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By Adrian Mastracci
North Shore News
Business Section, "Loose Change"
Sunday, June 17, 2001
Our newly elected Liberal government in British
Columbia has delivered on its promise to reduce
income taxes for B.C. taxpayers. The reductions
apply over two years, the first retroactive to
January 1, 2001 and the subsequent one taking
effect January 1, 2002.
The new B.C. personal income tax brackets and
rates are as follows:
| Tax Bracket |
Taxable Income* |
2001 Current |
2001 New |
2002 New |
| 1 |
$1 to $30,484 |
8.4% |
7.3% |
6.05% |
| 2 |
$30,484 to $60,969 |
11.9% |
10.5% |
9.15% |
| 3 |
$60,969 to $70,000 |
16.7% |
13.7% |
11.7% |
| 4 |
$70,000 to $85,000 |
18.7% |
15.7% |
13.7% |
| 5 |
Over $85,000 |
19.7% |
16.7% |
14.7% |
*Brackets are indexed to provincial inflation.
The combination of the federal and the B.C. rates
are represented by the following marginal tax
rates (MTR):
| Taxable Income |
2001
New MTR |
2002 New MTR |
| $1 to $30,484 |
23.3% |
22.05% |
| $30,485 to $30,754 |
26.5% |
25.15% |
| $30,755 to $60,969 |
32.5% |
31.15% |
| $60,970 to $61,509 |
35.7% |
33.7% |
| $61,510 to $70,000 |
39.7% |
37.7% |
| $70,001 to $85,000 |
41.7% |
39.7% |
| $85,001 to $100,000 |
42.7% |
40.7% |
| Over $100,000 |
45.7% |
43.7% |
This means that by next year British Columbia
will have the second lowest top marginal tax rate
(MTR) in Canada at 43.7 percent. Alberta will
have the lowest rate in 2002 at 39 percent in
the same category.
Further, the recent reduction in the B.C. rates
also reduces the income tax rate payable on capital
gains. The new rate will be one-half of the rates
shown above as only one-half of the gain is included
in your taxable income. Accordingly, B.C.'s highest
tax rate for capital gain income is 22.85 percent
in 2001 and 21.85 percent in 2002. Dividend income
also benefits by the provincial reductions.
An overview of how I approach client matters
with this information is with these suggestions:
- Prepare a taxable income projection for 2001
and 2002 to estimate income taxes payable as
early in the year as possible so that any additional
tax planning strategy can be undertaken within
sufficient time.
- Revisit the capital gain and capital loss
strategy for 2001 to ensure that it is consistent
with the client's long-term goals, such as financial
independence and retirement.
- Review the 2001 personal remuneration mix
of salary and dividend for business owners consistent
with the financial results achieved in their
company.
- Review the affects of the different capital
gain inclusion rates for the year 2000 and 2001
for businesses that operate on non-calendar
year ends and have realized a capital gain.
I counsel my clients to review all elements of
their income tax planning and capital gain strategies
to maximize the benefits of the applicable provisions.
Clearly, the year 2001 strategy requires considerable
thought, especially in view of all the federal
and provincial changes that have occurred in the
past twelve months.
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