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There may not be much sympathy out there for the top one per cent high-income earner who, in 2018, will face a marginal tax rate of over 50 per cent in more than half the provinces in Canada. But there should be some attention given as to why a lower-earning parent of a dual-earning couple, with two kids and a combined family income of $50,000, can face a marginal effective tax rate of over 70 per cent.

To better understand what’s going on here, we first need to revisit the concept of a statutory tax rate and compare that to your marginal and average tax rates. Then we can look at your marginal effective tax rate (METR) and participation tax rates (PTR), two concepts highlighted in a new report out this week from the C.D. Howe Institute entitled, “Two-Parent Families with Children: How Effective Tax Rates Affect Work Decisions.”

In the report, researcher Alexandre Laurin finds that working parents with children — particularly low-income families — “face prohibitive tax rates that discourage taking on extra employment to get ahead … (with) mothers and poorer families … the most adversely affected by this tax trap.”

Before we look at Laurin’s findings and potential fixes, let’s take a look at the different types of tax rates.

Read more from Financial Post


In this four-part series, I’m reviewing some of my favorite tips for working with bank and credit card feeds in QuickBooks® Online. This article is part two in the series. If you missed part one, find it 
here.

After connecting your bank and credit card accounts, bank rules help you control, customize and automate how QuickBooks categorizes transactions if a match is not found. You’ll save time on data entry. Here are five tips for creating Bank Rules in QuickBooks Online. In future articles, I’ll share my advice for adding or matching transactions.

Tip #1: Explore Your Conditions

Establishing conditions that work best for your transactions can take some planning, but will pay off in the end. Think about how you’d like QuickBooks to automate transaction entry and create your rules to fit your goals.
When creating a rule, choose Money In or Money Out and applicable bank and credit card account(s).
You can choose to structure your rule around ANY or ALL conditions and utilize the Bank TextDescription and/or Amount. You can create a rule based on a single condition or combine up to 5 conditions in a single rule.

Read more from Intuit

 

This New Year’s long weekend is the perfect time to review your tax minimization strategies for the year ahead. Here are five things to consider as we head into 2018.

Tax-smart portfolio rebalancing

If you’ve got global equities in your non-registered portfolio, chances are you fared quite well in 2017 with some financial markets hitting all-time record levels. What a great opportunity to rebalance your non-registered portfolio and defer the capital gains tax hit by up to sixteen months.
For example, let’s say your target portfolio allocation is 70 per cent equities and 30 per cent bonds or fixed income. This weekend, you go online and see that your portfolio, due to the success of your U.S. equity position, at the close of business on Friday Dec. 29 is actually skewed 80 per cent equities and 20 per cent fixed income. To rebalance back to your target 70/30 mix, you may wish to sell some equities and replace them with fixed income. The good news is that if you put in your sell order on Tuesday Jan. 2, 2018, once financial markets re-open for the new year, the taxes owing on that capital gain won’t be due until April 30, 2019.

Read more from Financial Post

 

On Mon. Jan. 1, the ability of small business owners to sprinkle income among family members was greatly curtailed. Draft legislation introduced last month proposes to extend the current “kiddie tax” anti-income sprinkling rules to a spouse or partner as well as to adult children who are not “actively engaged on a regular, continuous and substantial basis in the activities of the business.”
While there are some limited exceptions to the new rule (e.g. a spouse of a business owner over age 65 or related adults of non-professional corporations who meet certain share-ownership criteria), for the most part, income splitting via a private corporation is dead.
That being said, with top marginal tax rates for high-income earners over 50 per cent in more than half the provinces in 2018, there are still a bunch of perfectly legal income-splitting strategies you may want to consider for this tax year.

Read more from Financial Post

 

On the same day that the Minister of Finance, Bill Morneau, clarified the federal government's proposals to limit "income sprinkling" as a way for high-income owners of private companies to reduce their taxes, the Senate Finance Committee released its report recommending that all the tax changes should be scrapped. Instead, the Senate Committee recommended the government of Canada undertake an independent and comprehensive review of the tax system with the purpose of "reducing complexity, ensuring economic competitiveness and enhancing overall fairness."

The last time Canada had such a comprehensive review was the Carter Royal Commission on Taxation, which reported in 1966, with many but not all of its recommendations finally implemented in legislation in 1972. This process took a decade from the start of the Royal Commission. The Senate Committee's proposal, if taken seriously, looks very much like the proverbial "kicking the can down the road" – a massive delaying tactic.

Read more from Globe and Mail