Tax Planning
Important Tax Information for 2024
Tax Free Savings Account (TFSA)
- You can now make your 2024 TFSA contributions - The annual TFSA contribution limit for 2024 is $7000 and you can carry forward unused contribution room from previous years. You pay no tax on any investment income you may earn in your TFSA and you can withdraw funds from a TFSA without paying tax. Your TFSA can hold a variety of qualified investments, including cash, stocks, guaranteed investment certificates (GIC's) and mutual funds.
- Contributions are deductible against your income for Canadian income tax purposes, subject to your contribution limit, and are not taxed until you withdraw them as needed during retirement (ideally at a lower tax rate).
- Your contribution limit for 2023 can be found on your Canada Revenue Agency Notice of Assessment for 2022.
- The deadline for 2023 contributions is 11:59 p.m., February 29, 2024.
- Money invested in an RESP can grow tax-deferred, and the best part? The government can contribute up to $7,200 over the lifetime of your child’s RESP (a maximum of $500 a year).
- RESPs can be used for anything related to obtaining a post-secondary education, including tuition, textbooks, rent and transportation. The lifetime maximum contribution is $50,000 for each beneficiary
Advanced tax strategies for high-net-worth individuals
Just as your ambitions are uniquely your own, so too is your tax situation. No single tax strategy will fit all scenarios. Instead, your tax obligations may require a personalized guiding plan with annual consultations with tax advisors as your wealth accumulates or your business evolves.
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Incorporation
Prescribed Rate Loans
Family Trusts
Individual Pension Plans
Who might consider this? Executives with high incomes and small business owners.
High income earners may find at some point in their career that Registered Retirement Savings Plans (RRSPs) may leave too much wealth exposed to tax. An alternative solution is an Individual Pension Plan (IPP), a registered and defined benefit pension plan that a company can structure for their executives. A small business owner may also benefit from an IPP although to qualify they must pay themselves a salary.
An IPP can create more contribution room over and above RRSPs, and contribution room can significantly rise from there until age 65.
High income earners may find at some point in their career that Registered Retirement Savings Plans (RRSPs) may leave too much wealth exposed to tax. An alternative solution is an Individual Pension Plan (IPP), a registered and defined benefit pension plan that a company can structure for their executives. A small business owner may also benefit from an IPP although to qualify they must pay themselves a salary.
An IPP can create more contribution room over and above RRSPs, and contribution room can significantly rise from there until age 65.
Charitable donations
Who might consider this? Anyone who wants to make a sizable contribution or become more involved with their favourite charity.
The tax benefits of eligible charitable donations are available to all Canadians and you may earn tax credits which can lower the amount of tax you owe. Donations can be claimed for the previous five years if they haven't been claimed previously.
There may be another option for high-net-worth individuals who may want to consider giving more to their favorite charity and earning greater benefits. Through a donor advised fund, a benefactor can set up their own account with a minimum of $10,000 with an established foundation and will receive the donation tax receipt up-front. The fund can also provide flexibility if you are initially unsure which charity to donate to as there is no obligation to give immediately to a specific charity. In the meantime, you can continue to contribute to your fund and your money can continue to grow.
As well as a tax credit, donating investments directly can potentially eliminate the capital gains tax on eligible securities. Eligible investments include investments trading on designated stock exchanges, segregated funds, mutual funds, and government bonds. Calculating the tax benefits is complex and depending on your situation, donating the investments, and receiving a tax credit may be more beneficial than selling the investments and facing capital gains.
The tax benefits of eligible charitable donations are available to all Canadians and you may earn tax credits which can lower the amount of tax you owe. Donations can be claimed for the previous five years if they haven't been claimed previously.
There may be another option for high-net-worth individuals who may want to consider giving more to their favorite charity and earning greater benefits. Through a donor advised fund, a benefactor can set up their own account with a minimum of $10,000 with an established foundation and will receive the donation tax receipt up-front. The fund can also provide flexibility if you are initially unsure which charity to donate to as there is no obligation to give immediately to a specific charity. In the meantime, you can continue to contribute to your fund and your money can continue to grow.
As well as a tax credit, donating investments directly can potentially eliminate the capital gains tax on eligible securities. Eligible investments include investments trading on designated stock exchanges, segregated funds, mutual funds, and government bonds. Calculating the tax benefits is complex and depending on your situation, donating the investments, and receiving a tax credit may be more beneficial than selling the investments and facing capital gains.
