The year 2016 had its share of surprises, including the new tax measures in the federal and provincial budgets, which will affect professionals as of January 1, 2017.
The tax specialists and notaries of our Professional Practice department have closely followed these key developments and analyzed their potential impact on your assets. They present the findings of their analysis, as well as points to consider and recommendations to take full advantage of the positive aspects of the new tax measures, while minimizing the negative effects. They have chosen a thematic approach.
If you and your employees (as the case may be) work a maximum of 5,500 hours per year, or if you are a member of a “services pool” where income is shared by the doctors in the pool, your corporation will undoubtedly see a tax increase in 2017.
You could use your compensation to reduce the effects of this potential increase.
To optimize your compensation, don’t forget to take into consideration your capital dividend account (CDA) and your refundable tax dividend on hand (RTDOH) account.
Depending on your situation, you may want to review your compensation method. Compensation in the form of a salary may be preferable.
Your loans or advances
If you are incorporated, your corporation may have granted you a loan or an advance in 2016.
Don’t forget that you have to pay back this amount within one year following the end of the fiscal year in which the loan or the advance was made, otherwise it will be added to your taxable income.
Your tax shelters
If you turned 71 in 2016 and you earned professional or rental income, you can make a final contribution to your RRSP in December, based on your 2016 income.
This excess contribution will be subject to a penalty of 1% per month, so it’s important to only make it in December, to minimize the impact of the penalty.
If your spouse is younger than you, you can still contribute to his or her RRSP if you earned income during the year, even if you are over the age of 71.
Your investment portfolio
By selling the losing stocks in your non-registered investment accounts and your corporate investment accounts, you can use the losses to reduce your tax payable on capital gains realized this year (or in the past three years, or on future capital gains).
You would still like to keep these stocks in your portfolio? You can always buy them back 30 days after their disposition.
You may be considering buying mutual funds at year-end. Be cautious and inform yourself.
Some funds pay taxable distributions at year-end which can result in substantial taxes for a short holding period. Inform yourself about these potential investments and wait until the beginning of 2017 to buy securities that have a high tax cost.
|Your RESP (Registered Education Savings Plan)||Deadline to benefit from the government grants available in 2016|
|Your RRSP (Registered Retirement Savings Plan)||Deadline for contributions deductible in 2016|
|Your TFSA (Tax Free Savings Account)|
Want to learn more? Speak with your advisor, who will help you optimize your situation while protecting your assets.