Canadians: Income -about $40,000.00 ... -Income Tax ... $0.00
Income about $40,000. ... but income tax $00.00 ... impossible, you say?
Well, that's true, for most of us.
There are several provisos, as I assume that you'll suspect - and rightly so.
1. The "taxpayer" must be rich.
2. The "taxpayer must have only one kind of income.
3. The "Taxpayer" can't work.
Well, if s/he feels a responsibility to do some work in order to pay his/her way in society, that's fine - but s/he can't take pay for it ...
... and still be totally without income tax liability.
Don't get me wrong - the benefit that I referred to will still be there for that worker who has employment income, but the taxpayer won't be able to avoid tax entirely.
If a person has a million in assets that are invested in stocks of Canadian companies that pay 4%, producing income of $40,000 (more or less), and that "taxpayer" has no other income ...
... the use of the dividend tax credit coupled with the non-refundable tax credits that every taxpayer enjoys will mean that there is no tax to pay.
If the "taxpayer" is over 65, thus qualifies for the senior's tax credit, the amount of income can be larger, and if gifts are made to charity, or one has more than 3% of net income in medical expenses, an even larger income can be obtained without tax liability.
But - hold on a minute. At age 65, most of us who have certain years of residency in Canada receive the Old Age Security. And we have all contributed to Canada Pension Plan, so we can choose to begin drawing that (assuming that we are substantially retired) at any time between ages 60 and 70, with 6% per year penalty if claimed prior to 65, and 6% annual increase if not claimed till after 65.
Which will mean that, like the employed person who receives employment income, such seniors can't avoid paying any tax at all.
But the benefit still is there.
The tax-free amount used to be around $25,000.00, until they revamped the tax system, last year.
Remember how I said that I prefer earning Canadian dividends to earning interest?
That's part of the reason - I pay tax at top marginal rate on every dollar of interest earnings.
Anybody qualify now?
Or - interested in re-arranging your financial affairs in order to take advantage of the opportunity?
Hope you've had a lovely week, and are looking forward to the weekend.