2024 Year-End Tax Tips and Strategies for Business Owners

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As a business owner, managing your finances well can make a big difference for your business’s future. Whether it’s choosing how to compensate yourself or making the most of opportunities like the small business deduction and lifetime capital gains exemption, thoughtful planning can help you save on taxes. This guide offers practical tips to help you make informed decisions.

Salary and RRSP Contributions

Taking a salary from your corporation can help reduce the company’s taxable income while creating RRSP contribution room for you. In 2024, a salary of up to $180,500 allows you to maximize your RRSP contribution room for 2025, which is $32,490.

Dividends

Dividends offer another way to take income from your business. They’re paid from the corporation’s after-tax income, but thanks to the dividend tax credit, they’re often taxed at a lower rate than salary.

Compensating Family Members

If family members are involved in your business, paying them can be a practical and tax-efficient option:

  • Salaries to Family Members: Paying a fair salary to family members who work for your business not only compensates them but also gives them access to RRSP contributions and CPP. You must be able to prove the family members have provided services in line with the amount of compensation you give them.

  • Dividends to Family Members: If family members are shareholders, dividends can provide them with tax-efficient income. The tax-free amount varies by province or territory, so it’s worth checking the rules where you live.

  • Income Splitting: Distributing income among family members can help reduce overall taxes. However, be mindful of the Tax on Split Income (TOSI) rules to avoid penalties. A tax professional can guide you through this process.

Deferring Income

If you don’t need the full amount for personal use, leaving surplus funds in the corporation could be a smart move. This keeps the money invested within the business, benefiting from lower corporate tax rates. Over time, this approach may allow the funds to generate more income compared to personal investing, depending on your goals and investment strategy. However, be mindful of passive investment income limits, as exceeding $50,000 in passive income could reduce or eliminate your corporation’s access to the small business deduction. Monitoring this threshold is essential to maintaining the tax advantages available to your business.

Compensation

It’s always a good idea to review how you handle compensation beyond base salary.

Consider these options:

  • Shareholder Loans: Borrow funds from your corporation with deductible interest but ensure repayment to avoid personal tax.

  • Profit-Sharing Plans: These can be a tax-efficient alternative to bonuses for distributing profits.

  • Stock Options: Only the employee or employer—not both—can claim a deduction when options are cashed out.

  • Retirement Plans: Explore setting up a Retirement Compensation Arrangement (RCA) to save for retirement tax-efficiently.

Passive Investments

Canadian-controlled private corporations (CCPCs) benefit from a reduced corporate tax rate on the first $500,000 of active business income, thanks to the small business deduction (SBD). The SBD can lower the tax rate by 12% to 21%, depending on your province or territory.

However, passive investment income over $50,000 in the previous year reduces the SBD by $5 for every additional dollar, potentially eliminating it altogether. To maintain access to the SBD, it’s important to keep passive investment income below this threshold.

Here are some strategies to help preserve your SBD:

  • Defer Portfolio Sales: Delay selling investments that generate capital gains if possible.

  • Optimize Your Investment Mix: Focus on tax-efficient investments like equities over fixed income.

  • Exempt Life Insurance Policies: Income earned within these policies isn’t included in your passive investment total.

  • Individual Pension Plan (IPP): This defined benefit plan is exempt from passive income rules and offers tax-advantaged retirement savings.

  • Consider Corporate Class Mutual Funds: These funds offer tax-efficient growth by deferring taxable distributions. While recent tax changes have limited their benefits, they remain a viable option for minimizing taxable passive income.

Carefully managing passive investments can help your business maintain access to the SBD and maximize its tax advantages for continued growth.

Capital Gains Inclusion Rate Increase

With recent changes to the capital gains inclusion rate, business owners personally holding investments with unrealized gains may want to consider realizing up to $250,000 in capital gains in 2024. This approach allows you to benefit from the lower tax rate on gains within this threshold, provided it aligns with your overall financial strategy.

Tax-Free Dividends

If your corporation has investments with losses that haven’t been sold yet, it’s a good idea to check the balance of its Capital Dividend Account (CDA) before selling. The CDA keeps track of the non-taxable portion of capital gains and some other amounts. You can pay tax-free dividends to shareholders using this account if you don’t go over the balance. However, if you sell investments at a loss, the CDA balance will go down, which might reduce or even remove your ability to pay these tax-free dividends. To avoid this, think about paying out any available tax-free dividends before selling investments at a loss.

Business Transition

If you’re planning to transition your business and believe its value has decreased, now might be a good time to explore options like an estate freeze or refreeze as part of your strategy.

Lifetime Capital Gains Exemption (LCGE)

The 2024 Federal Budget increased the LCGE from $1,016,836 to $1.25 million as of June 25, 2024. This allows you to benefit from tax savings on up to $1.25 million in capital gains over your lifetime when selling qualifying small business shares, farm properties, or fishing properties. Ensuring your corporate shares qualify for this exemption can help reduce the tax burden when selling or transferring your business.

Canadian Entrepreneurs’ Incentive (CEI)

The 2024 Federal Budget also introduced the Canadian Entrepreneurs’ Incentive (CEI) to lower taxes on selling qualifying shares. Starting June 25, 2024, the CEI reduces the taxable portion of capital gains to one-third for gains over $250,000 on qualifying sales.

In 2025, the CEI will go even further, lowering the taxable portion of capital gains to half the usual amount for up to $2 million in lifetime gains. This $2 million limit will start at $400,000 in 2025 and increase by $400,000 each year until it reaches $2 million in 2029.

To use the CEI, the shares must meet certain rules. However, it does not apply to shares of professional corporations or businesses focused on financial services, insurance, real estate, food and accommodation, arts, recreation, entertainment, consulting, or personal care services.

Together, the LCGE and CEI offer tax savings for business owners when selling or passing on their businesses.

Employee Ownership Trusts (EOT)

An EOT is a way for employees to own a business. A trust holds shares of the business on behalf of the employees, so they don’t have to pay directly to buy shares themselves.

Starting in 2024, EOTs are allowed in Canada. If a business is sold to an EOT in 2024, 2025, or 2026, the first $10 million in capital gains from the sale is tax-free, if certain conditions are met. This $10 million limit applies to the entire business, not to each individual shareholder. If multiple people sell shares to an EOT as part of the sale, they can each claim part of the exemption, but the total claimed by everyone combined can’t be more than $10 million. All sellers must agree on how to split the exemption.

Depreciable Assets

Purchasing depreciable assets can be a smart tax planning move, as they allow you to claim Capital Cost Allowance (CCA) to reduce taxable income.

To maximize the benefits:

  • Take advantage of the Accelerated Investment Incentive, which offers an enhanced first-year CCA for eligible assets.

  • Postpone selling depreciable assets if it could trigger recaptured depreciation in your 2024 tax year.

Timing your asset purchases and sales can help optimize your tax savings.

Donations

Making donations, whether charitable or political, can provide valuable tax benefits. To maximize these advantages, consider options like:

  • Donating securities

  • Giving a direct cash gift to a registered charity

  • Using a donor-advised fund for ongoing charitable contributions

  • Setting up a private foundation

  • Donating a life insurance policy by naming a charity as the beneficiary or transferring ownership.

Each option offers unique tax advantages depending on your situation.

Final Corporate Tax Balances

Pay your corporate taxes within two months of year-end (or three months for some CCPCs) to avoid interest charges that can’t be deducted.

Contact Us

For guidance on implementing these strategies, connect with your trusted tax professional. If you’d like to discuss how these tips align with your overall plan, let’s schedule a meeting.

Sources:

CPA Canada, “2024 Federal Budget Highlights,” https://www.cpacanada.ca/-/media/site/operational/sc-strategic-communications/docs/02085-sc_2024-federal-budget-highlights_en_final.pdf?rev=6d565a6a66ef4e20b1e01dc784464c93, 2024.


Government of Canada, “Capital Gains Inclusion Rate,” https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html, 2024.


Advisor.ca, “Lifetime Capital Gains Exemption to Top $1M in 2024,” https://www.advisor.ca/tax/tax-news/lifetime-capital-gains-exemption-to-top-1m-in-2024/, 2024.


PwC Canada, “Year-End Tax Planner,” https://www.pwc.com/ca/en/services/tax/publications/guides-and-books/year-end-tax-planner.html, 2024.


CIBC, “2024 Year-End Tax Tips,” https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/year-end-tax-tips-en.pdf, 2024.


Government of Canada, “Federal Budget 2024,” https://budget.canada.ca/2024/report-rapport/tm-mf-en.html, 2024.

2024 Personal Year End Tax Tips

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The end of 2024 is quickly approaching – which means it’s time to get your paperwork in order so you’re ready when it comes time to file your taxes!

In this article, we’ve covered five different major types of 2024 personal tax tips:

  • Investment Considerations

  • Individuals

  • Families

  • Retirees

  • Students

Investment Considerations

Investment Portfolio Mix

Different investments are taxed differently, so reviewing your portfolio ensures optimal after-tax returns. With the recent increase to the capital gains tax rate on gains realized after June 24, 2024, it might make sense to focus on investments that yield eligible dividends instead of capital gains. Whether this works for you depends on your marginal tax rate and where you live, so take some time to evaluate your options.

Capital Gains Inclusion Rate

The 2024 federal budget introduced changes to the capital gains inclusion rate that could affect your tax planning. For individuals, the first $250,000 of annual capital gains remain taxed at the 50% inclusion rate. However, any gains exceeding this threshold are now taxed at 2/3 of the total. If this applies to you, consider strategies like tax-loss selling to offset realized gains.

Tax-Loss Selling

Selling investments in non-registered accounts with losses can offset capital gains elsewhere in your portfolio. Unused net capital losses can be carried back up to three years or forward indefinitely to offset gains in other years. To ensure the loss applies for 2024 (or the prior three years), the transaction must settle within 2024.

Be aware of the “superficial loss” rule: if you or an affiliated person repurchases the same investment within 30 days before or after the sale, the loss cannot be used to reduce taxes immediately. Instead, it’s added to the cost of the repurchased investment, and you’ll benefit from the loss when you sell it later.

Tax-Free Savings Account (TFSA)

You can contribute up to a maximum of $7,000 for 2024. You can carry forward unused contribution room indefinitely. The maximum amount you’re allowed to make in TFSA contributions is $95,000 (including 2024) if you have been at least 18 years old and resident in Canada since 2009.

Registered Retirement Savings Plan (RRSP)

For the 2024 tax year, you have until March 3, 2025, to contribute to your Registered Retirement Savings Plan (RRSP) or a spousal RRSP. However, contributing earlier can benefit you more due to tax-deferred growth. Your deduction limit for 2024 is 18% of your 2023 income, up to $31,560, but this will reduce if you have pension adjustments. Don’t forget, any unused contribution room from previous years or pension adjustment reversals can increase your limit.

Also, you can deduct contributions on your 2024 income if they are made within the first 60 days of 2025. It’s possible to defer these deductions to a later year if that suits your financial strategy better. 

Interest Deductibility

If you can, focus on paying off debts with non-deductible interest first, like personal loans or those with non-refundable credits (e.g., student loans). Use borrowing for investment or business purposes and save your cash for personal expenses. 


For Individuals

Income Timing

If your marginal personal tax rate is lower in 2025 than in 2024, defer the receipt of certain employment income; if your marginal personal tax rate is higher in 2025 than in 2024, accelerate.

First Home Savings Account (FHSA) 

If you are a Canadian resident, age 18 or older and planning to become first-time homebuyers. Starting from April 1, 2023, this account serves as a valuable tool for saving towards the purchase of a qualifying first home. 

The FHSA program comes with an annual contribution limit of $8,000, and a cumulative lifetime cap of $40,000, with the flexibility to carry forward up to $8,000 in unused contributions. Importantly, contributions made to the FHSA are tax-deductible, offering potential tax benefits. Additionally, the returns earned on your savings within this account are not subject to taxation, which can enhance the overall growth of your savings. Most notably, when you make qualifying withdrawals to buy your first home, these withdrawals are non-taxable.

Medical expenses

If you have eligible medical expenses that weren’t paid for by either a provincial or private plan, you can claim them on your tax return. You can even deduct premiums you pay for private coverage. Either spouse can claim qualified medical expenses for themselves and their dependent children in a 12-month period, but it’s generally better for the spouse with the lower income to do so.

Charitable Donations

Federal and provincial donation tax credits can significantly reduce your taxes, with the savings depending on your province. Larger donations receive higher federal credits, and you can pool receipts with your spouse or carry them forward for up to five years.

For 2024, changes to the Alternative Minimum Tax (AMT) limit the portion of the donation credit that can be applied for AMT purposes. Be sure to make your donations by December 31 to claim them for 2024.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) ensures a minimum level of tax is paid by limiting certain deductions, exemptions, and credits. If your AMT calculation exceeds your regular tax, you’ll pay the difference as AMT for the year.


Revised for 2024, AMT changes include a higher tax rate, a larger exemption, and stricter limits on tax-reducing measures like capital gains, stock options, Canadian dividends, and non-refundable tax credits. These changes may increase your AMT if your taxable income exceeds $173,205. 

For Families

Childcare Expenses

If you paid someone to take care of your child so you or your spouse could attend school or work, then you can deduct those expenses. A variety of childcare options qualify for this deduction, including boarding school, camp, daycare, and even paying a relative over 18 for babysitting. Be sure to get all your receipts and have the spouse with the lower net income claim the childcare expenses. In addition, some provinces offer additional childcare tax credits on top of the federal ones.

Caregiver

If you are a caregiver, claim the available federal and provincial/territorial tax credits.

Registered Education Savings Plan (RESP) 

RESP can be a great way to save for a child’s future education. The Canadian Education Savings Grant (CESG) is only available on the first $2,500 of contributions you make each year per child (to a maximum of $500, with a lifetime maximum of $7,200.) If you have any unused CESG amounts for the current year, you can carry them forward. If the recipient of the RESP is now 16 or 17, they can only receive the CESG if a) at least $2,000 has already been contributed to the RESP and b) a minimum contribution of $100 was made to the RESP in any of the four previous years.

Registered Disability Savings Plan (RDSP)

If you have an RDSP open for yourself or an eligible family member, you may be able to get both the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) paid into the RDSP. The CDSB is based on the beneficiary’s adjusted family net income and does not require any contributions to be made. The CDSG is based on both the beneficiary’s family net income and contribution amounts. In addition, up to 10 years of unused grants and bond entitlements can be carried forward.

For Retirees

Registered Retirement Income Fund (RRIF)

Turning 71 this year? If so, you are required to end your RRSP by December 31. You have several choices on what to do with your RRSP, including transferring your RRSP to a registered retirement income fund (RRIF), cashing out your RSSP, or purchasing an annuity. Talk to us about the tax implications of each of these choices. 

Pension Income

Are you 65 or older and receiving pension income? If your pension income is eligible, you can deduct a federal tax credit equal to 15% on the first $2,000 of pension income received – plus any provincial tax credits. Don’t currently have any pension income? You may want to think about withdrawing $2,000 from an RRIF each year or using RRSP funds to purchase an annuity that pays at least $2,000 per year.

Canada Pension Plan (CPP) 

If you’ve reached the age of 60, you may be considering applying for CPP. Keep in mind that if you do this, the monthly amount you’ll receive will be smaller. Also, you don’t have to have retired to be able to apply for CPP. Talk to us; we can help you figure out what makes the most sense.

Old Age Security (OAS)

If you’re 65 or older, enrolling in OAS is essential. If your income exceeds OAS thresholds, strategies like income splitting can help reduce clawbacks.

You can defer OAS for up to 60 months, increasing your monthly payment by 0.6% for each month deferred. Planning ensures you maximize your benefits and optimize your retirement income.


Estate planning arrangements

Regularly reviewing your estate plan is essential to ensure it aligns with your objectives and complies with current tax laws. An annual review allows you to adjust for life changes and legal updates, keeping your plan effective. Additionally, exploring strategies to minimize probate fees can preserve more of your estate for your beneficiaries. Regularly examining your will ensures it remains valid and reflects your current wishes. 

For Students

Education, tuition, and textbook tax credits

If you’re attending post-secondary school, claim these credits where available.

Canada tuition credit 

If you’re between 25 and 65 and enrolled in an eligible educational institution, you may be eligible for the Canada Training Credit, a refundable tax credit designed to help cover tuition and other fees associated with training. Additionally, you can claim tuition paid on your taxes, carry forward unused amounts to future years, or transfer unused tuition amounts to a spouse, parent, or grandparent. 

Need some additional guidance? Reach out to us if you have any questions. We’re here to help.

RDSP Explained

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Registered Disability Savings Plan (RDSP) Explained

Planning for the future financial security of individuals with disabilities is a priority for many families. The Registered Disability Savings Plan (RDSP) is a valuable tool that offers long-term financial security through tax-deferred savings and government contributions. If you or a loved one qualifies for the Disability Tax Credit (DTC), the RDSP can help build a financial cushion for future needs.

What is the RDSP?

The RDSP is a savings plan designed to help individuals with disabilities save for their long-term financial security. It is a tax-deferred account, which means the investments grow tax-free while inside the plan, though taxes may apply upon withdrawal. The RDSP offers government assistance through the Canada Disability Savings Grant and the Canada Disability Savings Bond, significantly boosting savings for those who qualify.

Key Features of RDSP

– Tax-Deferred Growth: Investments grow without being taxed until withdrawn.

– Government Contributions: Depending on family income, the Canadian government may contribute through matching grants and bonds.

– Flexibility: Contributions can be made by the beneficiary, family, or friends.

– Lifetime Contribution Limit: Up to $200,000 in contributions, with no annual limit.

Eligibility Criteria for RDSP

To be eligible for the RDSP, the beneficiary must:

– Qualify for the Disability Tax Credit (DTC).

– Be a Canadian resident with a valid Social Insurance Number (SIN).

– Be under the age of 60 when the account is opened (contributions cease at 49 years old).

Government Contributions Explained

Canada Disability Savings Grant (CDSG): The government will match contributions up to 300%, 200%, or 100%, depending on the beneficiary’s family income and the contributions made.

For 2023, the income thresholds and matching rates are as follows:

– Family income of $106,717 or less:

   • 300% match on the first $500 contributed, giving up to $1,500 in grants.

   • 200% match on the next $1,000 contributed, giving up to $2,000 in grants.

– Family income over $106,717:

   • 100% match on the first $1,000 contributed, giving up to $1,000 in grants.

The maximum annual CDSG a beneficiary can receive is $3,500, and the lifetime maximum is $70,000. This grant is a powerful tool for enhancing your savings, as the government significantly boosts even modest contributions to the RDSP.

Canada Disability Savings Bond (CDSB) for 2023: The CDSB is available to low-income Canadians to help grow their RDSP even if they are unable to make regular contributions. 

For 2023, if the beneficiary’s family income is $37,908 or less, the government will contribute up to $1,000 annually to the RDSP without requiring any personal contributions.

– Families with incomes between $37,908 and $56,756 may receive a partial bond based on a sliding scale.

– The maximum lifetime CDSB contribution is $20,000.

Why Open an RDSP?

The RDSP is one of the most effective ways to save for individuals with disabilities, providing them with long-term financial security. By taking advantage of tax-deferred growth and government contributions, families can ensure that their loved ones have financial support when they need it most.

Contact us today. 

Renewing Your Group Benefits Plan

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When it’s time to renew your organization’s group benefits plan, it’s a chance to step back, take a close look, and ensure everything still makes sense for your team and budget. Each year, your provider will review past claims and usage to help adjust coverage and premiums, so the plan remains relevant. Here’s how to get the most out of this process.

Reviewing Your Benefits: Focus on What Matters

Take time to examine each part of your benefits package to see if it still meets the needs of your team:

  • Health Coverage: Look at what’s covered for prescription drugs, hospital care, and specialist visits. Are the current limits in line with what your team uses most?
  • Dental Coverage: From cleanings to crowns, check that the plan covers routine and advanced dental needs. If usage is low, maybe it’s time for an update.
  • Disability and Life Insurance: Disability insurance protects income during tough times, while life insurance gives peace of mind. Make sure coverage levels are right for your team.
  • Critical Illness and Accident Insurance: These benefits can provide extra financial support for serious illnesses or accidents, with options for additional coverage if it’s a priority for employees.

Specialty Benefits That Add Flexibility

Consider adding options that give employees more control over their benefits:

  • Health Care Spending Accounts (HCSAs): With HCSAs, employees have a set allowance to cover eligible health expenses. This flexibility lets employees pick and choose the coverage that fits their needs.
  • Emergency Medical Coverage: This can be particularly valuable for employees who travel frequently, covering unexpected medical costs on the road.
  • Retiree and Self-Employed Benefits: If you offer benefits for retirees or contractors, make sure these plans focus on the essentials, like prescriptions, dental, and vision, to keep things simple and effective.

Checking Value and Staying on Budget

Once you know what you’re covering, see if it aligns with what your team values most and if it’s worth the premium cost:

  • Utilization Analysis: Look at which benefits are most used. If something like dental care isn’t being used much, that could mean there’s room to adjust.
  • Employee Feedback: Ask employees directly what benefits do they find most valuable? This feedback can guide your decisions.

Making the Right Adjustments

When you have the full picture, it’s time to consider if adjustments would make the plan stronger or more efficient:

  • Benefit Modifications: Maybe it’s time to add a health spending account, adjust critical illness coverage, or tweak other benefits to better reflect what employees want.
  • Cost-Sharing Adjustments: Evaluate how the premium costs are split. Adjusting the cost share may help keep the plan sustainable for everyone.

With the right approach to your group benefits renewal, you can keep your plan valuable, easy to understand, and tailored to what your team needs most. This way, you’re not just offering a benefits package—you’re providing a solution that works.

Understanding Taxes Payable at Death in Canada

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A common belief among Canadians is that they will be taxed on money they inherit. However, Canada does not impose an inheritance tax. Instead, after someone passes away, their final tax return must be filed, covering the income they earned up to the date of death. Any taxes owed are paid from the estate’s assets before the remaining funds are distributed to the beneficiaries.

While there isn’t an inheritance tax in Canada, other costs are associated with settling an estate. It’s important to understand these costs and how the process works.

Is There an Estate Tax in Canada?

Canada doesn’t have a traditional estate tax, but there are taxes and fees that apply after death. The Canada Revenue Agency (CRA) ensures that taxes are paid on any income earned up to the date of death. If there is a tax balance owing, the executor of the estate must file a final tax return and settle any outstanding taxes.

Earned Income

When you pass away, any earned income up to the date of death is included in your final tax return. This includes salary, wages, and other forms of income earned before death.

Deemed Disposition

Deemed disposition occurs when all your assets are treated as if they were sold at their current market value upon death. This means the difference between the original purchase price and the market value at the time of death is considered a capital gain.

Capital Gains:

If your assets have increased in value, the difference (capital gain) is taxable. Effective June 25, 2024, 50% of this gain is included in your income unless the total gain exceeds $250,000, in which case any amount above the first $250,000 the inclusion rate increases to two thirds.

What Property Does Deemed Disposition Apply To:

  • Non-Registered Investments: Securities, Mutual Funds, ETFs, Bonds
  • Income Properties
  • Businesses
  • Other Assets

Deemed Withdrawal

Deemed withdrawal applies to registered accounts such as RRSPs and RRIFs. The total value of these accounts is added to your income for the year of death, potentially leading to a significant tax liability.

Example: Earned Income, Deemed Disposition, and Deemed Withdrawal (Effective June 25, 2024)
Let’s consider an example to illustrate how earned income, deemed disposition, and deemed withdrawal work together, including how much of the estate is kept after taxes and how much is paid in taxes:

Scenario:

  • John earned $60,000 in salary up to the date of his death.
  • He owns an income property, stock portfolio and an RRSP.
  • Income Property: Purchased for $200,000, now worth $500,000.
  • Stock Portfolio: Purchased for $50,000, now worth $100,000.
  • RRSP: Total value of $150,000.

Earned Income:

  • John’s earned income of $60,000 is included in his final tax return.

Deemed Disposition:

1.  Income Property:

  •    Original Purchase Price: $200,000, Market Value at Death: $500,000
  •    Capital Gain: $500,000 – $200,000 = $300,000
  •    First $250,000 taxed at 50%: $125,000
  •    Remaining $50,000 taxed at two-thirds: $33,333
  •    Total Taxable Gain: $125,000 + $33,333 = $158,333

2.  Stock Portfolio:

  •    Original Purchase Price: $50,000, Market Value at Death: $100,000
  •    Capital Gain: $100,000 – $50,000 = $50,000
  •    Taxable Portion: 2/3 of $50,000 = $33,333 (Net capital gains exceed $250,000)

Deemed Withdrawal:

  • RRSP Value: $150,000
  • Added to Income: $150,000

Total Taxable Income Calculation:

  • Earned Income: $60,000
  • Taxable Gain from Income Property: $158,333
  • Taxable Gain from Stocks: $33,333
  • RRSP Added to Income: $150,000
  • Total Taxable Income: $60,000 + $158,333 + $33,333 + $150,000 = $401,666

Tax Liability:

  • Assuming John’s tax rate is 30%, his tax liability would be:
  • Total Tax Owed: 30% of $401,666 = $120,500

Estate’s Remaining Value:

  • John’s estate would need to pay $120,500 in taxes, which is 16.06% of the total estate value.
  • If the total value of the assets is $750,000 (including the stock portfolio, income property, and RRSP), the remaining value after taxes would be:
  • Remaining Estate Value: $750,000 – $120,500 = $629,500, which represents 83.93% of the estate.

So, after paying $120,500 in taxes, John’s estate would keep $629,500 to be distributed to the beneficiaries.

Strategies to Address Estate Taxes

To manage the tax burden on your estate, several strategies can be considered:

  1. Spousal Rollovers: Deferring taxes on RRSPs, RRIFs, and other assets by transferring them to your spouse can delay the tax liability until those assets are withdrawn or disposed of.
  2. Gifting Assets: Spreading out the gifting of assets over several years can reduce the overall taxable income in the year of death.
  3. Use of Life Insurance: Life insurance can provide funds to cover taxes, ensuring that your estate remains intact for your beneficiaries.
  4. Planning with a Will: Creating a detailed will that considers tax implications can help in minimizing the taxes payable and ensure your wishes are followed.
  5. Consider Trusts: Setting up trusts can be a way to manage and protect your assets, potentially reducing tax burdens.

Implementing these strategies effectively requires careful planning and consideration of your unique circumstances. Professional guidance can help tailor these strategies to your needs.

Understanding these rules helps in planning your estate effectively. For more personalized advice, feel free to contact us.

Understanding the Registered Education Savings Plan (RESP)

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Planning for your child’s education can be both exciting and overwhelming. The rising costs of post-secondary education make it important for parents and families to consider the financial tools available to help ensure children have the opportunity to pursue their educational dreams. One such tool is the Registered Education Savings Plan (RESP), a tax-deferred savings account specifically designed to help save for a child’s post-secondary education in Canada.

Eligibility and How to Open an RESP

You can open a Single Plan for an individual beneficiary, such as your child, or a Family Plan if you wish to contribute to the education of multiple children in your family. The great news is that anyone can open an RESP for a child, whether you’re a parent, grandparent, or other family member, making it a versatile option for educational savings.

RESP Withdrawals and Beneficiary Requirements

RESPs can be used to cover a broad range of educational expenses. The only stipulation is that the beneficiary must attend a qualifying educational institution, which could be a university, college, or technical or vocational school. Withdrawals from the RESP will help support tuition, textbooks, living expenses, and more, as long as the student is enrolled part-time or full-time.

Key Benefits of an RESP

RESPs come with a range of benefits that make them an attractive savings vehicle for education:

– Lifetime Contribution Limit: You can contribute up to $50,000 over the lifetime of the plan for each beneficiary.

– Tax-Deferred Growth: While contributions to an RESP are not tax-deductible, the investment growth within the plan is tax-deferred. This allows your savings to grow faster, as taxes on the earnings are deferred until the funds are withdrawn.

– RESP Duration: You can keep the plan open for up to 35 years, giving you ample flexibility for when the funds may be needed.

Canadian Education Savings Grant (CESG)

One of the biggest incentives for opening an RESP is the Canadian Education Savings Grant (CESG). Through this program, the government will match 20% of your annual contributions, up to a maximum of $500 per year. Over time, this can accumulate to a lifetime maximum of $7,200 in CESG funds for each child. If you’re unable to contribute the maximum amount in a given year, the unused CESG contribution room is carry-forwardable, and you may be able to receive up to $1,000 in grant payments annually in future years.

Eligibility for CESG

To qualify for the CESG, the beneficiary must be:

– 17 years of age or younger

– A Canadian resident

– In possession of a valid Social Insurance Number (SIN)

A Smart Way to Save for the Future

Starting an RESP early can make a significant difference in how much you can save for your child’s education. With contributions that grow tax-deferred, along with generous government grants like the CESG, the RESP is a valuable tool to help ease the financial burden of post-secondary education. Planning for your child’s future today ensures that when the time comes, they can focus on their studies without worrying about the costs.

Consider opening an RESP to take advantage of the substantial benefits and opportunities this plan offers. Start investing in your child’s future today!

What is disability insurance?

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If you cannot work because you are seriously injured or ill, disability insurance will provide you with a monthly, tax-free income to help replace your lost wages.  An injury does not have to be as blatant as a broken leg or arm – suffering from chronic pain or dealing with mental health issues can also qualify you for a disability insurance payout.  

Why do I need disability insurance?

Unfortunately, people become disabled – whether temporarily or permanently – quite often. In 2017, over 20 percent of Canadians had one or more disabilities. 

If you’re disabled, you may lose one of your most valuable assets – your ability to work and bring in a paycheck. Disability insurance can help replace that paycheck for as long as you need it to. Being able to rely on a disability insurance payout means you won’t have to dip into your savings if anything happens to you.

Disability insurance is especially important if you are self-employed, particularly if you are the family’s sole income earner.

What if I already have disability insurance through work?

If you have disability insurance through work, that’s great – but it may not replace 100 percent of your paycheck, especially if you’re off work for a long time. If you purchase private disability insurance, you can:

  • Choose how much coverage you want.
  • Adjust your coverage as needed.
  • Not have to worry if you leave your employer – you won’t lose your disability insurance coverage.

Having private disability insurance will give you peace of mind that you either have additional coverage if you are employed and at least some disability coverage if you lose your job.

How does disability insurance work?

We’d be happy to answer any questions you have about disability insurance. There are five main steps to disability insurance:

  1. Determine the amount of coverage you want. The higher your salary, the more coverage you should get.
  2. Pay your monthly premiums. Factors like your health, your age, and the amount of coverage you have will all impact the cost of your premiums.
  3. File a claim if you become disabled – we can help you with this.
  4. Receive your monthly payments once your waiting period has passed – a longer waiting period can lower your premiums, but it does mean you’ll go longer without any income.
  5. When you are healthy enough to return to work, or your coverage period runs out, you will stop receiving disability insurance payments.

We’re Here To Help

If you’d like to know more about disability insurance – from how much it would cost you to what you can file a claim for – we’re here to help! Give us a call today.

The Health Spending Account for Business Owners and Incorporated Professionals

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Are you tired of using your hard-earned after-tax dollars to cover medical expenses? As a business owner, the burden of managing healthcare costs can be overwhelming. However, there’s a little-known solution that can alleviate this financial strain – the Health Spending Account.

Designed specifically for entrepreneurs like you, the Health Spending Account offers a tax-efficient way to manage medical expenses. Say goodbye to paying out of pocket with after-tax dollars for your healthcare needs, and let’s explore the advantages of this specialized account tailored to meet the unique needs of business owners and incorporated professionals.

Who’s eligible?

The Health Spending Account is available to a wide range of businesses, making it an inclusive and flexible solution. Small businesses, professional corporations, and corporations that wish to supplement an existing health plan are all eligible to participate in this program. Whether you run a small family-owned enterprise, a professional practice, or a larger corporate entity, the Health Spending Account can cater to your specific needs and provide valuable healthcare benefits for you and your employees.

What are the benefits?

Tax Deductibility for Corporations

As a business owner or incorporated professional, you know the significance of minimizing tax burdens. The Health Spending Account allows your corporation to make contributions that are 100 percent tax-deductible. By taking advantage of this tax benefit, you can reduce your corporation’s taxable income, resulting in lower overall taxes. This leaves you with more funds to reinvest in your business, expand operations, or reward your hardworking employees.

Tax-Free Benefits for You and Your Employees

The Health Spending Account offers tax-free reimbursements for both you, as the business owner or incorporated professional, and your employees. Any medical expense covered through the account is received as tax-free income. This means you get to retain more of your earnings while providing valuable healthcare benefits to your workforce without increasing their taxable income. It’s a win-win situation that fosters employee satisfaction and loyalty.

No monthly premium to pay and cost-efficient

A Health Spending Account (HSA) offers a highly cost-efficient approach to managing medical expenses, providing individuals and businesses with significant financial advantages. One of the key benefits of an HSA is that there is no monthly premium to pay, unlike traditional health insurance plans. This means that participants can access valuable healthcare benefits without the burden of regular premium payments. With no ongoing costs, the HSA allows individuals and businesses to allocate their funds more strategically, ensuring that their healthcare budget is utilized efficiently. This cost-effective feature makes the Health Spending Account an attractive option for those seeking to optimize their healthcare spending while enjoying comprehensive medical coverage.

How it works

The Health Spending Account simplifies the process of managing healthcare expenses:

1. Employees pay for medical services out of pocket.

2. The employee submits the claim for reimbursement.

3. The claim amount is then reimbursed tax-free through the corporation’s account.

4. The claim is reimbursed to the employee.

This streamlined process eliminates the complexities associated with traditional health insurance plans, saving you time and effort.

To learn more about how a health spending account can benefit you, please reach out today to book a meeting, and we would be happy to help.

Protecting Key Talent using Group Benefits

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Building a Sustainable Future Together

As specialists in group benefits, the primary goal is to cultivate a sustainable future by collaborating closely with clients. The belief is that an informed and engaged workforce is pivotal for the success of any organization. A key component of this vision is the protection of the organization’s essential talent. This article delves into how group benefits can be instrumental in safeguarding an organization’s most treasured resource: its people.

The Importance of Essential Talent

Essential talent encompasses those employees who bring critical skills, expertise, and knowledge that propel an organization’s growth and success. These individuals form the core of any organization, ensuring its prosperity in the competitive market. Retaining such invaluable members is crucial as their absence can significantly affect business operations, productivity, and overall morale.

Challenges in Retaining Essential Talent

In the ever-evolving job market, holding onto essential talent can be a daunting task. Numerous factors, including enticing offers from rivals, opportunities for personal growth, work-life equilibrium, and employee well-being, can influence retention. For employers, recognizing and addressing these challenges is vital to safeguard top performers and sustain a competitive advantage.

The Significance of Group Benefits

Group benefits serve as a potent strategy in attracting and retaining essential talent. By presenting comprehensive and tailored benefits packages, organizations showcase their dedication to the well-being, security, and future of their employees. Here are some pivotal aspects of group benefits that aid in retaining essential talent:

  1. Health and Wellness Coverage: Offering comprehensive health and wellness benefits, such as medical, dental, and vision plans, not only fosters a healthy workforce but also signifies an organization’s commitment to overall employee well-being. Employees who feel this support are more inclined to stay loyal.
  2. Income Protection: Many group benefits packages encompass disability insurance, offering financial security for employees facing injuries or illnesses that hinder their work. Such provisions alleviate financial concerns during tough times, fostering a sense of stability and encouraging talent to remain with the organization.
  3. Retirement Planning: A meticulously crafted retirement plan appeals to essential talent. It signifies an organization’s concern for their future and dedication to ensuring their financial comfort during retirement. Contributing to such plans also strengthens the bond between employers and employees.
  4. Support for Work-Life Balance: Benefits that champion work-life balance, like flexible work schedules, paid leaves, and family leaves, reflect an organization’s understanding of the significance of a balanced life. Employees who sense this flexibility are more likely to remain devoted.
  5. Career Advancement: Benefits can also encompass professional development and training opportunities. Investing in employee growth not only sharpens their skills but also underlines an organization’s commitment to their long-term achievements.

Educational Approach and Teamwork

The role of group benefits specialists is to offer educational support and foster collaboration with clients. Through open dialogues about an organization’s aspirations and needs, it’s possible to design group benefits packages that resonate with specific demands. The collective goal is to nurture and protect essential talent, ensuring a sustainable future.

Protecting essential talent through group benefits is more than a strategic move; it embodies a dedication to employee welfare. By investing in the well-being, security, and future of employees, organizations not only boost loyalty and retention but also lay the foundation for a robust and sustainable future. The journey ahead is one of partnership, aiming for a flourishing and vibrant workforce.

Exploring the Value of Group Benefit Plans for Your Employees

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In today’s ever-evolving workplace landscape, employees place a premium on several key factors:

1. Alignment with employer values, especially sustainability.

2. Achieving a harmonious work-life balance.

3. Assistance in coping with the rising cost of living expenses.

4. Opportunities for delayed retirement.

5. Cultivating a sense of belonging within the workplace.

6. Flexibility in terms of work hours and location.

7. Ensuring job security.

If your business is experiencing growth and you’re considering adding group benefit plans to your employee offerings, you’re in the right place. We understand the importance of providing the right employee benefits solution for your business.

Understanding Group Benefit Plans and Their Value

Group benefit plans form a crucial part of a company’s total compensation package, available to employees regardless of their seniority, position, or qualifications. These plans often encompass medical coverage for employees and their dependents. While it may seem like an additional expense during a period of growth, offering employee insurance benefits is essential for the long-term sustainability of your business.

So, why should your company consider offering group insurance benefits? Here are some compelling reasons:

1. Convenience: Group insurance benefits simplify healthcare coverage for your employees and their families.

2. Workforce Protection: These benefits provide a safety net for your staff, promoting their well-being.

3. Staff Retention: Offering benefits can help you retain valuable employees, reducing turnover.

4. Tax Benefits: Group insurance plans offer tax advantages for both employers and employees.

5. Customization: Plans can be tailored to meet your business’s unique needs.

6. Morale Boost: Providing benefits can boost productivity and morale among your workforce.

What’s Covered by Group Insurance Plans?

Group insurance plans typically cover medical-related expenses that provincial healthcare plans might not fully address. This coverage can include paramedical and ambulance services, dental care, eye care, hospital stays, and certain prescription drugs. Additionally, you have the option to combine group benefits plans with retirement and savings plans.

Types of Group Benefits Plans

Various types of group benefits plans are available, each catering to different company needs and preferences. The most popular options include:

1. Fully-Insured

2. Self-Funded

3. Level-Funded

No matter the size of your business, there’s a group insurance benefit plan that suits your needs. We offer flexible and innovative plans that anticipate your requirements. Our services aim to reduce your administrative workload, allowing you to focus on critical aspects of your business.

Is Group Insurance Cost-Effective?

One of the financial advantages of group insurance is lower premiums while maintaining coverage equivalent to individual health insurance. Typically, employers cover most of the group benefit plan costs, with employees contributing a small percentage of their salary towards the monthly premium. If you’re concerned about the tax implications of providing benefits at work, it’s advisable to with us for specific details.

In conclusion, offering group benefit plans is a strategic move to attract and retain top talent while promoting employee well-being and financial security. Whether you have a small or large business, we are here to assist you in finding the right plan that aligns with your organization’s needs and objectives.