Text by Denis G Fillion CMA
This past 2006 year has brought about the most changes in income tax laws that we have seen since the late 80’s. There is no one that is not affected in one form or other. For some of you, it will mean more money in your pocket, but for most of you, except for the child amount, it will be a shifting of money from the left pocket to the right pocket.
The change in taxation on dividends received from the portion of a corporation’s profit taxed at the high tax rates levels the playing field in terms of taxation with income received from income trusts. The last proposal made by the government to add a tax on income received from income trusts has shifted the balance and income trusts are no longer an effective tool to increase your investment income. As a result the values have declined significantly. You should sit down with your investment advisors and come up with a strategy that will minimize the losses.
The child tax benefit received by eligible parents during the year will be income to the parent with the lowest income. The effect will be a tax of approximately 26% of the amount received during the year.
Having your tax return prepared is no longer simply a method of settling with the government on your share of government expenditures. The return has become an instrument used for a variety of benefits and calculations. Did you realize the information on the return is used for calculating your child tax benefit, your Old Age Security amount, your Old Age Security supplement, cost of living credits, property tax credits, the rent calculation for subsidized housing (most manors), the daily cost for personal care home fees, the GST credits, and for farmers, the CAIS payments and most program payments. It is also used by the financial institutions to verify your credit worthiness. Proper return preparation and proper tax planning has never been more important. Yes, it is more expensive to seek help from the professionals, but the additional benefits far outweigh the additional costs. There is also no price that can be attributed to the peace of mind received.