CAPITAL GAINS TAX and INCOME TAX
FUNDS FOR THE TAX BILL - ANOTHER THING WE ALL WANT !
Owning a cottage in addition to your principal residence, the cottage will be subject to Capital Gains Tax when it's sold. Keeping the cottage in the family is often the desire of all the interested parties, so how do you meet the challenge of passing the cottage down from one generation to the next generation.
Revenue Canada rules essentially says that just prior to the owner's death you have been deemed to have disposed of all your possessions. The Capital Gains Tax is now due and payable on the cottage and all the capital assets you owned prior to your death. Taxable Assets would include your ownership in a Business, Land, Stocks and Bonds, RRSP or RRIF and any Rental Property to name the more common assets.
Taxation on Annuities
- Registered: The annuity payment is fully taxable.
- Non-registered: Only the interest portion of the annuity payment is taxable.
The taxable portion can be reported on a "prescribed" or "non-prescribed" basis.
- Prescribed: level taxable portion each year
- Non-prescribed: taxable portion changes each year (interest reported each year reduces)
The prescribed taxation basis is attractive to taxpayers because it allows for the deferral of taxes. It is regulated and can only be used with specific types of annuities. All other annuities must be on a non-prescribed taxation basis.
Are you really unhappy about how much income taxes you pay? In addition to RRSPs and IPPs there are other vehicles that can provide you with significant tax deferral plus other advantages. For the self employed individual or the business owner, self insuring your health and dental expenses by setting up a Health Spending Account (HSA) will provide you with tax deductible benefits. Investment Loans interest deductibility and Pension Income splitting are other opportunuties worth exploring to determine if you are eligible.
All canadian residents are legally required to file income tax returns annually by April 30th. Sometimes an individual as a result of unforseen circumstances may have missed their tax filing and any amounts owing are subject to a late filing penalty and interest fees.
If you need help with filing any previous year or current year income tax returns, call (416)523-3256.