Benjamin Franklin famously said, ‘A Penny Saved is a Penny Earned’ and I couldn’t agree more. Investors are always looking for ways to grow their account balances and reducing their tax bill might be the simplest way. Here are a few ways to get more out of your investments by paying less in taxes:
Tag Archive for capital gains
Prior to 2016, it was CRA’s administrative practice that the disposition of your principal residence was not reportable where the entire gain is exempt. There have been a few court cases where the administrative practice was not upheld because CRA Form T2091 was not filed.
On October 3, 2016 changes were announced to the computation of the available principal residence exemption. Changes were made to properties held by individuals and to properties held by trusts. Discussion below is limited to the changes affecting individuals. Changes to trust is more complex and may be addressed later.
Today, all owners face three significant headwinds that increase the difficulty of a successful business exit. One is our flat economy—today and for the foreseeable future. The second is the substantially higher tax bill that’s due upon the sale of a business. And last, but not least, is the long-term mediocre investment climate that depresses the amount of income owners can expect from their sale proceeds and other investments. Combined, these three headwinds wreak havoc on an owner’s ability to cross the finish line at all, let alone as they originally planned.
For the past few years, year-end tax planning has been challenging due to the lateness of action by Congress. This year is no different because of uncertainty over whether Congress will extend any of the many expired or expiring tax provisions. However, regardless of what Congress does later this year, solid tax savings can still be realized by taking advantage of tax breaks that are still on the books for 2015. For individuals and small businesses, these include:
• Capital Gains and Losses – You can employ several strategies to suit your particular tax circumstances. If your income is low this year and your tax bracket is 15% or lower, you can take advantage of the zero percent capital gains bracket benefit, resulting in no tax for part or all of your long-term gains. Others, affected by the market downturn earlier this year, should review their portfolio with an eye to offsetting gains Read more
• Keeping home improvement records
• Home gain exclusion amounts
• Records may be required to avoid tax
Many taxpayers don’t feel the need to keep home improvement records, thinking the potential gain will never exceed the amount of the exclusion for home gains ($250,000 or $500,000 if both filer and spouse qualify) if they meet the 2-out-of-5-year use and ownership tests. Here are some situations when having home improvement records could save taxes: Read more
Canada and the United States have very different regimes for imposing taxes on death. The United States imposes a Federal Estate Tax; however, Canada has not imposed any Estate Tax since 1971. Rather, Canada taxes accrued, but unrealized, capital gains on death, as part of its income tax system.
Most tax practitioners are not aware of the fact that there special rules found in Article XXIX-B of the Canada-United Tax Convention (“the Treaty”) that are aimed at providing relief in connection with certain cross-border death taxes issues.
Some of these are summarized below:
With my family snugly content amidst a long holiday season I felt compelled to pen some thoughts regarding the ubiquitous United States Tax Code and all its myriad of seemingly scary changes looming around the proverbial corner. This post lists ten tax matters to be aware of in the new year that have come up in conversations with clients. It also offers four recommendations to minimize tax obligations that I’ve found myself repeatedly trumpeting whenever asked. And finishes with some quick reference tax facts.
1. For 2013 the self-employment tax has reverted back to its normal 15.3% rate, and the limit for the Social Security portion of the tax has increased to $113,700. Read more
Government Debt Securities
Interest on non-taxable bonds
The interest on most of these is not taxable but must be reported on the tax return. On form 1040 and 1040A, it is reported on line 8b (non taxable interest). On form 1040 EZ, on line 2, put “TEI” and then the amount, but do not include it in the amount reported for taxable interest on line 2. Exceptions (i.e., interest is taxable) are federally guaranteed obligations (there are some exceptions to these), revenue bonds used to finance home mortgages (there are some exceptions to these), and private activity bonds (there are some exceptions to Read more
The normal assumption in domestic business transactions is the expectation that there will not be a movement in terms of a currency’s accelerating or declining value during the interim of a financial transaction. In an international transaction there is an expectation the currency will have volatility. The use of financial instruments has as its purpose, a prudence of assurance that delivery of currency on a contract date certain will enable the sale or purchase of goods to be unaffected by a fluctuation. To accommodate the necessity in the international market place to hedge international transactional risks, a business enterprise often utilizes an offshore corporate conduit to carryout the financial management of this function.
Financial instruments frequently are companion to a business transaction and utilized to manage the market risk inherent in the currency fluctuations of the floating exchange system. A purchase or sale of goods in conjunction with transnational agreements is in many instances a secondary transaction that poses a risk by virtue of a financial instrument being tied to the transaction. Where a purchase of merchandise requires payment in a currency other than the vendee, financial instruments insure against currency fluctuations. The purchase of such financial instruments is incidental to the transaction and can result in gain or loss of the actual financial instrument utilized to manage the risk.
One party to a transaction may anticipate a currency to accelerate in value and purchase a currency contract reflecting that expectation. Contrarily, a counter party may sell a currency contract anticipating a currency will Read more