Based on the recent tax changes following are the ones which might affect your tax planning decisions:
Accelerated capital cost allowance
Recent changes to tax depreciation rules provide a possibility to claim an accelerated deduction. This incentive increases the deduction available for all assets (with certain exceptions) purchased after November 20, 2018 and available for use before 2024, to three times what was previously allowed.However, you should keep in mind this deduction will be offset by lower deduction in subsequent years.
Tax on split income (TOSI)
Currently, government discourages business owners from splitting income with a minor (individual under 18) by imposing the highest marginal tax rates. However with the new rules in effect, highest marginal tax rate also applies if income is split with an adult family member who does not makes sufficient contribution to the business. As a consequence no tax benefit results from income splitting.
As is the case with many income tax provisions there are exceptions to this general rule! Making proper use of these exceptions you can lower your household tax liability while lawfully extracting funds from your corporation. Contact us to discuss your specific tax situation.
Passive investment income earned by a private corporation
Government has introduced changes to discourage earning passive investment income through a private corporation due to low tax rates for small businesses. Under the new rules there will be a reduction in the small business limit. Small business limit will be reduced by $5 for every $1 of investment income above $50,000 threshold. This leads to full elimination of the small business limit for a corporation whose investment income is $150,000 or more.
For professional advice contact Alpha Accountzy, Accounting & Tax Solutions.
