Vancouver, BC -- (ReleaseWire) -- 09/24/2021 --The BC economy is reopening slowly. It's time to start planning for the return to normal as the physical threats brought about by the pandemic subside. For businesses and individuals in Vancouver, the accountants at Mew + Company have released a new article advising Canadians about potential increases that could impact their lifestyle.
With all the government assistance and money printing that went on during the heart of the pandemic, taxpayers who owned assets benefitted greatly from asset appreciation. Assets such as real estate, stocks, bitcoins, etc. appreciated tremendously and continue to do so. On the flip, Canadian taxpayers also have to pick up the cost of the financial benefits provided during the pandemic. In other words, tax increases are on the way.
Higher Tax Rates in BC
The simplest way to increase revenue is by increasing the tax rate on the same amount of income. Many Canadians have noticed that income taxes have been increasing at a quick rate since 2017. Also, CPP contributions by employees and employers are expected to grow to 5.95 percent of salary by each party by year 2023, with the maximum pensionable earnings ceiling estimated to be around $ 67,000. CPP is not an income tax but a payroll tax that impacts the take-home pay of Canadian employees.
Stagnant wages, higher income tax rates, higher CPP rates with expected inflation are all expected to greatly reduce the amount of after-tax income available to meet family obligations and nondiscretionary spending.
Higher Capital Gains Inclusion Rate
For many years, there have been whispers the capital gains inclusion rate would be increased. With the asset appreciation that occurred during the pandemic, particularly with real estate prices in major Canadian cities, it's getting louder.
A higher capital gains inclusion with higher inflation and the current tax brackets will seriously impact investments returns for Canadians. Hence, the use of tax shelters will become critical. For many years, the problem with RRSPs is that withdrawals from this account (which have capital gains embedded) are taxable at 100% whereas capital gains outside of the RRSP are taxable at 50%. The use of RRSP will be crucial with a higher capital gains inclusion rate. Of course, there is always the TFSA where contributions are not tax-deductible and neither are withdrawals.
For corporate taxpayers who use retained earnings to invest, higher inclusion rates will exacerbate the very complex set of rules on investment income earned by CCPS, brought into legislation by the current government during 2017/2018.
Protecting assets means understanding evolving tax laws. This article is a small sample of tax issues potentially facing Canadian taxpayers and the tax planning opportunities that should be discussed with tax advisors before the year-end. To learn more or get started, call 604 688 9198.
About Mew + Company
Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields—including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.
To learn more about Mew + Company and discuss their services, log on to https://mewco.ca/
Lilly Woo, CPA, CA, CFE, CFP
Mew + Company Chartered Professional Accountants
604 688 9198
Company Website: https://www.mewco.ca
New Article by Mew + Company Explores Canadian Tax Planning in 2021—And Beyond
Tax accountants advise tax planning can help Canadians prepare for impending increases