f&a taxes ppt

1. What is Taxation?

Tax year

• For individuals: January 1 – December 31

• At year-end:

  • Add up all income

  • Apply tax brackets

  • Subtract deductions (reduce ___)

  • Subtract credits (reduce tax ___**)

Tax Reconciliation - Your tax ____ ≈ final calculation of how much tax you actually owe based on all income and applicable deductions/credits.

income, payable, return

2. Types of Taxes

A. Progressive Tax System (Income Tax)

• Higher income → higher tax bracket

• Canada uses progressive income taxes.

• Canada Child Benefit is also ___.

⚠ Common Myth

“If I move into a higher tax bracket, I take home less after tax.” ❌ FALSE.

Only the income above the bracket threshold is taxed at the higher rate.

progressive

B. ____ Taxes (Sales Taxes like HST)

• Everyone pays the ____ rate, regardless of income.

• Hurts low-income households more (bigger % of their income).

HST = 13%

regressive, same

C. Sin Taxes

• Tax on products __ to society

  • Cigarettes

  • Alcohol

  • Sugar

  • Carbon tax

Goal: discourage consumption.

harmful

D. HST (Harmonized Sales Tax)

• GST (5%) + Provincial Sales Tax

• Rate varies by province.

• Some goods have no HST:

  • Basic groceries

  • Bank fees

  • Some __ supplies

medical

3. Property Tax

• Municipality taxes you based on ___ of your home’s assessed value.

• If home value increases → property tax ___ automatically every year.

%, increases

4. How Different Structures Are Taxed

A. Sole Proprietor

• Business income taxed on T1 (____ tax return).

• If you earn $100,000 → taxed as personal income.

personal

B. Partnerships

• The partnership itself is not taxed.

• Instead, income is __ to each partner.

Net income = $100,000
Partner A = 50%
Partner B = 50%

→ A reports $50,000 on T1
→ B reports $50,000 on T1

allocated

C. Corporations

• Corporations pay corporate tax.

Corporate Tax Rates

⚠ MUST MEMORIZE

• ___% for small businesses (first $500,000)

• ___% general corporate rate

9, 15

The Goal of Integration

If you start a corporation and leave money inside, you pay ___%.
But once you pay yourself (dividends/salary), total tax should ≈ what you would have paid ___.

✔ You cannot save tax by hiding money inside a corporation.

9, personally

5. Eligible Deductions

Deductions reduce taxable income.

A. RRSP Contribution — VERY IMPORTANT

• Contribution reduces ___.

Income = $60,000
RRSP deposit = $5,000
New taxable income = $60,000 – 5,000 = 55,000

income

RRSP Contribution Room

You can contribute up to:

18% of previous year's earned income
✔ MEMORIZE THIS: ___% RULE

Last year’s income = $90,000

RRSP room = 90,000 × 0.18 = $16,200

If you don’t use it → it carries forward forever.

18

6. Tax Credits

Credits reduce the amount of tax you ____

Basic Personal Amount (BPA)

• Everyone gets a ____ credit on the first $16,129 of income.

Must Memorize: BPA = $_____

Income: $14,000
Tax rate: 14.5%
Tax = 14,000 × 0.145 = 2,030

BPA credit = 16,129 × 14.5% = 2,338

Since credit > tax, tax owing = $0.

✔ BPA is non-refundable → brings tax to ____ but cannot create a refund.

owe, non-refundable, 16 129, 0

7. CPP & EI (____ Deductions)

A. CPP — Canada Pension Plan

• You and employer ____ contribute.

• You get CPP payments when you retire.

• No __ charged on first $3,500 of income
  ✔ Must memorize: Basic exemption = $_____

• Contributions stop at $71,300 income.

Income: $40,000
CPP income = 40,000 – 3,500 = 36,500

Rate: 5.95%

CPP deduction = 36,500 × 0.0595 = 2,171.75

payroll, both, CPP, 3 500

B. EI — Employment Insurance

• Protects you if you lose your job or take __ leave.

• Employer contributes 2.32%

• Employee contributes 1.66%

• ✔ No basic exemption for EI.

parental

8. Income Types & Tax Treatment

A. ____ Income

• Fully taxable (100%)

• Taxed at your ___ rate.

• Hardest income to shelter.

Earn 10% interest → the entire amount is added to income.

interest, income

B. Capital Gains

• Only ___% is taxable
  ✔ MUST MEMORIZE: 50% inclusion rate

Capital gains are only taxed when you __ the asset.

Buy shares for $2,000
Value rises to $5,000
But you haven’t sold → No tax yet.

Sell later:
Capital gain = 5,000 – 2,000 = 3,000
Taxable = 3,000 × 50% = $1,500

50, sell

9. Write-Offs for Businesses

If you have a business:

• Reasonable expenses can be deducted.

• You pay tax on __ income

• Supplies

• Meals (limited)

• Equipment

• Car expenses

net

10. Key Numbers to Memorize for Exam

✔ BPA = $___
✔ CPP basic exemption = ___
✔ EI basic exemption = ___
✔ RRSP room = ___% of prior year income
✔ Capital gains inclusion rate = 50%
✔ Corporate tax = ___% (small biz), ___% general
✔ CPP contributions stop at $71,300 income

16 129, 3 500, none, 18, 9, 15

Progressive tax	Higher income → higher rate
Regressive tax	Same rate but harder on low-income
Corporation tax	9% small biz, 15% general
RRSP	Deduction; room = 18% of __ year's earnings
Credits	Reduce tax, not income
BPA	First $16,129 → ___
CPP	No contribution on first $3,500
EI	No basic exemption
Capital gains	50% taxable
Interest income	100% taxable

last, exempt