Business Owner Reduces Taxes with Income Splitting
aliko-aapayrollservices.com - Small businessess from 1 to 80 employees outsource your payroll management to us and let us worry about your payroll processing.
RSS Follow Become a Fan

Delivered by FeedBurner


Recent Posts

Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

Most Popular Posts

Help your teenager build credit responsibly
Being an Executor of an Estate
Anti-Aging
Student Line of Credit
Principal Residence Exemption

Categories

aliko nutrition store- isotonix
aliko payroll services
canada revenue news and videos
canadian news
CPP ,OAS RRIF ANNUITY
Cross border Tax
Disability awareness and Benefits for disabled
estate planning
FINANCIAL LITERACY
HEALTH & NUTRITION
Home Car Insurance
Income Splitting Strategies in Retirement
INVESTING
kids and money -set your children up for financial success
life insurance
on line safety tips
online safety tips
PAYROLL
Real Estate - Investments / Retirement
RETIRE HAPPY BLOG
Retirement planning
SAVE YOUR MONEY
Save your money
SERVICE CANADA NEWS
small business planning
Tax Information for Students
tax news
tax planning
tax tips.ca
Tech news
TFSA

Archives

January 2016
July 2015
May 2015
April 2015
February 2015
December 2014
November 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013

powered by

MY BLOG

Business Owner Reduces Taxes with Income Splitting

Business Owner Reduces Taxes with Income Splitting
 
Business Owner Reduces Taxes with Income Splitting
 
 
Steve currently makes $84,000 in his small unincorporated business in BC; he wants to pay his new wife Carin half this amount, as they work together in the business. How much will the family save on taxes if they split income?
 
 
Currently Steve pays $20,349 in income taxes (including $4,712 in CPP Contributions). If he pays Carin a salary of $40,000, his net business income will be reduced to $42,193. (The business will need to pay the employer portion of Carin’s CPP contributions.)
As a result, Steve’s tax bill is reduced to $9,422 (including $3,830 in CPP contributions) and Carin’s tax bill will be $5,232 (plus CPP contributions of $1,807). Together they pay $18,267 for income taxes and CPP contributions.
That’s a savings of $2,082 each year by splitting the income. As a bonus, Carin will now be eligible for a CPP retirement pension when she reaches age 60, and potentially (depending on eligibility), a CPP disability benefit.
 
 
This family should also be looking closely at how to maximize earned income for RRSP/ PRPP purposes. This involved producing enough taxable income to reach contribution maximums. There are many benefits. The RRSP or PRPP contribution will reduce net income on the tax return, thereby increasing some tax credits. Future retirement income will be earned on a tax deferred basis. In addition, it’s possible to tap RRSP funds for the Lifelong Learning Plan or Home Buyer’s Plan. Couples who plan well can even use their tax refunds to fund their Tax-Free Savings Accounts (TFSAs)—another way to be sure all their eggs are not in one basket.
To legitimately write off the costs of hiring family members, certain rules must be followed:
 
 
·         work must actually be performed by the family member;
·         the amount paid must be reasonable for the work, time and effort put into the business by the family member and should be similar to the amount that would be paid a stranger in the same capacity; and
·         the amounts must be actually paid and a normal paper trail, including payroll source deductions and T4 Slip issuance, is required.
 
 
 
 
 
 
 

0 Comments to Business Owner Reduces Taxes with Income Splitting:

Comments RSS

Add a Comment

Your Name:
Email Address: (Required)
Website:
Comment:
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment