Further details and guidance on these new rules are expected to be provided in future announcements.
Lifetime Capital Gains Exemption
The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Canadian Entrepreneurs’ Incentive
The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.
Qualifications for the incentive include:
-
Shares must be of a small business corporation directly owned by an individual.
-
For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.
-
The seller needs to be a founding investor who held the shares for at least five years.
-
The seller must have been actively involved in the business continuously for five years.
-
The seller must have owned a significant voting share throughout the subscription period.
-
The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.
-
The shares must have been acquired at their fair market value.
-
The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.
This measure will apply to dispositions after December 31, 2024.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Further proposed changes to the AMT include:
-
Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.
-
Exempting employee ownership trusts (EOTs) entirely from AMT.
-
Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.
These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.
Employee Ownership Trust (EOT) Tax Exemption
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:
-
Sale of shares must be from a non-professional corporation.
-
The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.
-
The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.
-
At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.
-
If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption
-
If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.
-
For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.
-
The normal reassessment period for the exemption is extended by three years.
-
The measure now also covers the sale of shares to a worker cooperative corporation.
This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.
Home Buyers Plan (HBP)
The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:
-
Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.
-
Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments
Interest Deductions and Purpose-Built Rental Housing
The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.
Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing
The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.
Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.
Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets
The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:
-
Class 44- Patents and rights to patented information
-
Class 46- Data network infrastructure and related software
-
Class 50- General electronic data-processing equipment and software
Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.
To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.
Canada Carbon Rebate for Small Businesses
The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:
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File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.
-
Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.
The amount of the tax credit for each eligible business will depend on:
-
The province where the company had employees during the fuel charge year.
-
The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.
-
The CRA will automatically calculate and issue the tax credit to qualifying businesses.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
Network of Professionals
/in Accountants, Blog, business owners, Center of Influences, Estate Planning, Family, farmers, financial advice, Financial Planning, incorporated professionals, individuals, Insurance, Investment, life insurance /by Coulas Insurance Ltd.Our Network of Professionals
As a financial advisor, my primary goal is to help you achieve financial clarity. I do this by accessing a network of dedicated professionals, each bringing their unique expertise to the table. Together, we provide personalized advice and services that help you make informed decisions and secure your future.
Financial Advisor
Think of me as your financial coordinator. I help you figure out your goals, create plans to achieve them, and keep everything on track. Whether it’s planning for retirement, managing investments, or saving for a major purchase, I have access to a network of professionals who ensure every aspect of your financial life works together smoothly.
Accountant/Tax Professional
Having an accountant or tax professional in your financial network is essential for keeping your financial records in order. They handle tasks like bookkeeping, preparing financial statements, and assisting with tax planning. Their role is particularly important during tax season. They help you file your taxes accurately and on time, taking the stress out of the process. By optimizing your tax strategies and ensuring everything is reported correctly, they help you save money. Their skills are invaluable for both your immediate needs and long-term financial planning.
Investment Advisor
Investment advisors focus on building and managing investment portfolios tailored to your short-term, medium-term, and long-term goals. They thoroughly research the market, evaluate investment opportunities, and offer valuable insights to help you create a well-rounded portfolio. Whether you’re saving up for a major purchase, planning for retirement, or aiming for other financial milestones, they assist in choosing the right investment vehicles, such as RRSPs, TFSAs, RRIFs, and non-registered accounts, to support your financial stability and future needs.
Life Insurance and Living Benefits Advisor
Life insurance and living benefits advisors are here to help you protect your greatest asset: yourself. Their job is to make sure you and your family are financially secure if unexpected events occur. These advisors walk you through different insurance options, including disability insurance, critical illness insurance, and life insurance, to find the coverage that fits your needs best. By understanding your unique situation and recommending the right policies, they provide you with peace of mind, knowing that you have a safety net in place for life’s uncertainties.
General Insurance Specialist
General insurance specialists cover a wide range of insurance needs, including auto, property, travel, and liability insurance. They assess your risks and recommend policies that provide the protection you need. Their advice helps you understand your options, compare quotes, and select the best policies to safeguard your assets, ensuring you are well-protected in various aspects of your life.
Banker
Bankers are there to help you navigate a wide range of financial services, especially when it comes to getting loans and credit products. They offer advice on securing personal loans, understanding credit options, and managing debt effectively. Whether you’re looking to finance a major purchase, consolidate debt, or build your credit, bankers provide the support and guidance you need to make informed financial decisions.
Mortgage Broker
Mortgage brokers assist you in securing financing for property purchases by accessing multiple lenders on your behalf. They assess your financial situation, compare mortgage products from various sources, and recommend the best options for you. With their ability to shop around and understand different interest rates, loan terms, and application processes, they ensure you get the best possible mortgage deal, making homeownership more accessible and affordable.
Realtor
Realtors are your go-to professionals for buying or selling property. They provide market insights, negotiate deals, and manage the legal aspects of real estate transactions. With their knowledge of local market trends and property values, realtors help you make informed decisions whether you’re purchasing a home, investing in real estate, or selling property.
Legal & Estate Professional
Legal and estate professionals play a vital role in your financial planning by handling the legal side of things, such as estate planning, wills, trusts, and probate. They make sure your assets are distributed according to your wishes and that all the necessary legal documents are properly set up. Their guidance helps you reduce estate taxes and smoothly navigate the legal processes, ensuring your wealth is transferred to future generations just as you intended.
Having a network of financial professionals is essential for achieving financial well-being. Each member brings their own expertise to address different aspects of your finances, from investments and insurance to legal and real estate matters. As your financial advisor, I act as the coordinator, ensuring that all these professionals work together seamlessly. By leveraging their combined knowledge and skills, you can gain financial clarity and know that every aspect of your financial life is taken care of.
Ready to take control of your financial future? Contact us today.
The Five Steps to Insurance Planning
/in Blog, Insurance, life insurance /by Coulas Insurance Ltd.The Five Steps to Insurance Planning
One of the first “grown-up” things you do is to get insurance. Maybe it’s renters’ insurance when you’re first starting out. After that, you move on to life insurance, home insurance, and car insurance.
Whatever your insurance needs are, meeting with a licensed insurance agent can help ensure you have all the coverage you need.
Find an insurance agent
The first thing you need to do is to find an insurance agent. Ask trusted friends or family members if they can recommend one. Look for reviews online and make sure that the person is licensed – this is required in all provinces.
Meet with your insurance agent
Your insurance agent may ask you to bring some information to the meeting – such as your current salary or the estimated worth of your house. The point of your first meeting is to determine what kind of insurance you need.
Review your insurance options
One of an insurance agent’s primary duties is to help you make an informed decision about your insurance coverage. Your insurance agent should explain the following:
Your insurance agent will talk to you about different scenarios where you could need insurance to help determine the best coverage for you.
Purchase insurance
Once you’ve settled on the amount of coverage you need, your insurance agent will then check to see if you are eligible for any discounts. They will then let you know how much your policies will cost and enroll you in them.
File a claim
If you get into a situation where you need to file a claim, your insurance agent can help you file a claim and update you on its progress.
It’s essential to be adequately insured – so contact an insurance agent or us today!
Succession Planning for Business Owners
/in Blog, business owners, Estate Planning, Family, life insurance /by Coulas Insurance Ltd.Succession Planning for Business Owners
Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.
We created this infographic checklist to be used as a guideline highlighting main points to be addressed when starting to succession plan.
Needs:
There are 2 sets of events that can trigger a succession plan: controllable and uncontrollable.
Controllable events
Sale: Who do you sell the business to?
Retirement: When do you want to retire?
Uncontrollable Events
Divorce: A disgruntled spouse can obtain a significant interest in the business.
Illness/Disability: If you were disabled or critically ill, would your business survive?
Death: In the case of your premature death, what would happen to your business?
Execution: It’s good to go through this with but you need to get a succession plan done. Besides having a succession plan, make sure you have an estate plan and buy-sell/shareholders’ agreement.
Because a succession plan is complex, we suggest that a business owner has a professional team to help. The team should include:
Next steps…
When and Why You Should Conduct an Insurance Audit
/in Blog, business owners, Family, individuals, life insurance /by Coulas Insurance Ltd.As our lives grow and change with variable circumstances, new additions, and job transitions, our needs for insurance will also evolve. Additionally, economic fluctuations and external circumstances that influence your insurance policy will need frequent re-evaluation to ensure that you are making the most appropriate and financially favorable decisions. Perhaps you aren’t sure whether you should conduct an insurance audit or not. The following scenarios are usually a good indication that you should thoroughly assess and review your current policy contract:
The specific type of insurance policy you carry as well as personal details certainly influence coverage and premium prices, so if any of the following factors apply to you, be sure to update your policy accordingly. You might be eligible for a rate reduction.
Insurance policies generated for business purposes should also be regularly reviewed to make sure the policy still offers adequate coverage to meet the needs of the company and includes the appropriate beneficiary information. With life happening so quickly, it can be easy to forget about keeping insurance policies up to date, however, major changes can have a profound impact on coverage and premiums. Be sure to conduct insurance audits often to ensure your policies are still meeting your needs.
Contact us to see how we can help.
Do you need an estate plan?
/in Blog, Charitable Gifting, Debt, Estate Planning, Family, individuals, life insurance, Retirees /by Coulas Insurance Ltd.Managing your finances raises a number of topics but none as tricky and potentially unpleasant as planning for your family and finances in the event that you pass away or become incapacitated. Understandably, these questions are often ignored by many—but don’t fall into the trap of avoiding these difficult matters. Good estate planning will help to make sure that your wishes are carried out, and your family and assets are well protected.
With this in mind, let’s take a look at the key areas that you should consider when designing your estate plan:
Choosing a guardian – One of the most important considerations is who you select to become the legal guardian of your children. This is a very personal and complex decision, and you will consider several unique factors depending on your circumstances, but your principal concerns might be how physically able the person is to look after your children, as well as such practical matters as how close they live to you and their personal and financial situation and stability.
Life insurance and trusts – Life insurance gives your family the financial security to continue their standard of living and fulfil their dreams in the event that you are unable to provide for them yourself. Life insurance payouts can be used in various ways, including paying off debts, paying for college education, or simply helping with general living costs.
A trust is a way of specifying how and when you wish to pass money and other resources to your children. It can be an excellent way of ensuring that their inheritance reaches them before the age of eighteen or twenty-one, unlike a court-controlled process, as you will stipulate who manages and distributes the funds.
· Choosing someone to make decisions on your behalf
It is crucial to make sure that somebody trustworthy is nominated to manage and distribute your various assets according to your wishes. This executor can be anybody, though spouses, older children, or close friends are often common choices. Similarly, if you become too sick to make your own decisions about your finances or your family’s care, a health care directive and a power of attorney will give you peace of mind and go a long way towards protecting your assets.
Now that we understand the key areas that should be considered in estate planning, here are some of the important components or documents involved in the process:
· Will, trusts, and beneficiary forms
Both a will and a trust should detail your assets and how you wish them to be distributed when you die, as well as assigning the guardians of your children. However, one benefit that a trust has over a will is that a trust does not have to go through probate prior to being executed, as well as the option of coming into effect before you pass away; it remains under your control and transfers the role of trustee to someone else when you decease.
Beneficiary forms are slightly different. They assign designated beneficiaries to specific financial accounts such as mortgages and bank accounts. As this information holds more legal weight than a will itself, it is crucial to regularly ensure that your beneficiaries are up to date.
· Durable powers of attorney
The term power of attorney refers to the person, or persons, that you nominate to act on your behalf in the event that you are too ill to state or carry out your own wishes. There are various ways to implement this; you can choose specific individuals for particular roles, such as one person to look after your finances and another to make your healthcare decisions, or you can designate one person full power of attorney to manage all of your affairs.
· A living will
Not to be confused with a last will and testament, a living will details the type of medical treatment that you wish if you were ever incapacitated. Along with a general or healthcare power of attorney (see above), this document is known as your advance health care directive, and it not only provides you with peace of mind that your medical wishes will be respected, but it also gives direction and support to your family when faced with difficult decisions about your care.
· Letter of intent
This document is not legally binding and can offer a more personal touch alongside an official will or trust. As the letter is less formal and binding than other documents, many people use it to express their wishes about more personal aspects such as their requests for funeral arrangements, or even preferences and desires for how their family should be brought up.
As with any financial arrangement, changes over time, not only in process and legislation but in your own personal situation, mean that it is imperative to keep your estate planning strategy under review and regularly updated to ensure it’s fit for its purpose and accurately reflects your wishes.
Stay Ahead in 2024: A Comprehensive Checklist for Federal Tax Updates
/in 2024, Blog, business owners, Family, financial advice, Financial Planning, individuals, Investment, Retirees, retirement /by Coulas Insurance Ltd.With the upcoming 2024 Canadian tax rule changes, it’s important to review your financial strategies. We’ve identified the key changes that we expect to influence financial decisions for investors, business owners, incorporated professionals, retirees, and individuals with high income or net worth.
Capital Gains Inclusion Rate
Starting on June 25, 2024, the tax on capital gains is changing. Until now, you would only have to include half of your capital gains in your income for tax purposes. But after that date, you’ll have to include two-thirds of any capital gains over $250,000 on your tax return. This is also the case for employee stock options.
Consequently, for corporations and trusts, they will have to include two-thirds of all their capital gains, no matter the amount. This is a significant change.
Lifetime Capital Gains Exemption (LCGE)
The budget proposes increasing the LCGE for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. This change increases tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, suggesting revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Employee Ownership Trust (EOT)
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met.
Canadian Entrepreneurs’ Incentive
This new tax measure offers a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years. However, it’s important to know that not all businesses qualify—this doesn’t apply to businesses in professional services, finance, real estate, hospitality, arts, entertainment, or personal care.
Below is a checklist to help you navigate the tax adjustments and ensure your financial plans are updated and aligned with the new rules.
Investors
Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate.
Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.
Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.
Employee Stock Options: Adjust the timing of exercising stock options to align with the upcoming changes in inclusion rates.
Business Owners:
Corporate Investments: Assess the impact of increased inclusion rates on corporately held assets, exploring the timing of gains realization. Review trust-held investments.
Lifetime Capital Gains Exemption: Maximize the benefits of the increased LCGE for qualifying business assets.
Employee Ownership Trust: Consider the advantages of transferring business ownership via an EOT.
Succession Planning: Update your succession plans to consider the potential impact of capital gains tax changes.
Entrepreneurs Incentive: Check if you are eligible to reduce capital gains taxes.
Incorporated Professionals:
Investments: Assess both personal and corporate investments for the new inclusion rate. Determine the most tax-effective structure for holding and realizing gains from investments.
Succession Planning: Time the potential sale of your professional corporation to capitalize on the current LCGE.
Retirees:
Estate Planning: Update estate plans considering the impending increase in capital gains rates.
Life Insurance Coverage: Ensure life insurance is adequate to cover increased capital gains tax liabilities upon death.
Non-Registered Investments and Retirement Income: Review your strategy for non-registered investments to manage taxes on gains and adjust your retirement income plans to accommodate the upcoming changes in capital gains rates.
Individuals with High Income or Net Worth:
Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate. Review trust-held investments.
Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.
Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.
Charitable Contributions: Align your charitable giving strategies with the new tax benefits and AMT considerations.
Please reach out to us to review your financial strategy together and ensure it aligns with the upcoming changes.
2024 Federal Budget Highlights
/in Blog, business owners, Estate Planning, Family, Financial Planning, incorporated professionals, individuals, Investment, mortgage, personal finances, Professional Corporations, Professionals, Retirees, retirement, tax /by Coulas Insurance Ltd.On April 16, 2024, Canada’s Deputy Prime Minister and Finance Minister, Chrystia Freeland, presented the federal budget.
While there are no changes to federal personal or corporate tax rates, the budget introduces:
An increase in the portion of capital gains subject to tax, rising from 50% to 66.67%, starting June 25, 2024. However, individual gains up to $250,000 annually will retain the 50% rate.
The lifetime exemption limit for capital gains has been raised to $1.25 million. Additionally, a new one-third inclusion rate is set for up to $2 million in capital gains for entrepreneurs.
The budget confirms the alternative minimum tax changes planned for January 1, 2024 but lessens their impact on charitable contributions.
This year’s budget emphasizes making housing more affordable. It provides incentives for building rental properties specifically designed for long-term tenants.
Introduces new support measures to aid people buying their first homes.
Costs for specific patents and tech equipment and software can now be written off immediately.
Canada carbon rebate for small business.
Capital Gains Inclusion Rate
The budget suggests raising the inclusion rate on capital gains after June 24, 2024:
Corporations and trusts, from 50% to 66.67%.
Individuals, on capital gains over $250,000 annually, also from 50% to 66.67%.
For individuals, the $250,000 annual threshold that applies to net capital gains—the amount remaining after offsetting any capital losses. This includes gains acquired directly by an individual or indirectly through entities such as partnerships or trusts. Essentially, this threshold acts as a deductible, considering various factors to determine the net gains eligible for the increased capital gains tax rate.
Individuals in the highest income bracket, who earn above the top marginal tax rate threshold, will face a higher tax rate on capital gains exceeding $250,000 due to these changes. Furthermore, the budget modifies the tax deduction for employee stock options to align with the updated capital gains taxation rates yet maintains the initial 50% deduction for the first $250,000 in gains. Regarding previously incurred financial losses, the budget plans to adjust the value of these net capital losses from past years so that they are consistent with the current gains, upholding the uniformity with the new inclusion rate.
The budget outlines transitional rules for the upcoming tax year that straddles the implementation date of the new capital gains rates. If the tax year begins before June 25, 2024, but ends afterward, capital gains realized before June 25 will be taxed at the existing rate of 50%. However, gains accrued after June 24, 2024, will be subject to the increased rate of 66.67%. It’s important to note that the new $250,000 threshold for higher tax rates will only apply to gains made after June 24.
Consequently, for individuals earning capital gains beyond the $250,000 threshold and who fall into the highest income tax bracket, new rates will be effective as outlined in the table below. Specifically, this pertains to individuals with taxable incomes exceeding $355,845 in Alberta, $252,752 in British Columbia, $1,103,478 in Newfoundland and Labrador, $500,000 in the Yukon, and $246,752 in all other regions.
Further details and guidance on these new rules are expected to be provided in future announcements.
Lifetime Capital Gains Exemption
The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.
Canadian Entrepreneurs’ Incentive
The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.
Qualifications for the incentive include:
Shares must be of a small business corporation directly owned by an individual.
For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.
The seller needs to be a founding investor who held the shares for at least five years.
The seller must have been actively involved in the business continuously for five years.
The seller must have owned a significant voting share throughout the subscription period.
The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.
The shares must have been acquired at their fair market value.
The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.
This measure will apply to dispositions after December 31, 2024.
Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.
Further proposed changes to the AMT include:
Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.
Exempting employee ownership trusts (EOTs) entirely from AMT.
Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.
These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.
Employee Ownership Trust (EOT) Tax Exemption
The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:
Sale of shares must be from a non-professional corporation.
The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.
The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.
At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.
If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption
If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.
For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.
The normal reassessment period for the exemption is extended by three years.
The measure now also covers the sale of shares to a worker cooperative corporation.
This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.
Home Buyers Plan (HBP)
The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:
Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.
Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments
Interest Deductions and Purpose-Built Rental Housing
The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.
Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing
The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.
Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.
Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets
The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:
Class 44- Patents and rights to patented information
Class 46- Data network infrastructure and related software
Class 50- General electronic data-processing equipment and software
Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.
To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.
Canada Carbon Rebate for Small Businesses
The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:
File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.
Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.
The amount of the tax credit for each eligible business will depend on:
The province where the company had employees during the fuel charge year.
The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.
The CRA will automatically calculate and issue the tax credit to qualifying businesses.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
Tax tips to know before filing your 2023 income tax
/in 2024, Blog, corporate, Family, financial advice, Financial Planning, tax /by Coulas Insurance Ltd.This year’s tax deadline is April 30, 2024. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. We’ve separated this article into 2 sections:
What’s New for 2023
Advanced Canada Workers Benefit (ACWB)
Automatic advance payments of the Canada Workers Benefit (CWB) are now seamlessly distributed through the ACWB program to individuals who received the benefit in the last tax year. However, it’s important to note that not everyone who received the CWB in the previous tax year will automatically receive the ACWB payments. Only individuals who filed their 2022 tax return before November 1, 2023, are eligible for the ACWB payments.
Furthermore, it’s worth mentioning that the ACWB program eliminates the need to file Form RC201. Recipients are no longer required to fill out this form. Instead, starting in 2023, individuals should report the amounts from their RC210 slip on Schedule 6, Canada Workers Benefit, of their tax return. Additionally, for eligible spouses, the option to claim the basic amount for the CWB is available regardless of who received the RC210 slip.
Deduction for Tools (Tradespersons and Apprentice Mechanics)
Starting in 2023, the maximum employment deduction for eligible tools of tradespersons has risen from $500 to $1,000. Consequently, the threshold for expenses eligible for the apprentice mechanics tools deduction has also been adjusted.
Temporary Flat Rate Method for Home Office Expenses
For the year 2023, the temporary flat rate method for claiming home office expenses is not applicable. Consequently, taxpayers seeking to claim such expenses for 2023 must utilize the detailed method and obtain a completed Form T2200, Declaration of Conditions of Employment, from their employer.
Federal, Provincial, and Territorial COVID-19 repayments
Repayments of COVID-19 benefits at the federal, provincial, and territorial levels, made after December 31, 2022, can be deducted and claimed.
First Home Savings Account (FHSA)
The FHSA is a registered plan designed to aid individuals in saving for their first home. Starting April 1, 2023, contributions made to an FHSA are typically deductible, and eligible withdrawals made from an FHSA for purchasing a qualifying home are tax-free.
Property Flipping
Starting January 1, 2023, any profit generated from the sale of a housing unit (including rental properties) situated in Canada, or a right to acquire a housing unit in Canada, that you owned or held for less than 365 consecutive days prior to its sale is considered business income rather than a capital gain. This is applicable unless the property was already classified as inventory or the sale occurred due to, or in anticipation of specific life events.
Multigenerational Home Renovation Tax Credit (MHRTC)
The MHRTC is a refundable tax credit designed to enable eligible individuals to seek reimbursement for specific renovation expenses incurred in establishing a secondary unit within an eligible dwelling. This enables a qualifying individual to live with their qualifying relative. If eligible, you can claim up to $50,000 in qualifying expenditures for each renovation project completed, with a maximum credit of $7,500 for each eligible claim.
Fuel Charge Proceeds Return to Farmers Tax Credit
The Fuel Charge Proceeds Return to Farmers Tax Credit is now accessible to self-employed farmers and individuals involved in a partnership operating a farming business with one or more permanent establishments located in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, or Saskatchewan. If eligible, you may be entitled to a refund of a portion of your fuel charge proceeds.
For Individuals and Families
Canada Training Credit (CTC)
The CTC is a refundable tax credit available to help Canadians with the cost of eligible training fees.
To qualify for the CTC, you need to fill out Schedule 11 for the following:
To be eligible for the CTC, you must meet all these conditions:
Canada Caregiver Credit (CCC)
The CCC is a non-refundable tax credit aimed at assisting individuals who provide support to a spouse, common-law partner, or dependent with a physical or mental impairment, as outlined by the CRA.
You might be eligible for the CCC if you aid:
The amount you can claim varies depending on your relationship to the individual, your circumstances, their net income, and whether other credits are claimed for them.
Child Care Expenses
Child care expenses encompass payments made by you or someone else to arrange care for an eligible child. This care allows you to participate in income-earning activities, pursue education, or conduct research funded by a grant.
If you qualify, you can claim certain childcare expenses as deductions when you file your personal income tax return.
Disability Tax Credit (DTC)
The DTC is a non-refundable tax credit designed to support individuals with disabilities, or their family members who provide support, by reducing their income tax responsibilities.
To be eligible for this credit, individuals must have a significant and enduring impairment. Once approved, they can apply the credit when filing their taxes.
The DTC aims to ease some of the extra costs linked with the disability by lessening the individual’s income tax burden.
Moving
You can claim moving expenses you paid during the year if you meet these conditions
Interest Paid on Student Loans
You might qualify to claim an amount for the interest paid on your student loan for post-secondary education if it was obtained under the following acts:
Only you, or a person related to you, can claim the interest paid on the loan within the tax year 2023 or the preceding 5 years.
Donations and Gifts
When you or your spouse/common-law partner donate to eligible institutions, you might be eligible for federal and provincial/territorial non-refundable tax credits when you file your income tax and benefit return.
Normally, you can claim a portion or the full eligible donation amount, capped at 75% of your net income for the tax year.
Seeking guidance?
Wondering if you qualify for valuable tax credits or deductions? Reach out to us – as your financial advisor, we’re here to assist you in optimizing your finances and maximizing your savings.
Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/whats-new.html
Canada Training Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-45350-canada-training-credit.html
Canada Caregiver Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/canada-caregiver-amount.html
Child Care Expense: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21400-child-care-expenses.html
Disability Tax Credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/disability-tax-credit.html
Moving: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-21900-moving-expenses.html
Interest Paid on Student Loans: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31900-interest-paid-on-your-student-loans.html
Donations and Gifts: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-34900-donations-gifts.html
Ontario’s 2024 Budget Highlights
/in 2024, Blog, Ontario Only, tax /by Coulas Insurance Ltd.On March 26, 2024, the Ontario Minister of Finance announced the province’s 2024 budget. This article highlights the most important things you need to know about this budget, broken into 2 sections:
Personal Tax Changes
Business Tax Changes
Personal tax changes
There are no changes to the province’s personal tax rates in Budget 2024.
As a result, Ontario’s personal income tax rate remains as follows:
Gasoline tax and fuel tax
The Ontario government has chosen to extend the reduced tax rates on gasoline and fuel. This means that the tax you pay when you buy gas or fuel will remain at nine cents per litre until December 31, 2024, instead of ending on June 30, 2024.
Alcohol taxation and fees
The budget reveals that the government plans to review the taxes and fees on beer, wine, and alcoholic beverages.
Property assessment and taxation review
The budget says that Ontario will keep postponing property reassessments while it looks at how property assessments and taxes work. Ontario also plans to talk to different groups about property assessments starting in the early spring.
Housing supply and affordability
The budget says Ontario wants to make it easier for certain cities to:
Bring in a Vacant Home Tax
Give lower property taxes on new apartment buildings with many units for rent.
Technical amendments
The budget mentions that Ontario might suggest some small changes, like fixing how small estates are handled in the Estate Administration Tax Act of 1998 and adjusting how loans are dealt with during the day in Ontario.
Carbon tax referendum
The budget states that the provincial government plans to introduce a law that would ask the public to vote in a referendum before starting any new provincial carbon pricing program.
Tax system review
The budget states that the government is still looking at how taxes work in the province, which they started doing in the 2023 Ontario budget.
Business tax changes
There are no changes to the province’s corporate tax rates in Budget 2024.
As a result, Ontario’s Corporate income tax rate remains as follows:
1 On first $500,000 of active business income.
Ontario computer animation and special effects tax credit
The budget is making changes to who can get the Ontario Computer Animation and Special Effects (OCASE) Tax Credit. Now, for each movie or TV show, a company must spend at least $25,000 on Ontario workers’ wages, with certain timing rules. Also, instructional videos, music videos, and gaming videos won’t count for the credit anymore.
These updated eligibility criteria replace the previous requirement for an eligible film or television production to also be certified for either the Ontario Film and Television Tax Credit or the Ontario Production Services Tax Credit.
The changes start for productions that begin computer animation or special effects work on or after March 26, 2024.
We can help!
Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!
Source: https://budget.ontario.ca/2024/index.html
Insured Retirement Program
/in Blog, Estate Planning, life insurance, Retirees /by Coulas Insurance Ltd.There are a number of mechanisms available for individuals to save in a tax-efficient manner for their retirement – from employer-sponsored pension plans to government plans, RRSPs (registered retirement savings plan) or TFSAs (tax free savings account). But, for those who earn a higher income and wish to contribute more to their pension savings than they can benefit from under the plans which are subject to annual caps, options can be limited. The insured retirement program is an effective way to bridge the retirement savings gap for such individuals in a cost-effective way.
Who is the insured retirement program best suited to?
Individuals who already contribute the maximum allowable amounts to both RRSPs and employer-sponsored pension plans but want to save more for their retirement are ideal candidates for this program.
Individuals at least fifteen years away from retirement so they can accumulate enough funds inside their life insurance policy for collateralization.
Individuals that are comfortable with the concept of borrowing.
How does the insured retirement program work?
This program works with the concept of collateralization in the following way:
Individual takes out a universal life (or eligible whole life) insurance policy and subsequently makes sizable cash deposits into it. These deposits grow within the policy on a tax-sheltered basis providing that the funds remain in the policy and are within the maximum allowable limit.
Upon the retirement of the policyowner, the funds within the policy may be used as collateral in order to take out a loan.
This loan can provide valuable cash for the retiree, in order to purchase an annuity or to use as income, via a series of short loans.
When the retiree dies, the loan is repaid and the remaining balance can be distributed among their beneficiaries.
Are there any pitfalls associated with the program?
As with all investment strategies, there are some risks. Namely, in this case, the fact that the program involves incurring a debt, borrowing funds and interest rate changes means that investors need to be comfortable with the unlikely but possible fact that the bank calls the loan or that changes in tax rules negatively impact them.
The insured retirement program can be smart way for high earners to maximize their retirement income in a tax effective manner. Contact us today to learn more about this opportunity and allow us to work in partnership with you to understand your unique needs and requirements and create a retirement strategy that works for you.