 in 2019. Please see the news release.

2018 Employment Insurance Rates
Employment Insurance (EI) rates for 2018 have changed to 1.66% (vs 1.63% for 2017) of earnings for employees. The maximum annual premium increases to $858.22 (from $836.19 in 2017). The rate for employers is 1.4 times the employee rate or 2.324%. The maximum insurable earnings for 2018 increases to $51,700 from $51,300 in 2017.

2018 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2018 will be $55,900 – up from $55,300 in 2017. Contributors who earn more than $55,900 in 2018 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2018 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2018 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2018 will be $2,593.80 and the maximum self-employed contribution will be $5,187.60. The maximums in 2017 were $2,564.10 and $5,128.20.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates
The prescribed rates for the first quarter of 2018 is as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2018 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2018 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income Regular Income

%

Ineligible (Private Corporation) Dividends % Eligible Canadian Dividends % Capital Gains %
$0 to $42,960 20.05 8.00 0.00 10.03
$42,961 to $46,605 24.15 12.76 0.00 12.08
$46,606 to $75,657 29.65 19.14 6.39 14.83
$75,658 to $85,923 31.48 21.26 8.92 15.74
$85,924 to $89,131 33.89 24.06 12.24 16.95
$89,132 to $93,208 37.91 28.72 17.79 18.95
$93,208 to $144,489 43.41 35.10 25.38 21.70
$144,490 to $150,000 46.41 38.58 29.52 23.20
$150,001 to $205,842 47.97 40.39 31.67 23.98
$205,843 to $220,000 51.97 45.03 37.19 25.98
$220,001 and up 53.53 46.84 39.34 26.76

(This table does not include the Ontario Health Premium.)

2018 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations Other Corporations
Small Business Income(up to $500,000) Investment Income** General Manufacturing and Processing General Active Business Income
13.50% 50.20%* 25.00% 26.50%
*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.
**Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

2017 Tax Tips and Reminders

Year End Tax Planning

  1. Consider paying reasonable salaries to family members before year end. Reasonable salaries can be deducted by you and taxable to them at possibly lower rates.
  2. Businesses should purchase capital assets before year end. Assets purchased and in use before the business year end are eligible for one half of the usual capital cost allowance rate.
  3. Owner-managers should consider their salary/dividend mixfrom their corporation. If you have drawn funds from your corporation throughout the year, you should determine whether these amounts should be characterized as salary or dividends before the year end. Ritchie Shortt & Tully LLP can help you with this decision.
  4. Consider gifting funds or making interest-free loans to your spouse or an adult child to contribute to the Tax Free Savings Account.
  5. Consider selling investments with accrued losses before the end of the year to offset any gains you have had during the year. Capital losses in excess of gains can be carried back three years and forward indefinitely.
  6. Contribute to your RRSP by March 1, 2017 to make the contribution deductible for 2016. Also remember to make your required Home Buyer’s repayment by March 1, 2017.
  7. Charitable donations, medical expenses, political donations, child care expenses, investment counsel fees and professional dues should be paid by December 31, 2017 to be creditable or deductible in the 2017 year.
  8. Contribute to Registered Education Savings Plans for your children by December 31. Rather than an annual RESP contribution limit there is now a lifetime contribution limit of $50,000. When you contribute money to any RESP, the federal government will deposit an additional amount – the Canada Education Savings Grant (CESG) – equal to 20% of your contribution up to certain limits. The maximum CESG each year is $500 (20% x $2,500 contribution). The lifetime CESG limit is $7,200.
  9. Family caregiver tax credit -beginning in 2012, there is a $2,000 tax credit available to caregivers of infirm relatives including spouses, common-law partners and minor children.
  10. Direct Deposit – Canada Revenue Agency will soon stop mailing tax refunds and other benefits. We urge you to set up direct deposit at this time. This can be done online through “My Account” (if you are registered), by phone (call 1-800-959-8281), by completing and mailing the Direct Deposit Enrolment Form, or by providing us with a void cheque (we will submit this information to CRA when we electronically file your return).
  11. Ontario Healthy Homes Renovation Tax Credit – effective in 2012, this credit is a 15% refundable credit on up to $10,000 of eligible expenses per year incurred on or after October 1, 2011 for permanent home modifications that improve mobility and accessibility for seniors. The individual does not have to be disabled. Eligible expenses include ramps, stair lifts, walk-in tubs, handrails and more.

2017 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2017 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income

%

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$ 0 to $ 42,201

20.05

6.13

0.00

10.03

$ 42,201 to $ 45,916

24.15

10.93

0.00

12.08

$ 45,916 to $ 74,313

29.65

17.37

6.39

14.83

$ 74,313 to $ 84,404

31.48

19.51

8.92

15.74

$ 84,404 to $ 87,559

33.89

22.33

12.24

16.95

$ 87,559 to $ 91,831

37.91

27.03

17.79

18.95

$ 91,831 to $142,353

43.41

33.46

25.38

21.70

$142,353 to $150,000

46.41

36.97

29.52

23.20

$150,000 to $202,800

47.97

38.80

31.67

23.98

$202,800 to $220,000

51.97

43.48

37.19

25.98

$220,000 and up

53.53

45.30

39.34

26.76

(This table does not include the Ontario Health Premium.)

2017 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.00%

50.17%*

25.00%

26.50%

*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid. **
Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid. **
** These rules may change with the July 18, 2017 federal tax proposals.

2016 Tax Tips and Reminders

2014 Employer Health Tax Changes
As of January 1, 2014, the EHT exemption increased to $450,000 from $400,000. To better target EHT relief, the exemption is eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities will continue to claim the exemption at all payroll sizes.

2015 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $40,922

20.05

5.35

0.00

10.03

$40,922 to $44,701

24.15

10.19

0.00

12.08

$44,701 to $72,064

31.15

18.45

9.63

15.58

$72,064 to $81,847

32.98

20.61

10.99

16.49

$81,847 to $84,902

35.39

23.45

14.31

17.70

$84,902 to $89,401

39.41

28.19

19.86

19.70

$89,401 to $138,586

43.41

32.91

25.38

21.70

$138,586 to $150,000

46.41

36.45

29.52

23.20

$150,000 to $220,000

47.97

38.29

31.67

23.98

$220,000 and over

49.53

40.13

33.82

24.76

(This table does not include the Ontario Health Premium)

2015 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.5%

46.17%*

25%

26.5%

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 33.33%. This tax is eligible for refund at a rate of $1 for every $3 of dividends paid.

Universal Child Care Benefit (UCCB)

The UCCB was introduced in 2006 as a taxable benefit designed to help Canadian families. On January 1, 2015, the UCCB was expanded to include a new benefit for children aged 6 through 17, and the payments that parents receive for children under the age of 6 were increased. The UCCB was increased from $100 to $160 per month for each child under the age of 6. The UCCB was expanded to children aged 6 through 17. Parents will receive a benefit of up to $60 per month for each child in their care aged 6 through 17.

For more information on how to apply for the UCCB, visit the CRA website UCCB information.

Note that on December 7, 2015, Finance Minister Bill Morneau commented on two Liberal platform commitments. He announced that the proposed Canada Child Benefit, which will replace the Universal Child Care Benefit, Child Tax Benefit and National Child Benefit Supplement, will begin July 1, 2016. The Finance Minister also announced the intention to eliminate the Family Tax Cut for 2016 and subsequent tax years.

Investing in the UCCB

The UCCB is taxable in the hands of the lower-income spouse. However, recent changes to the law mean that you can invest the UCCB money in your child’s name so that all the investment earnings are taxed in your child’s hands. In 2015, everyone can earn up to $11,327 tax-free, so your child is not likely to owe tax on the earnings.

For information on how to apply for the UCCB, visit the CRA website UCCB information.

2016 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

Taxable Income

Regular Income

%

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $41,536

20.05

6.13

0.00

10.03

$41,536 to $45,282

24.15

10.93

0.00

12.08

$45,282 to $73,145

29.65

17.37

6.39

14.83

$73,145 to $83,075

31.48

19.51

8.92

15.74

$83,075 to $86,176

33.89

22.33

12.24

16.95

$86,176 to $90,563

37.91

27.03

17.79

18.95

$90,563 to $140,388

43.41

33.46

25.38

21.70

$140,388 to $150,000

46.41

36.97

29.52

23.20

$150,000 to $200,000

47.97

38.80

31.67

23.98

$200,000 to $220,000

51.97

43.48

37.19

25.98

$220,000 and over

53.53

45.30

39.34

26.76

(This table does not include the Ontario Health Premium)

2016 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled Private Corporations

Other Corporations

Small Business Income

(up to $500,000)

Investment Income**

General Manufacturing and Processing

General Active Business Income

15%

50.17%*

25%

26.5%

*30.667% of investment income is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

**Canadian taxable dividend income (not from a connected corporation) is taxed federally only under Part IV at a rate of 38.33%. This tax is eligible for refund at a rate of $1 for every $2.61 of dividends paid.

2015 Tax Tips and Reminders

2015 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit is $5,500 for 2015. The limit was $5,500 for 2014 and 2013. For 2009 to 2012, the limit was $5,000. Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2015 RRSP and Pension Limits
The RRSP contribution limit increases to $24,930 in 2015 from $24,270 in 2014. Please see the news release.

2014 Employer Health Tax Changes
As of January 1, 2014, the EHT exemption increased to $450,000 from $400,000. To better target EHT relief, the exemption is eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities will continue to claim the exemption at all payroll sizes.

2015 Employment Insurance Rates
Employment Insurance (EI) rates for 2015 have remained unchanged at 1.88% of earnings for employees. The maximum annual premium increased to $930.60 (from $913.68 in 2014). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2015 increased to $49,500 from $48,600 in 2014.

2015 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2015 will be $53,600 – up from $52,500 in 2014. Contributors who earn more than $53,600 in 2015 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2015 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2015 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2015 will be $2,479.95, and the maximum self-employed contribution will be $4,959.90. The maximums in 2014 were $2,425.50 and $4,851.00.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates
The prescribed rates for the first quarter of 2015 and for all four quarters of 2014 were as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2014 Tax Tips and Reminders

2014 TFSA limit is $5,500
The Tax Free Savings Account (TFSA) limit is $5,500 for 2014 and was increased in 2013 to $5,500 from $5,000 in previous years beginning in 2009. Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2014 RRSP and Pension Limits
The RRSP contribution limit increases to $24,270 in 2014 and to $24,930 in 2015. The RRSP contribution limit was $23,820 in 2013. Please see the news release.

2014 Employer Health Tax Changes
As announced in the 2013 Ontario Budget, to provide greater Employer Health Tax (EHT) relief to small businesses, the government proposes to increase the amount of annual payroll that is exempt from the tax from $400,000 to $450,000 and index this amount for inflation. To better target EHT relief, the exemption would be eliminated for private-sector employers (including groups of associated employers) with annual Ontario payrolls over $5 million. Registered charities would continue to claim the exemption at all payroll sizes. The government proposes to introduce legislation to implement these proposed changes that would, subject to the approval of the Legislature, be effective January 1, 2014.

2014 Employment Insurance Rates
Employment Insurance (EI) rates for 2014 have remained unchanged at 1.88% of earnings for employees. The maximum annual premium increased to $913.68 (from $839.97 in 2013). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2014 increased to $48,600 from $47,400 in 2013.

2014 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2014 will be $52,500 – up from $51,100 in 2013. Contributors who earn more than $52,500 in 2014 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2014 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2014 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2014 will be $2,425.50, and the maximum self-employed contribution will be $4,851.00. The maximums in 2013 were $2,356.20 and $4,712.40.

Canada Pension Plan Changes for Persons Between Ages 60 and 70
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates 2014
The prescribed rates for 2014 were as follows:

  • The interest rate paid on overpayments was 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans was 1%.
  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%.

For more information please see CRA’s website on prescribed rates.

2013 Tax Tips and Reminders

2013 TFSA limit has increased to $5,500
The Tax Free Savings Account limit has increased in 2013 to $5,500 per year (from $5,000). Contributions can be made by Canadian residents aged 18 or over. Up to $5,000 per year ($5,500 for 2013) can be contributed, with unused contribution room being carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, he or she may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2013 Employment Insurance Rates
Employment Insurance (EI) rates for 2013 have increased to 1.88% of earnings for employees (from 1.83% in 2012) as has the maximum annual premium of $839.97 (from $786.76 in 2012). The rate for employers is 1.4 times the employee rate or 2.632%. The maximum insurable earnings for 2013 increased to $47,400 from $45,900 in 2012.

2013 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2013 will be $51,100 – up from $50,100 in 2012. Contributors who earn more than $51,100 in 2013 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2013 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2013 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2013 will be $2,356.20, and the maximum self-employed contribution will be $4,712.40. The maximums in 2012 were $2,306.70 and $4,613.40.

Reminder of 2012 Canada Pension Plan Changes
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates For First Quarter 2013
The CRA announced December 6th, the prescribed interest rates for the first calendar quarter of 2013:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see CRA’s website on prescribed rates.The prescribed rate has remained the same since April 1, 2009.

2013 RRSP and Pension Limits
The RRSP contribution limit increases to $23,820 in 2013 and to $24,270 in 2014 . The RRSP contribution limit was $22,970 in 2012. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2012 Tax Tips and Reminders

2012 Employment Insurance Rates.
Employment Insurance (EI) rates for 2012 have increased to 1.83% of earnings for employees (from 1.78% in 2011) as has the maximum annual premium of $840 (from $787 in 2011). The rate for employers is 1.4 times the employee rate or 2.56%. The maximum insurable earnings for 2012 increased to $45,900 from $44,200 in 2011.

2012 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100 – up from $48,300 in 2011. Contributors who earn more than $50,100 in 2012 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2012 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2012 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2012 will be $2,307, and the maximum self-employed contribution will be $4,613. The maximums in 2011 were $2,218 and $4,435.

2012 Canada Pension Plan Changes
Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, he or she may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. In order to avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. There are several other changes related to CPP benefits. Please contact us for information.

Prescribed Interest Rates For First Quarter 2012
The CRA announced December 8th, the prescribed interest rates for the first calendar quarter of 2012:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2012 RRSP and Pension Limits

The RRSP contribution limit increases to $22,970 in 2012. The RRSP contribution limit was $22,450 in 2011. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2012 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2012 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $39,020

20.05

2.77

0.00

10.03

$39,020 to $42,707

24.15

7.90

3.80

12.08

$42,707 to $68,713

31.15

16.65

13.43

15.58

$68,713 to $78,043

32.98

17.81

14.19

16.49

$78,043 to $80,955

35.39

20.82

17.51

17.70

$80,955 to $85,414

39.41

23.82

19.88

19.71

$85,414 to $132,406

43.41

28.82

25.40

21.71

$132,406 to $500,000

46.41

32.57

29.54

23.21

$500,000 and over

47.97

34.52

31.69

23.99

(This table does not include the Ontario Health Premium)

Ontario Personal Tax Rates

In 2012, the 20% Ontario surtax will apply where the basic Ontario tax exceeds $4,213 and the additional 36% surtax will apply to basic Ontario tax over $5,392. This tax affects individuals with taxable income over $500,000. As shown in the tax chart above, this has pushed the top marginal tax rate in Ontario from 46.41% to 47.97% in 2012 and to 49.53% in 2013.Tax planning to limit the amount of income taxed at this top rate is now more important than ever.

Strategies include:

  1. Income splitting with family members. Current legislation requires interest at 1% be charged on spousal loans making shifting income to a low income spouse very inexpensive.
  2. Leave earnings in a corporation rather than paying out bonuses or dividends.
  3. Transferring investments into a corporation.
  4. If your income is temporarily over $500,000, consider purchasing flow-through shares in that year to create a tax deduction.

2012 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations

Other Corporations

Small Business Income
(up to $500,000)

Investment Income

General Manufacturing and Processing

General Active Business Income

15.5%

46.17%*

25%

26.5%**

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

2011 Tax Tips and Reminders

2011 Employment Insurance Rates
Employment Insurance (EI) rates for 2011 have increased to 1.78% of earnings for employees (from 1.73% in 2010) as has the maximum annual premium of $786.76 (from $747.36 in 2010). The rate for employers is 1.4 times the employee rate or 2.492%. The maximum insurable earnings for 2011 increased to $44,200 from $43,200 in 2010.

2011 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2011 will be $48,300 – up from $47,200 in 2010. Contributors who earn more than $48,300 in 2011 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2011 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2011 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2011 will be $2,217.60, and the maximum self-employed contribution will be $4,435.20. The maximums in 2010 were $2,163.15 and $4,326.30.

Prescribed Interest Rates For First Quarter 2011
The CRA announced December 8th, the prescribed interest rates for the first calendar quarter of 2011:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2011 RRSP and Pension Limits

The RRSP contribution limit increases to $22,450 in 2011. The RRSP contribution limit was $22,000 in 2010. Please see the news release.

Please note: this material is general in nature and should not be relied upon to replace the requirement for specific professional advice.

2011 Combined Federal and Ontario Tax Brackets for Individual and Corporations

2011 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $37,774

0 – 20.05

0 – 2.77

0.00

0 – 10.03

$37,774 to $41,544

24.15

7.90

3.88

12.08

$41,544 to $66,514

31.15

16.65

11.72

15.58

$66,514 to $75,550

32.98

17.81

12.50

16.49

$75,550 to $78,361

35.39

20.82

15.90

17.70

$78,361 to $83,088

39.41

23.82

18.32

19.71

$83,088 to $128,800

43.41

28.82

23.96

21.71

$128,800 and over

46.41

32.57

28.19

23.21

(This table does not include the Ontario Health Premium)

2011 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations

Other Corporations

Active Business Income
(up to $500,000)

Investment Income

Manufacturing and Processing

General

15.50%

46.42%*

26.5%

28.25%**

*26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

** The general corporate tax rate is scheduled to be reduced to 25% by 2014.

2010 Tax Tips and Reminders

2010 Employment Insurance Rates
Employment Insurance (EI) rates for 2010 remain unchanged at 1.73% of earnings for employees as does the maximum annual premium of $747.36. The rate for employers is 1.4 times the employee rate or 2.422%. The maximum insurable earnings for 2010 increased to $43,200 from $42,300 in 2009.

2010 Canada Pension Plan Rates
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2010 will be $47,200 – up from $46,300 in 2009. Contributors who earn more than $47,200 in 2010 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2010 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2010 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2010 will be $2,163.15, and the maximum self-employed contribution will be $4,326.30. The maximums in 2009 were $2,118.60 and $4,237.20.

Prescribed Interest Rates For First Quarter 2010
The CRA announced December 3rd, the prescribed interest rates for the first calendar quarter of 2010:

  • The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.
  • The interest rate paid on overpayments will be 3%.
  • The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For more information please see the news release.

2010 RRSP and Pension Limits

The RRSP contribution limit increases in 2010 to $22,000. Please see the news release.

2010 Combined Federal and Ontario Tax Brackets for Individuals and Corporations

2010 Combined Federal and Ontario Tax Brackets for Individuals

Taxable Income

Regular Income %

Ineligible (Private Corporation) Dividends %

Eligible Canadian Dividends %

Capital Gains %

$0 to $37,106

0 – 20.05

0 – 2.77

0.00

0 – 10.03

$37,107 to $40,970

24.15

7.89

3.96

12.08

$40,971 to $65,344 31.15 16.64 9.76 15.58
$65,345 to $74,214

32.98

17.81

10.55

16.49

$74,215 to $76,986

35.39

20.82

14.03

17.70

$76,987 to $81,941

39.41

23.82

16.49

19.70

$81,942 to $127,021 43.41 28.82 22.25 21.70
$127,022 and over

46.41

32.57

26.57

23.20

(This table does not include the Ontario Health Premium)

2010 Federal and Ontario Combined Corporate Income Tax Rates

Canadian Controlled
Private Corporations
Other Corporations

Active Business Income
(up to $500,000)

Investment Income

Manufacturing and Processing

General

16.00%*

47.67%**

29.00%

31.00%***

*Ontario decreased the small business corporate tax rate from 5.5% to 4.5%, effective July 1, 2010.

**26.667% of investment income is eligible for refund at a rate of $1 for every $3 of dividends paid.

***The general federal corporate tax rate was decreased from 19% to 18%, effective January 1, 2010. The general Ontario corporate tax rate was decreased from 14% to 12% effective July 1, 2010.

Note that the general corporate tax rate will be reduced from 31% in 2010 to 25% by July 1, 2013.

2009 Tax Tips and Reminders

  • Automobiles – The automotive rates for 2009 are $0.52 per kilometre for the first 5,000 km and $0.46 per kilometre for each additional kilometre in excess of 5,000 kilometres. The taxable operating benefit for company-owned vehicles is $0.24 per kilometre per personal use kilometre. See FAQ for details on allowed automobile amounts.
  • CRA prescribed interest rates for the first quarter of 2009 are 2% for calculating taxable benefits, 4% on refunds of income tax overpayments and 6% on payments of overdue accounts.
  • Maximum Employment Insurance premiums for 2009 are: employee $731.79; employer $1,024.51 for a total of $1,756.30 ($1,706.47 in 2008).
  • Maximum Canada Pension Plan pensionable earnings for 2009are $46,300 with an exemption of $3,500, leaving a maximum contributory earnings of $42,800 at 4.95% equalling $2,118.60. The employer (or self-employed person) matches this amount for a total of $4,237.20 ($4,098.60 in 2008).
  • Effective March 31, 2009, the general minimum wage will increase from $8.75 to $9.50 per hour. The minimum wage for students under 18 who do not work more than 28 hours a week will rise from $8.20 per hour to $8.90 per hour. For more information on minimum wage, including the upcoming increases to the rates, visit the Ontario Ministry of Labourwebsite.

October 30, 2007 Economic Statement's Tax Reductions

Here are the highlights of the October 30, 2007 Economic Statement’s Tax Reductions:

  • The general federal corporate tax rate will be reduced from 22.12% in 2007 to 15% by 2012
  • The small business tax rate will be reduced to 11% effective January 1, 2008 instead of 2009 as previously proposed
  • The GST rate will be reduced to 5% effective January 1, 2008
  • The lowest personal income tax rate will be reduced retroactively to January 1, 2007
  • The basic personal amount tax credit for 2007 will be increased to $9,600 and to $10,100 in 2009
  • The employer and employee Employment Insurance (EI) contributions will be reduced in 2008
  • The national debt will be reduced by $10 billion this fiscal year

To read full details on the Department of Finance Canada’s website, please click here.

2007 Tax Tips and Reminders

  • Automobiles – The automotive rates for 2007 are $0.50 per kilometre for the first 5,000 km and $0.44 per kilometre for each additional kilometre in excess of 5,000 kilometres. The taxable operating benefit for company-owned vehicles is $0.22 per kilometre per personal use kilometre. See FAQ for details on allowed automobile amounts.
  • CRA prescribed interest rates for the fourth quarter of 2007 are 5% for calculating taxable benefits, 7% on refunds of income tax overpayments and 9% on payments of overdue accounts.
  • Maximum Employment Insurance premiums for 2007 are: employee $720.00; employer $1,008.00 for a total of $1,728.00 ($1,750.32 in 2006).
  • Maximum Canada Pension Plan pensionable earnings for 2007are $43,700 with an exemption of $3,500, leaving a maximum contributory earnings of $40,200 at 4.95% equalling $1,989.90. The employer (or self-employed person) matches this amount for a total of $3,979.80 ($3,821.40 in 2006).
  • Effective February 1, 2007, the general minimum wage increased from $7.75 to $8.00 per hour. The minimum wage for students under 18 who do not work more than 28 hours a week rose from $7.25 per hour to $7.50 per hour. The minimum wage for liquor servers rose from $6.75 per hour to $6.95 per hour. For more information on minimum wage visit the Ontario Ministry of Labour website.

CPP Changes for 2007

The Canada Revenue Agency recently announced that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2007 will be $43,700, up from $42,100 in 2006. The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.

Contributors who earn more than $43,700 in 2007 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2007 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2007 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%. The maximum employee and employer contributions to the plan for 2007 will be $1,989.90, and the maximum self-employed contribution will be $3,979.80. The maximums in 2006 were $1,910.70 and $3,821.40.

2006 Federal Budget Highlights

On May 2, 2006, changes that may affect you or your business were announced in the federal budget. Click here for the highlights.

Provincial tax changes effective July 1, 2004

Ontario Health Premium – On May 18, 2004, the Minister of Finance for Ontario announced changes to the Ontario tax for 2004. The Ontario Health Premium will be payable on annual taxable income in excess of $20,000. The Ontario Health Premium is not related to the Employer Health Tax for Ontario. Effective July 1, 2004, the Ontario Health Premium is calculated as follows:

Health Premium Payable (per individual)

Taxable Income 2004 Taxation year 2005 Taxation year
Up to $20,000 Nil Nil
$20,000 to $25,000 3% of income > $20,000 6% of income > $20,000
$25,000 to $36,000 $150 $300
$36,000 to $36,600 $150 + 12.5% of

income > $36,000

$300 + 25% of

income > $36,000

$36,600 to $48,000 $225 $450
$48,000 to $48,600 $225 + 12.5% of

income > $48,000

$450 + 25% of

income > $48,000

$48,600 to $72,000 $300 $600
$72,000 to $72,600 $300 + 12.5% of

income > $72,000

$600 + 25% of

income > $72,000

$72,600 to $200,000 $375 $750
$200,000 to $200,600 $275 + 12.5% of

income > $200,000

$750 + 25% of

income > $200,000

$200,600 and over $450 $900

Click here to access Frequently Asked Questions regarding the Ontario Health Premium on the CRA website

2004 Federal Budget Highlights

Unless otherwise noted the changes are effective March 22, 2004.

  • Fines and Penalties – The Budget proposes that, with exceptions, all fines or penalties imposed by federal, provincial or municipal governments in Canada or by a foreign country are not deductible. This includes any fines or penalties imposed by any person with a statutory authority to levy a fine or penalty. Penalty interest imposed under the Excise Act, the Air Travelers Security Charge Act and the GST/HST portions of the Excise Tax Act will continue to be deductible.
  • Capital Cost Allowance on Computer Equipment – The Budget proposes that the CCA rate for “general purpose electronic data processing and system software” (computer equipment) increase from 30% to 45%. The separate class election provisions for rapidly depreciating electronic equipment will not be available for this new class. As an interim measure, taxpayers may elect to include acquisitions of computer equipment before 2005 in class 10 (30%) and still be eligible for the separate class election.
  • Small Business Deduction – For 2005 and subsequent years, the Small Business Deduction available to Canadian Controlled Private Corporations (CCPCs) has a new proposed business limit of $300,000. Taxpayers with taxation years that are not calendar years will be required to pro-rate the increase to the limit.
  • Carry-forward Periods for Business Losses – For losses and credits that arise in taxation years ending after March 22, 2004, non-capital losses will now be eligible for a ten year carry-forward period. This is an increase from the current seven year carry-forward period.
  • Taxpayer-Request Adjustments – Generally, the Income Tax Act (ITA) prevents the Minister from assessing tax after the “normal reassessment period”, which is three or four years after the day of mailing an original Notice of Assessment. However, the ITA provides the Minister with discretion with respect to any year since 1985 to:
    • accept late, amended or cancelled elections from any taxpayer,
    • waive or cancel interest for any taxpayer,
    • reassess returns to refund taxes beyond the normal reassessment period for individuals and testamentary trusts to correct any error or omission on their return.

The Budget proposes that the discretion will now only apply to requests that are in respect of a taxation year that ended in the previous ten calendar years. This amendment is to be effective in 2005. Therefore, taxpayers have the remainder of 2004 to review their records and make any requests for earlier years.

Please contact us to determine how these measures may affect you or your business.

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