Extreme upcoming 6% Liquor tax increase ( federal)

[Equity Market investor]

Without explaining it. This should help.

A side note. States in the US which are allowed to some sort of a property tax deduction are fortunate. I'm not sure if that is correct but, that is what I've been told. That being said....We, ( the regular stiffs ) here in Canada don't have such a system. We pay with no deductions allowed. If you work from home, or have rentals, then that's another story. Write-offs are then allowed.

https://www.td.com/ca/en/investing/...ns: In Canada, only,at your marginal tax rate.

How is capital gains tax calculated in Canada? In the United States, an investment gain, such as stocks or real estate, incur a capital gains tax. if the investment is retained for less than one year, the gain is taxed as regular income. If the investment is kept over one year, typically it is taxed at 15%. Depending on income, it could be taxed at 20%, which is much lower than most peoples tax liability. Slow Joe wants to repeal capital gains tax so that he can spend more money. Property tax is an entirely different monster controlled by each state. In California, the purchase price of a residential property incurs a 1.25% property tax. For example, if a property cost $1 million, the first year’s property tax would be approximately $12,500, however, it can only increase 1/2% per year. Californians are also allowed to deduct $7000 from the purchase price for property tax purposes. As they say on television, that’s not all. Within six months of the purchase of a property in California, a one time supplemental tax must be paid at 1% of the purchase price. In other words the million dollar property is assessed a one time $12,000 supplemental tax, which is in addition to the regular property tax. In Idaho, there is no supplemental tax and the property owner is allowed to deduct $125,000 annually from the assessed value of the house. Nobody can explain how Idaho determines property value. I guess it is a complicated system. However as an example, I am told I can sell my current primary residence for about $2 million, but it is only assessed at $1,200,000. After I deduct the $125,000, it is taxed on the remaining amount, which this year incurred a $6200 property tax..

 

[Motorman]

Without explaining it. This should help.

A side note. States in the US which are allowed to some sort of a property tax deduction are fortunate. I'm not sure if that is correct but, that is what I've been told. That being said....We, ( the regular stiffs ) here in Canada don't have such a system. We pay with no deductions allowed. If you work from home, or have rentals, then that's another story. Write-offs are then allowed.

https://www.td.com/ca/en/investing/direct-investing/articles/capital-gains-tax#:~:text=Capital gains: In Canada, only,at your marginal tax rate.

the US imposes state and federal taxes and both allow property tax deduction if a person has enough deductions that exceeded, in 2022, $27500. The exclusion (27500) normally increases slightly ever year. Everyone can take that amount off their total income and if deductions exceed that amount, then other items can be deducted to lower tax liability. However I believe the maximum property deduction is capped at 10k. Also, in the US a person always will pay capital gains, but we also can deduct capital loses. For example, if I bought 1000 shares of AAPL for 100k and sold it for 50k five years later, I can deduct 50k from my income tax. There is a bit more to it, but that’s capital loss in a nut shell. A sick person can also deduct medical expenses as long as the expenses exceeded 2% of their income.

 

[luvsdaty]

Aren't they allowed to deduct interest on their home mortgages in the US?

 

[Motorman]

Aren't they allowed to deduct interest on their home mortgages in the US?

Before I address mortgage interest, the auto correct feature on my iPad indicated the personal tax exemption in the above post is $27500. I dictate and did not proof read. The exemption is $25900 for a married couple and half for a single person. It simply means the first 12950 or 25900 earned is tax free.
mortgage interest can be deducted, but the return but be itemized to do it. If the interest and all other allowed deductions do not total12950 or $25900, a person cannot do it. In other words a person cannot claim the 12950 /25900 personal exemption and claim itemized deductions…..it is one or the other, not both. Two other notable tax laws are if a married couple buys a house for 500k, lives in it for two years, then sells it for 1 million, the 500k capital gain is tax free……250k is tax free for a single person. Therefore you can flip a house every two years, I’ve done it several times and made a killing.The second law is our income tax is structured. If you look at the attached link you will see that our tax liability is bracketed. The first $10,275 that exceeds the personal exemption (12950/25900) is taxed at 10% and then it jumps to 12% until you earn 41775…..and continues. Those figures are for a single person. So even if you earn 10 million, the first 10275, above the personal exemption is only taxed at 10%.
https://taxfoundation.org/2022-tax-brackets/

can a person deduct mortgage interest in Canada?

 

[masterpoonhunter]

can a person deduct mortgage interest in Canada?

Not specifically.
But.
If the property is used for rental, business etc, the mortgage interest becomes a business expense.
Or.
If you have the capital, you take out a loan for the equivalent of the mortgage, pay off the mortgage with the loan then use your own capital to invest declaring the interest on the loan as an expense in your investment. This may make sense if the math works in your favour.
Typical Canadians really do not have the ability to write off mortgage interest.

 

[Motorman]

Not specifically.
But.
If the property is used for rental, business etc, the mortgage interest becomes a business expense.
Or.
If you have the capital, you take out a loan for the equivalent of the mortgage, pay off the mortgage with the loan then use your own capital to invest declaring the interest on the loan as an expense in your investment. This may make sense if the math works in your favour.
Typical Canadians really do not have the ability to write off mortgage interest.

Wow, that totally sucks! I haven’t had a mortgage in years, but in the US they currently are hovering around 7%. Housing prices are starting to come down, but they are still historically high. For example, in Boise Idaho the median home price is about 550k. Typically the bank requires at least 20% down. Therefore a 500k home with 20% down, a payment would be about 2700….without property tax or insurance. Honestly 500k won’t buy much, maybe a stick house. What is the overall tax burden of the typical Canadian? A while back, I read somewhere it is around 43%? Are business expenses the only deduction allowed? To give you perspective, last year my TOTAL income was 504k. After deductions, I paid just over 28% in state and federal tax. On a related matter, stock dividends are always taxed at a person income tax rate. What about Canada? Can a person in Canada sell a home and capture any of the profit tax free? In the states I own several rental properties and if I sell one, or all, I can do what is called, a 1031 exchange. Provided I buy another investment property of equal, or greater value, I do not pay tax on the profit from the original sale. Also, every expense I put into an investment property is 100% deductible.

 

[masterpoonhunter]

Wow, that totally sucks! I haven’t had a mortgage in years, but in the US they currently are hovering around 7%. Housing prices are starting to come down, but they are still historically high. For example, in Boise Idaho the median home price is about 550k. Typically the bank requires at least 20% down. Therefore a 500k home with 20% down, a payment would be about 2700….without property tax or insurance. Honestly 500k won’t buy much, maybe a stick house. What is the overall tax burden of the typical Canadian? A while back, I read somewhere it is around 43%? Are business expenses the only deduction allowed? To give you perspective, last year my TOTAL income was 504k. After deductions, I paid just over 28% in state and federal tax. On a related matter, stock dividends are always taxed at a person income tax rate. What about Canada? Can a person in Canada sell a home and capture any of the profit tax free? In the states I own several rental properties and if I sell one, or all, I can do what is called, a 1031 exchange. Provided I buy another investment property of equal, or greater value, I do not pay tax on the profit from the original sale. Also, every expense I put into an investment property is 100% deductible.

Motorman: Canadian tax laws are not all that different in fundamental principal, and frankly when it comes down to trying to put all the numbers in place it would be an accounting challenge, ie add in sales taxes, property taxes and so on, but if we are talking only income it is more straightforward. I have shared my income and taxation over beers, with others doing similar work in the US, Britain, Germany, Australia and Korea. The Scandinavians don't seem to want to talk about tax rates but do enjoy the beer sessions. Not to share specifics but I'm in the top tax level and with modest deductions and some of my income from dividends and capital gains, I'm at 32% overall income tax rate. Better than some, not as good as others but I'm good with it.
Re houses, its the one bastion (so far) a Canadian home owner can still count on to not be taxed as any gains on a principal residence are not taxed.
All other property is viewed as a sale of capital property and if a gain is incurred, half the gain is taxed at the marginal rate. Stocks included. There are lifetime limits.
And there is a lifetime capital gains limit applicable to usually small business at arms length where up to about $970K gain is tax free.
Expenses put into investment real estate are viewed as expenses and deductible.
The Canadian tax system is 'integrated' such that the premise being the taxes on a company or an individual are the same levels (with some rules - more than a note in a pooner post should include). Examples, a shareholder bonus can be paid to the shareholders and that bonus reduces the profit of the company which could be beneficial tax wise to the company. Similarly to salaries, writeoffs for the company but taxed for the recipient. However if a company declares a dividend that is paid from after tax profit that dividend is not a deductible for the company but is taxed at a lower rate for the recipient.
Any tax lawyers please chime in.
Back to one of your questions are business expenses the only deductions allowed, no, there are some others, maybe not all that attractive but could be if one gets into some more sophisticated investments, ie flow through mining shares etc. The RRSP is still a top tax deduction - a deferral - where one can buy a tax sheltered investment but has to pay marginal tax when withdrawn. Limits apply here. IF one has enough in the RRSP which I would have if I hadn't had to split the nut with 2 ex wives, one could have enough in the RRSP to be able to hold a mortgage but that is a digression and reminds me of a great quote Rod Stewart had on divorce: "Oh divorce, right, that's where I buy a house for a woman I don't like".
Cheers, MPH

 

[masterpoonhunter]

Oh and the only reason I am spewing all this is that I have been sitting with the auditor of my company this past week and am up to here with tax things ...

 

[Mrmotorscooter]

Reduced to 2% according to CTV

I found that out when I rolled up to the till with $400 worth of Booze in the cart Today!🤣

 

[Motorman]

Motorman: Canadian tax laws are not all that different in fundamental principal, and frankly when it comes down to trying to put all the numbers in place it would be an accounting challenge, ie add in sales taxes, property taxes and so on, but if we are talking only income it is more straightforward. I have shared my income and taxation over beers, with others doing similar work in the US, Britain, Germany, Australia and Korea. The Scandinavians don't seem to want to talk about tax rates but do enjoy the beer sessions. Not to share specifics but I'm in the top tax level and with modest deductions and some of my income from dividends and capital gains, I'm at 32% overall income tax rate. Better than some, not as good as others but I'm good with it.
Re houses, its the one bastion (so far) a Canadian home owner can still count on to not be taxed as any gains on a principal residence are not taxed.
All other property is viewed as a sale of capital property and if a gain is incurred, half the gain is taxed at the marginal rate. Stocks included. There are lifetime limits.
And there is a lifetime capital gains limit applicable to usually small business at arms length where up to about $970K gain is tax free.
Expenses put into investment real estate are viewed as expenses and deductible.
The Canadian tax system is 'integrated' such that the premise being the taxes on a company or an individual are the same levels (with some rules - more than a note in a pooner post should include). Examples, a shareholder bonus can be paid to the shareholders and that bonus reduces the profit of the company which could be beneficial tax wise to the company. Similarly to salaries, writeoffs for the company but taxed for the recipient. However if a company declares a dividend that is paid from after tax profit that dividend is not a deductible for the company but is taxed at a lower rate for the recipient.
Any tax lawyers please chime in.
Back to one of your questions are business expenses the only deductions allowed, no, there are some others, maybe not all that attractive but could be if one gets into some more sophisticated investments, ie flow through mining shares etc. The RRSP is still a top tax deduction - a deferral - where one can buy a tax sheltered investment but has to pay marginal tax when withdrawn. Limits apply here. IF one has enough in the RRSP which I would have if I hadn't had to split the nut with 2 ex wives, one could have enough in the RRSP to be able to hold a mortgage but that is a digression and reminds me of a great quote Rod Stewart had on divorce: "Oh divorce, right, that's where I buy a house for a woman I don't like".
Cheers, MPH

Very Interesting, however, it sounds a bit complicated to me. I believe your RRSP is probably almost identical to our 401k. Americans are allowed to deposit pre-taxed dollars into a 401k and when it is withdrawn, after age 59, it is taxed at the going rate. In the United States, I refer to it as the poor man’s savings account, maybe because I don’t get the advantage. If a person begins to deposit money into a 401(k) at age 25, and is required to pay taxes on everything that is withdrawn when that person turns 59 or older, the tax liability on the funds would have increased dramatically. Federal tax in the United States never goes down. It always increases what time. Therefore had that same person paid the tax on it when they were 25 years old and invested the money in stocks, the taxes would 15% capital gains. Additionally, it is a great likelihood that the 25 year old would make a lot more money at age 59, and therefore be in a higher tax bracket than they were at 25. There is one vehicle called a Roth IRA that allows a person to place after tax dollars into a retirement account and that account grows tax-free for the duration. I was always a stock, bond, and real estate type of guy and I never messed with either of those two investment accounts. I think I am also lucky because Ive never been married. There are two sets of words in the English language that terrify me, community property, and assembly required. That said, had I known Richmond BC has the highest concentration of Asian women outside of Asia, maybe I would have an ex wife as well! Cheers!!!!

 

[zippy45]

Very Interesting, however, it sounds a bit complicated to me. I believe your RRSP is probably almost identical to our 401k. Americans are allowed to deposit pre-taxed dollars into a 401k and when it is withdrawn, after age 59, it is taxed at the going rate. In the United States, I refer to it as the poor man’s savings account, maybe because I don’t get the advantage. If a person begins to deposit money into a 401(k) at age 25, and is required to pay taxes on everything that is withdrawn when that person turns 59 or older, the tax liability on the funds would have increased dramatically. Federal tax in the United States never goes down. It always increases what time. Therefore had that same person paid the tax on it when they were 25 years old and invested the money in stocks, the taxes would 15% capital gains. Additionally, it is a great likelihood that the 25 year old would make a lot more money at age 59, and therefore be in a higher tax bracket than they were at 25. There is one vehicle called a Roth IRA that allows a person to place after tax dollars into a retirement account and that account grows tax-free for the duration. I was always a stock, bond, and real estate type of guy and I never messed with either of those two investment accounts. I think I am also lucky because Ive never been married. There are two sets of words in the English language that terrify me, community property, and assembly required. That said, had I known Richmond BC has the highest concentration of Asian women outside of Asia, maybe I would have an ex wife as well! Cheers!!!!

On a RRSP when you withdraw it you are taxed on only the amount you withdraw for that year, so if you have no other income, or just a small govt pension your tax will be very low

 

[Motorman]

On a RRSP when you withdraw it you are taxed on only the amount you withdraw for that year, so if you have no other income, or just a small govt pension your tax will be very low

I understand that, it is the same in the states. People contribute to a 401k and are only taxed on the amount of the annual withdrawal. I googled “British Columbia taxes vs the United States, I am sure that doesn’t tell the entire story……but still! 53% holy cow, that hurts thinking about it. Several other articles indicated about the same…..except a few articulated it did not include “fuel tax and sales tax.” I assume, people in BC have been paying high taxes so long, it doesn’t bother anyone. That is very similar to states like California and New York, people just accept it. attached. I’m

 

[rampart]

It is not a big deal as the excise tax is calculated on Hectolitres which is 22gallons. The cost increase on an actual pint of booze will be mere pennies as far as the excise tax increase is concerned. It will be the manufacturers and the retailers who will bump up the price which in turn will cause an increase in the sales tax which will have people crying in their beer.