Issue 413, January 2016

possibilities for changing income inclusion timing

As personal tax rates for income levels over $200,000 will be increasing in 2016, many have been considering methods for shifting 2016 income into the 2015 year. Although some of the strategies may be too late, here is a listing of provisions and possibilities that can, in effect, accelerate the year in which income is to be included on a personal tax return.

These strategies may also be used when a taxpayer will be experiencing an otherwise low income year where the lower bracket rates would not be fully utilized.

  1. Bonus or dividend out amounts prior to the end of the year. 
  2. Postpone claiming RRSP contributions made in the year to subsequent years when rates are higher. 
  3. Postpone or do not claim discretionary business deductions, such as CCA and bad debt reserves. 
  4. Consider whether capital gains reserves should be claimed in the year. 
  5. Do not claim discretionary farming deductions/write-downs. Consider elective inventory inclusions. 
  6. Close major sales with unrealized gains prior to year end. 
  7. Complete sales with unrealized losses after year end. 
  8. Consider whether a shareholder loan should be included in income pursuant to Subsection 15(2) and then deducted in future years against higher rate income when repaid. 
  9. Pay taxable dividends rather than capital dividends in the year. Save the CDA account for higher rate years. 

See Appendix B for a listing of the 2016 top marginal personal tax rates.

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