3 Tax Savings Strategies for 2015

Prime Minister Trudeau promised that taxes will be going up for the rich and going down for the middle class in Canada at the start of 2016. Read further to learn about the top 3 tax savings strategies that you can take advantage of by the end of the year.

What are the Changes in the Tax Rates?

In 2016, a new federal tax bracket will be introduced such that income over $200,000 will be taxed at 33%. This is a 4% increase from the previous year. At the same time, the tax rate for Canadians earning between $45,000 to $90,000 will decrease from 22% to 20.5% in 2016.

Tax Strategy #1: Change the Payment Date for Your Year End-Bonus

If you’re making more than $200,000 and expect to receive a year-end bonus, ask your employer to pay the bonus by no later than December 31, 2015. Otherwise, you will pay an extra 4% in taxes in 2016.

On the other hand, if you are earning between $45,000 to $90,000, including your bonus and a regular salary, ask to receive your bonus next year so that you can save 1.5% in taxes.

Tax Strategy #2: Exercise Your Stock Options

If you’re making more than $200,000, then exercise your stock options by the end of the year. This will save you 4% in taxes compared to 2016. Employer-provided stock options create taxable income when they are exercised.

On the other hand, if you are earning between $45,000 to $90,000, including your stock option income and a regular salary, then exercise your stock options in 2016 to save 1.5% in taxes.

Tax Strategy #3: Sell Property that Has Come Up in Value

Do you own property, such as stocks, bonds, mutual funds or real estate that have gone up in value? If yes and you are making more than $200,000, then consider selling some of your property by the end of the year. This will save you 4% in taxes compared to 2016.

On the other hand, if you are earning between $45,000 to $90,000, including your property gains and other income, then consider selling some of your property next year to save 1.5% in taxes.

So Here’s the Tip:

Review your year-end bonus, stock options, and property to determine whether you need to take any action by the end of or after 2015 to save taxes.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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