With a new federal government likely bringing in tax changes, it's time
to check in with your advisor
TORONTO, Nov. 9, 2015 /CNW/ - CIBC (TSX: CM) (NYSE: CM) - With less than two months left before the
calendar turns over, Canadians run the risk of paying more taxes than
necessary if they wait until April to review their tax savings
strategies, says Jamie Golombek, Managing Director, Tax & Estate
Planning, CIBC Wealth Advisory Services.
"It's important to act now before the holiday season begins if you hope
to have enough time to take full advantage of tax-savings strategies
for 2015 and beyond," says Mr. Golombek. "As we enter the home stretch
of year-end tax planning season and with tax changes expected from the
new federal government, it's worth sitting down with your advisor now
to go over how you may be affected."
Mr. Golombek outlines various tax-planning strategies in his new report 2015 Year End Tax Tips.
Consider the timing of income and expenses
The Liberals stated that their first priority will be to cut the federal
tax rate from 22 per cent to 20.5 per cent for the middle income-tax
bracket, which affects Canadians with taxable annual income between
about $45,000 and $90,000. The party also promised to increase the
federal tax rate from 29 per cent to 33 per cent for individuals
earning more than $200,000 annually.
The timing of these tax rate changes is still uncertain but many believe
they will be effective in 2016.
Middle-income earners who expect the federal tax rate to decrease in
2016 may want to defer income to 2016, where possible. For example, it
may be possible to delay receiving bonuses or selling assets that have
unrealized capital gains. It may also be useful to claim expenses, such
as for RRSP contributions, in 2015.
High-income earners who expect the federal tax rate to increase in 2016
may consider the opposite course of action - receive income in 2015 and
defer expenses to 2016, where possible.
Exercising employee stock options important for high-income earners
When an employee stock option is exercised, the stock option benefit
(the difference between the exercise price and the fair market value of
the share at the date of exercise) is included in income. Generally, a
deduction equal to 50 per cent of the benefit may be claimed, which
allows the stock option benefit to be taxed like a capital gain for tax
The Liberals have proposed to cap the stock option deduction that can be
claimed to $100,000 of stock option gains annually. "As it is unclear
when this change may come into effect, employees holding significant
stock options may want to consider exercising a portion of stock
options in the near future," says Mr. Golombek. This could be
particularly important for high-income earners who expect the federal
tax rate to increase in 2016.
Harvesting tax losses? Watch out for foreign currencies
Tax-loss selling involves selling investments with accrued losses prior
to December 31 to offset capital gains realized either elsewhere in
your portfolio or from the sale of another asset, such as a vacation
home or property. In order for losses to be available for 2015, trades
must be made no later than Dec. 24, 2015.
"Tax-loss selling is a popular topic this year after the rocky year most
major stock markets have had," says Mr. Golombek. "If you purchased
securities in a foreign currency, don't forget that capital gains are
calculated in Canadian dollars - so currency fluctuations can be a key
factor in determining whether you're in a loss position."
The decline in the value of the Canadian dollar may increase capital
gains or decrease capital losses, or in some cases, turning what looks
like a gain into a loss.
"These tips outline some of the ways you can maximize your 2015 tax
savings. And, there may be further planning opportunities given the tax
changes that are expected," says Mr. Golombek.
CIBC is a leading Canadian-based global financial institution with 11
million personal banking and business clients. Through our three major
business units - Retail and Business Banking, Wealth Management and
Capital Markets - CIBC offers a full range of products and services
through its comprehensive electronic banking network, branches and
offices across Canada with offices in the United States and around the
world. You can find other news releases and information about CIBC on
our corporate website at www.cibc.com/ca/media-centre/.
SOURCE Canadian Imperial Bank of Commerce
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