Business Tax Planning Strategies

Business Tax Planning Strategies-18
If the purchase of an asset is delayed until the coming year, the business will have to wait a full fiscal year before the maximum depreciation rate can be used.Over the past few years, a number of changes have been made to the tax system, reducing the difference from a tax perspective in receiving dividend or salary compensation.Donating to a donor-advised fund can also yield an upfront tax deduction.

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It should be noted that family members on payroll should not be overcompensated.

Good policy is to pay family members fair compensation for work performed.

Historically, those on payroll never receive dollar for dollar value for their contributions.

Benefits received during retirement are typically only a fraction of the amounts contributed.

For each dollar earned, a different tax rate may apply depending on which tax bracket the additional income falls into.

In other words, higher income earners will have to pay higher rates of tax on a portion of their income.The Act doesn't currently include any provision against "clawbacks", which would allow prior financial gifts to be taxed as part of your estate under the old limits.There's still time for regulations prohibiting clawbacks to be put in place but that's something to consider when making gifts.With this in mind, businesses planning to purchase significant assets near the year end date should do so before the fiscal year is over.Under this approach, the business will be able to utilize the full write-off much sooner.If you operate a business that's taxed as a pass-through entity, you may be able to deduct 20% of your qualified business income right off the top, with certain limitations.If you're a high-income earner who owns a business, you may want to explore the advantages of forming a limited liability company to take advantage of this deduction.For many business owners, this means paying the maximum amount for both the personal and company portion of CPP.For 2015, the maximum contribution amount is almost ,000 dollars.Currently, the after-tax cash received at the individual level is largely the same for both wages and dividends in most cases.That being said, those that earn salary are still subject to paying into the Canada Pension Plan.


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