Important Tax Rate Changes for 2016

A new tax bracket has been created for Ontario residents ($200,000-$220,000).

This rate is almost 52%. All personal income earned above $220,000 will be taxed at almost 54%!! It is therefore advisable that you try to structure your financial affairs to stay below $200,000 of personal income. This can include investing more money within your holding company, income-splitting with family members, etc. We would be happy to discuss this further with you and review the planning opportunities for tax minimization.

Please also note that the corporate tax rate for investment income (and passive rental income) is going up to 50.2% (a 4% increase from 2015 rates). You may ask: why keep money in holding companies if the tax rate is so high?? Holding companies are still very valuable and important for asset protection. They also enable you to invest money taxed at 15% (or 26%) in your operating business; rather than investing personal income which has been taxed at 54%! So by leaving money in your holding company, you can effectively invest 85 cents on the dollar as opposed to 46 cents (after the highest personal tax rate). Even though your investment income will be taxed at the high rate, you will have more money invested overall.

There are some planning opportunities available with holding companies as well. Please call us for more information and to discuss your tax planning needs.

Please click on the link below for the personal tax rate chart for 2016. You will notice that some of the lower brackets are going down slightly; while the 2 top brackets are going up significantly.

New Personal Tax Rates for Ontario Residents 2016

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation