Tax tips added to your Black Friday shopping list

It is always good idea to plan your tax matters ahead of time while preparing your Black Friday shopping list.

Personal

Real estate is definitely on top of the list if you sold the property during 2016 calendar year. Different from previous years, the CRA has made it clear that even the sale of the your principal residence with no tax implication is still needed to be reported. “The taxpayer will be required to provide basic information in the taxpayer’s income tax return for that year in order to claim the exemption,” says the Department of Finance.

Tax Free Savings Account (TFSA) Overall Limit is $46,500 by 2016 for those over 18 years old since 2009. It will increase to $5,000 on January 1, 2017.Open a TFSA account to take advantage of the tax free benefit.Remind you, the TFSA is available for people being Canadian resident each year only.

Family

For a lot of parents, children fitness credit and children art credit provide some relief.However,effective for the 2017 and subsequent taxation years, both credits will be eliminated.What it means, for 2016 taxation year, it will be the last time to enjoy those benefits.

Children fitness credit was previously a non-refundable, and then converted to a refundable credit effective for the 2015 taxation year. It is a refundable tax credit that means if you spend $500 on your children’s eligible activities, you will be refunded with the same amount. As compared, children’s art credit is a non-refundable credit based on up to $500 in eligible expenses per eligible child.

So, don’t miss out those two credits in your 2016 tax return. And more importantly, if you have not spent enough for your kids, better plan to register some programs before 2016 year-end.

Business

Talking about tax planning when client has a business, we cannot miss income splitting strategy. So, when family members work(really work) in your business,you can considering paying salaries to them to reduce overall tax burden in 2016. A few points to remind yourself:payroll cost for family members should not include EI.And no CPP is required for those children under 18. Save some money in your pocket.

Another tax strategy that are commonly implemented before year-end is paying corporate dividend.The timing and amount of dividend is critical. Let’s say you are expecting $42k salary plus dividend in 2016, then you can pay out the dividend early 2017 so that your personal tax on the dividend income portion has been deferred almost 14 months.On the other hand, in order to max out the dividend tax credits, a minimum dividend should be paid out.Canadian tax is complex. use of dividends can save money on CPP contribution but does not create RRSP room. And the tax implication may vary depending on type of dividends used: Eligible or Ineligible.