December 31, 2021 is fast approaching… see below for a list of tax planning considerations. Please contact us for further details or to discuss whether these may apply to your tax situation.
See the later section of this newsletter, “2021 Remuneration,” for tips on managing your income levels to minimize these clawbacks.
Some zero-emission electric vehicles purchased by businesses may be eligible for a 100% write-off (limited in some cases to the first $55,000). Alternatively, zero-emission vehicles purchased in 2021 may be eligible for a federal incentive rebate of up to $5,000.
Information exchange agreements have increased the flow of information between CRA and the IRS. Collection agreements enable CRA to collect amounts on behalf of the IRS.
Higher personal income levels are taxed at higher personal rates, while lower levels are taxed at lower rates. Therefore, individuals may want to, where possible, adjust income out of high-income years and into low-income years. This is particularly useful if the taxpayer is expecting a large fluctuation in income due to, for example, an impending
In addition to increases in marginal tax rates, individuals should consider other costs of additional income. For example, an individual with a child may receive reduced Canada child benefit (CCB) payments. Likewise, excessive personal income may reduce receipts of OAS, GIS, GST/HST credit and other provincial/ territorial programs.
There are a variety of ways to smooth income over several years to ensure an individual is maximizing access to the lowest marginal tax rates. For example,
Dividends paid out to shareholders of a corporation that do not “meaningfully contribute” to the business may result in higher taxes due to the “tax on split income” rules.
Year-end planning considerations not specifically related to changes in income levels and marginal tax rates include:
The effect on the “qualified small business corporation” status should be reviewed before selling the shares where large amounts of capital have accumulated. In addition, changes that may limit access to the small business deduction where significant corporate passive investment income is earned should be reviewed.