4%20Taxable%20Income%20and%20Tax%20Payable

4%20Taxable%20Income%20and%20Tax%20Payable - Taxable Income...

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Taxable Income and Tax Payable for Individuals
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Deductions to keep in mind All the deductions covered in Chapter 3 – Deductions from employment income – Home relocation loan deduction – Stock option plan deduction Additional amounts discussed in this chapter: – Payments received by taxpayers for social assistance, WCB (these are actually categorized as Other Income, but for some reason are discussed in this chapter) – Lump sum payments – Northern residents deductions Additional amounts to be discussed later in the course: – Lifetime Capital Gains Deduction (Chapter 11) – Losses (Chapter 11)
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Additional Deductions • For payments – The following amounts are included in NIFTP, but then deducted in calculating taxable income: • WCB, social assistance payments • Amounts exempt by virtue of a tax treaty • Reason: – Many tax calculations are based on NIFTP, not taxable income. – The intention is that the above amounts should be considered part of income in order to be equitable, even though they are not taxable. – Therefore, they are included in NIFTP and then deducted when determining taxable income.
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Additional Deductions Home Relocation Loan – ITA 110(1)(j) – Definition: A loan made to an employee by an employer to assist in acquiring a dwelling must be related to employment at a new work location, and dwelling must be at least 40km closer to the new work location Deduction is equal to the lesser of: i. The taxable benefit as calculated based on Chapter 3 reduced by payments made by the employee ii. Amount of interest, calculated at the prescribed rate (same as the benefit), on a $25,000 home relocation loan, not reduced by payments made by the employee The deduction is available for up to 5 years, but is not available if the loan has been repaid Complete Exercise Four-1 on page 134
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Additional Deductions • Northern Residents Deductions – Available to residents of Labrador, the Territories as well as some parts of other Provinces – Must reside in the region for a continuous period of 6 moths beginning or ending during the taxation year – The calculation of this deduction is not covered. • Lump Sum Payments – For example: a court ordered termination benefit – Can be taxed over several years – Calculation not covered
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Calculation of Tax Payable Federal tax is based on progressively increasing rates and marginal amounts of taxable income. At a minimum each taxpayer will have the amount calculated using these rates reduced by a tax credit of $1,557 (15% x $10,382) Taxable income in excess of Federal tax Marginal Rate On Excess $ 0 $ 0 15% $40,970 $6,146 22% $81,941 $15,159 26% $127,021 $26,880 29%
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Provincial Tax Calculation Most provinces have a similar calculation, although the rates are lower. Alberta has a flat rate of 10% Ontario has rates ranging from 5.05% to 17.41%. Note: these rates include the Ontario surtax. The federal government no longer has any surtax.
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This note was uploaded on 01/31/2011 for the course MOS 4462 taught by Professor Ann during the Fall '10 term at UWO.

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4%20Taxable%20Income%20and%20Tax%20Payable - Taxable Income...

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