Tax Changes for Families and Business Owners

Tax Changes for Families and Business Owners

ATTENTION: The Department of Finance paper released July 18, 2017 targets the tax advantages of using private corporations and trusts to sprinkle investment income among family members. The federal government is seeking input on proposed tax legislation to curb these advantages. GGFL is responding immediately to this release to see how best to guide our clients. We are committed to keeping you informed on key developments as they occur. Should you have any questions or concerns, please contact your GGFL advisor.

 

Chad Saikaley, CPA, CA, TEP, Partner

(Originally published in 2015. For more current articles, visit our Business or Tax Library.)

This article outlines the impact of the recent tax changes, and other proposed changes, for families and business owners. Most of these benefits are in the form of tax credits, which means they can only be applied against tax owing and would not create a tax refund.  The proposed changed to the children’s fitness tax credit would allow for a refund.

Business owners who only receive dividend income may not be able to benefit from the Child Care Expense Deduction. Business owners should determine whether their spouse’s salary is high enough to take full advantage of the proposed increased child care expense limits described below. They may want to expand their spouse’s responsibilities within the business in order to increase their compensation.

Family Tax Cut

The new “Family Tax Cut,” announced in October 2014, allows for the effect of income splitting between you and your spouse, up to $50,000 for tax purposes, if you have children under the age of six. The savings take the form of a tax credit and can reduce your federal tax owing up to $2,000.

Business owners have other more effective means of splitting income that may result in tax reductions well above $2,000. The inclusion of family members as shareholders of the corporation is one way, although there are other ways of sharing wealth and reducing your tax bill.

Proposed Additional Child Tax Benefits:

The government has proposed the following changes which are expected to be introduced in 2015:

Universal Child Care Benefit (UCCB):
•    Increased to $160 per month for children under the age of six; and
•    Introduction of benefit for children aged six to 17 of $60 per month.

Child Care Expense Deduction increased by $1,000 to:
•    $8,000 per child under seven;
•    $5,000 for children aged seven to 16; and
•    $11,000 for children eligible for the Disability Tax Credit.

Children’s Fitness Tax Credit:
•    Doubled to $1,000 maximum credit for children enrolled in eligible fitness activities; and
•    The changes could result in a tax refund.

Speak with your tax advisor to take advantage of these tax planning opportunities and others that allow for additional benefits such as liability protection of assets and minimizing taxes at death.