Waters & Meredith

Serving Niagara..

Client Information Newsletter: 1st Quarter 2004

CONTENTS

  • Car Benefit Rates
  • Income Tax Rates
  • Capital Gains
  • OAS Clawback
  • Employment Insurance (EI)
  • Canada Pension
  • Non-Cash Gifts
  • Minimum Wage
  • Corporate Tax Rates - Federal
  • Corporate Tax Rates - Provincial
  • RRSP Limit
    		•
    Tax Tips

    CAR BENEFIT RATES UNCHANGED FOR 2004

    1. Capital cost allowance may be claimed on a passenger vehicle up to a cost of $30,000 plus applicable taxes for vehicles acquired after 2003.


    2. The limit on deductible leasing costs will remain at $800 per month plus applicable taxes for leases entered into after 2003. A separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost maximum.


    3. The maximum allowable interest deduction for amounts borrowed to purchase an automobile will remain at $300 per month.


    4. The limit on the deduction of tax-exempt allowances paid by employers to employees remains at 42¢ per km. for the first 5,000 km. and 36¢ for each additional km. driven.

    5. The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers will remain at 17¢ per km. For taxpayers employed principally in the selling or leasing of automobiles, the prescribed rate shall remain at 14¢ per km.

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    INCOME TAX RATES FOR 2004 ON INDIVIDUALS

    1. Low rate to $35,000 - approximately 20%


    2. Mid rate $35,000 - $70,000 - approximately 30%


    3. Next rate $70,000 to $113,803 - approximately 43%


    4. High rate over $113,803 - approximately 46%

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    CAPITAL GAINS

    1. Only 50% of capital gains are taxable, so the income tax rate on capital gains is one-half of the rates above.

    OLD AGE SECURITY CLAWBACK

    1. The OAS clawback begins when an individual's net income exceeds $59,790.


    2. The clawback is approximately 15¢ for each dollar of net income over $59,790.

    EMPLOYMENT INSURANCE (EI)

    1. For 2004, the employee's rate of EI is 1.98% on income to $39,000 (maximum $772.20).


    2. The employer's rate is 1.4 times that of an employee to a maximum of $1,081.08.

    CANADA PENSION PLAN

    1. For 2004, the employee's rate of CPP is 4.95% of income to $40,500, less a $3,500 exemption, to a maximum of $1,831.50 ($37,000 x 4.95%).


    2. The employer's CPP cost is equal to the employee's, a maximum of $1,831.50.


    3. For self-employed individuals, the CPP is $3,663.00 ($37,000 x 9.90%).

    NON-CASH GIFTS TO EMPLOYEES

    1. An employer may make a non-cash gift on a tax-free basis to an employee, up to twice a year where the aggregate of gifts does not exceed $500 in the year.


    2. Also, there may be up to two (2) non-cash awards annually in recognition of special achievement, such as years of service, meeting or achieving safety standards, or reaching similar milestones where the total cost of the awards to the employer does not exceed $500 in the year.

    MINIMUM WAGE - EFFECTIVE FEBRUARY 1, 2004

    1. General - increased from $6.85 per hour to $7.15 per hour


    2. Students under 18 and working not more than 28 hours per week - increased from $6.40 per hour to $6.70 per hour


    3. Liquor server - increased from $5.95 per hour to $6.20 per hour


    4. Homeworkers - 110% of the minimum wage. This is for people doing paid work in their home for an employer.

    CORPORATE INCOME TAX RATES - FEDERAL

    1. For the calendar year 2003 on taxable income up to $225,000 - 13.12%.


    2. For the calendar year 2004 on taxable income up to $250,000 - 13.12%.


    3. The federal rate on corporate income above the $225,000 and $250,000 levels is 22.12%.

    CORPORATE INCOME TAX RATES - PROVINCIAL

    1. For the calendar year 2003 on taxable income up to $320,000 is 5.5%.


    2. For the calendar year 2004, the rate remains at 5.5% on taxable income up to $360,000.


    3. The rate of tax on income over the $320,000 and $360,000 is 14%.

    RRSP LIMIT

    1. The maximum deductible RRSP contribution for 2003 is $14,500. The limit will show on your assessment notice for 2002 from CCRA.


    2. The maximum contribution increases to $15,500 for 2004.

    TAX TIPS

    1. Interest income should be earned in a RRSP wherever possible. Dividends and capital gains are taxed more favourably and should be earned outside a RRSP where possible.


    2. You do not have to deduct an RRSP contribution the year in which it was made. Instead you can carry it forward for deduction in a future period when you have income placing you in a higher tax bracket, resulting in more tax savings.


    3. If you are age 65 consider creating pension income by converting part of your RRSP to an annuity or RRIF.


    4. You may include premiums paid for private health insurance in your medical expense claim.


    5. You may deduct reasonable travel expenses if required to seek specialized medical treatment outside Canada.

    We welcome comments you may have on this newsletter as well as suggestions for future topics.

    The information herein is provided for your general information and action should not be taken on the basis of this newsletter, but only on the advice of your own individual advisor, applying this advice to your individual situation. Please call if you have any questions.

    Waters Meredith MacRae & Tchang LLP
    Chartered Accountants
    Telephone: 905-356-4324
    Fax: 905-356-0964
    E-mail: wm@watersmeredith.com

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