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MIDDLE CLASS TAX CUT INTRODUCED

A middle class tax reduction was introduced for 2016. It has been called a middle class tax cut because it is supposed to primarily benefit the families of middle class Canadians. Middle Class Tax Cut
This federal tax reduction affects income earned within the second tax bracket, which in 2016, is between $45,282 and $90,563.
Within this bracket, the federal tax rate will drop from 22% to 20.5%.

Not all income within this bracket will be taxed at the same rate in British Columbia. This is because provincial brackets are significantly different than those of their federal counterparts. Within this federal bracket, there are three tiers of taxes in British Columbia.
For income from $45,282 to $76,421, the total tax rate will be 28.2%. On income earned between $76,421 and $87,741, the rate increases to 31.0%.
Finally, income between $87,741 and $90,563 will be taxed at 32.79%.  The maximum tax savings from this measure will be $679 per person.

MINIMUM RRIF WITHDRAWALS DECREASED

Registered Retirement Income fund (RRIF) rules were recently changed to take into account the changing financial outlook for retirees. The government does not allow taxpayers to keep investments in their Registered Retirement Savings Plan (RRSP) for their entire lifetime. By the end of the year in which a taxpayer turns 71, they must have rolled their RRSP into a RRIF, or report all of the money in their RRSP as taxable income on their personal income tax return for that
year.
Once the investments have been rolled into a RRIF, the government dictates the amounts that must be withdrawn from the RRIF on an annual basis.
Minimum annual withdrawal amounts, coupled with decreasing interest rates, were resulting in many retirees depleting their RRIF’s earlier than anticipated.
The original calculations used to determine the required withdrawal amounts from RRIF’s were based on assumptions that returns on investment would be 7%, and inflation would be 1%. This type of investment return is now unrealistic for most seniors with a conservative portfolio.
The new guidelines assume a 5% return on investments, as well as a 2% rate of inflation. Although a 5%  return may still be higher than most retirees receive on their investments, it has helped to reduce the minimum withdrawal rate. The new minimum withdrawal rate for people who turn 71 in the year will be 5.28% of the balance in the RRIF. The previous minimum withdrawal rate was 7.38%. Furthermore, between the ages of 71 and 94, all minimum withdrawal rates have been lowered. By the time a taxpayer is 94, the minimum withdrawal rate is 20%, which is the same percentage that has been used in the past. For somebody  who has withdrawn over 5.28% already from their RRIF, they will be allowed to repay their overpayment back into their RRIF. The excess must be recontributed
to the investment by February 29, 2016. One drawback of taking a smaller annual withdrawal is that the taxpayer may have a larger balance in their RRIF when  they pass away, resulting in a higher total tax bill on cumulative withdrawals. This should be considered when determining how much is going to be withdrawn on an annual basis.

ELIGIBLE CHARITABLE EXPENSES EXPANDED

The recent federal budget changed regulations related to the taxability of capital gains on property that is donated to eligible charities. Several years ago, the federal government amended the tax act to encourage people to donate shares in public companies to their favourite charities. A taxpayer receives a charitable
donation receipt for the market value of the shares donated to the charity, but does not have to pay tax on any gains on the shares if they have increased in value  since they were originally purchased. The federal government is now expanding this regulation to eliminate tax on capital gains that arise on the donation of real estate or private company shares.
In order for the disposition to be tax free, the following guidelines must be met:
• The seller must donate the proceeds received from the sale of the property, rather than donating the property itself.
• The seller must make the donation within 30 days of the sale.
• The purchaser must be at arm’s length (not related) to both the donor and the qualified donee.
• The disposition has to occur after 2016.
• The seller cannot buy back the land or shares within 5 years of the disposition. Note that in many instances, the sale of real estate or private company shares may have already held special taxation status if the property had qualified for the capital gains exemption on its disposition.

Tom Kemp

tomkempIt is with great sadness we announce the passing of Tom Kemp after a short struggle with ALS.

Tom moved to Penticton in 1972 with his wife Carol and their 2 children, Brenda and Andrea. He opened an accounting practice on his own and then later partnered with his friend and colleague Bob Harvey where they formed Kemp Harvey and Co., CGA’s, which still operates today. There are now 7 Kemp Harvey offices throughout the province, something that Tom was extremely proud of. Tom partially retired in 1999, and the Penticton office he helped create, is now operated by his daughter Andrea and her business partner Nicole Thompson. Throughout his life, Tom was an active Member of the CGA Association of BC and in 1989 he was President. He was also a member of the CGA Board of Canada.

From the beginning, Tom was active member in the community. He was a member of the Peach Festival Society, Kiwanis, Ironman Canada, VFCU, Penticton Yacht Club, and several other boards.

Tom is survived by his loving partner Liz Bingham, daughters Brenda (Robyn), Andrea (Rick), former spouse and long-time friend Carol Kemp, and brother Albert (Barb). Tom loved to dance and was an outgoing man; always the life of the party.

Further information can be found in the printed obituary.  Our thoughts are with Tom’s family during this time.

In lieu of flowers, donations may be made to the SPCA or the Penticton Red Cross HELP Program.

Kelowna Office at New Location

We are open for business at our new location – Unit 203, 1740 Gordon Drive. We are on the corner of Gordon Drive and Highway 97 in the same building as Dairy Queen with ample parking located behind the office.

T: 250.763.8029
TF: 888.763.8029
F: 250.763.5155
E: kelowna@khgcga.com
W: www.khgcga.com

We’d love to have you stop by and see our new office!

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