Mid-year Personal Tax Review Brief

We are in the second half of 2024 tax year accelerating to the end of fiscal yearend. One of the major tax highlights for this tax year was the enactment of the realized Capital Gains (CG) inclusion rate increase from 50% to 66.6% for CG that exceed $250,000.00 for individuals which was effective June 25, 2024. There was a lot of taxpayers’ outcries from across the country especially from high-net-worth taxpayers with investments in equities, Employee Share Options Plans (ESOP) and Real Estate. These are most affected cluster of the taxpayers.

The most notable comment on the increase was from the Prime Minister (PM) Justin Trudeau, when he advised the affected taxpayers to consult their Accountants on the increase and its impact on their future tax obligations. This comment was received with mixed feelings from accountants, taxpayers and tax pressure groups. I believe the PM was trying to advise the affected taxpayers to consult their Accountants on the best strategy(ies) on how to absorb the potential future tax obligations increase due to the change or how mitigate the impact thereof.

The PM’s referral comment is not uncommon. Accountants are constantly consulted by the taxpayers or tax clients on tax strategies on how to maximize on the tax refunds or minimize the tax obligations (tax payable). These are typical tax planning requests. In addition to consulting accountants, please consult your Investments Portfolio Managers. You may need to rebalance your portfolios or investment mix between fixed income and equities.

As we hit the second half of the tax year, its time to start preparing for the yearend from the income tax perspective for both corporations and individuals and small businesses. For individuals’ taxpayers, key personal tax review questions are:

1. Has my income increased due to embarking on the second or part time job? If, yes, then.
2. How did I you complete the payroll tax form (TD1), claim for tax credits including the personal basic amount?
3. Do I have a Registered Retirement Saving Plan (RRSP) account, Tax-free saving account (TFSA) or First-Time Home Saving Account (FHSA)?
4. Did I register or intend to register a small business?
5. Am I offering short term accommodation to the public directly or indirectly through brokerage firms such as Airbnb?
6. Did I purchase a house for the first time in Canada? Or do I plan to buy a house for the first time in Canada?

These are just a few questions for personal tax review to reflect on. In my next brief, I will try to cover some suggestions around those questions and hot topics around inflation and interest rates trends.

Per the PM’s advice, please consult your tax accountant but also reach out to your portfolio manager(s), personal banker and mortgage specialists. 

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