Taking advantage of tax planning opportunities is more important than ever in 2024

VANCOUVER, BC, September 23, 2024 /24-7PressRelease/ — Canadian taxpayers—take note. Overall, taxes are higher after the 2024 budget. Hence, taking advantage of tax planning opportunities is more important now than ever. For more, go to https://www.mewco.ca/blog/higher-taxes-all-around-more-tax-planning-opportunities-all-around/

Before the 2024 Federal Budget, all capital gains earned personally or in a corporation were taxed at the same 50 percent inclusion rate. Post 2024 Federal Budget, all capital gains earned in a corporation are taxed at an inclusion rate of 66.67 percent. Capital gains earned personally are taxed at a 50 percent inclusion rate for the first $250K and then increased to a 66.67 percent inclusion rate on amounts above this annually.

The inclusion rate of 66.67 percent is effectively a 33.33 percent tax increase regardless of the tax bracket. There are tax planning opportunities individual taxpayers can undertake to avoid the 66.67 inclusion rate (most years).

Capital Gain Tips for BC Taxpayers

Income splitting with the spouse on capital gains is the most obvious way to double the $250K. This is because each taxpayer is provided a 50 percent inclusion rate on the first $ 250K annually. If the stock portfolio, bitcoins, or the cottage are equally owned by both spouses, in the year of disposition, each spouse gets the $ 250K. Also, liquid assets such as stocks can be sold to crystallize gains not exceeding $ 250K annually. As for real estate, which has appreciated dramatically, well, $ 250K per spouse is better than one.

Capital Gains for BC Seniors

Seniors are another group of taxpayers greatly impacted by the $250K rule. Seniors have assets that have appreciated greatly in their unregistered accounts. In the year of death, assets assessed at market value could trigger capital gains that exceed $250K. Two planning opportunities are to crystallize gains not exceeding $250K annually and hold off crystallizing capital losses until the year of death.

Corporate Tax Planning Vancouver, BC

As for corporate retained earnings, before the 2024 budget, the general rule of thumb was to remunerate the shareholder just enough to pay for personal living expenses while the corporation invests the retained earnings. However, with the 66.67 inclusion rate at the corporate level, maximizing the RRSP, TFSA, and FHSA contribution rooms makes math sense. After all, capital gains earned within a corporation are also subjected to the refundable tax regime, which forces the corporations to pay very high taxes upfront, and part of these taxes are only refunded back to the corporation when dividends are issued to the shareholder.

Complexities may be avoided on capital gains earned personally in registered and unregistered accounts. Hence, post 2024 Federal Budget, switching to payroll, maximizing RRSP, FHSA, and TFSA contributions and reducing corporate retained earnings could make math sense.

Vancouver Tax Planning Services – Mew + Company

The 2024 Federal Budget passed only recently. Check back for new tax planning discussions as tax advisors digest and calculate the new rules.

For more information or to start discussing strategies to save money, call 604-688-9198 to connect with the Chartered Professional Accountants at Mew + Company.

Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields—including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.

To learn more about Mew + Company and discuss their services, log on to https://mewco.ca/

Lilly Woo, CPA, CA, CFE, CFP
Mew + Company Chartered Professional Accountants
604-688-9198

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