As we sit here in the last quarter of 2016, the new tax brackets ushered in by the Federal Liberals are about to become reality as people begin preparing their tax returns early next year.
The Liberal web site states:
- When middle class Canadians have more money in their pockets to save, invest, and grow the economy, we all benefit.
- We will cut the middle income tax bracket to 20.5 percent from 22 percent – a seven percent reduction. Canadians with taxable annual income between $44,700 and $89,401 will see their income tax rate fall.
- This tax relief is worth up to $670 per person, per year – or $1,340 for a two-income household.
- To pay for this tax cut, we will ask the wealthiest one percent of Canadians to give a little more. We will introduce a new tax bracket of 33 percent for individuals earning more than $200,000 each year.
For Ontarians the new tax brackets generally mean that those earning an income between $45 – 90k will be paying less tax than last year, and those earning $200k and up will be paying more.
While income tax reduction strategies like RSP contributions can be done early next year for the 2016 tax year, other’s need to be done before year end in order to be applied to 2016. Some examples include: tax loss selling, sharing capital losses with a spouse, or strategic withdrawals from RIF / RRSP accounts.
Our Income Tax calculator is a great starting point to assist in some year-end tax planning. It can quickly provide an estimate of taxes owing, your marginal tax rate on various forms of income, and your annual net take-home amount.
For high income individuals earning $200k+, our rather unique tax strategy may be able to provide some significant annual tax savings. Take note of these potential tax savings highlighted in the bottom section of our calculator*.
*Time is running out to participate in this strategy for 2016. Contact a TriDelta advisor soon to see if it can work for you.