Tax Tips - Personal Tax Returns: Investing & Financial Planning
TAX BRACKETS
Tax planning for individuals becomes important where individuals are approaching or exceeding the amounts where tax rates change. These amounts are called tax brackets and occur at taxable income of $30,754 in 2001 (increasing to $ 35,000 in the next five years) and $61,509 (increasing to $ 70,000 in the next five years). The two bracket amounts result in three basic tax rates which are approximately 25% (reducing to 23% in the next five years) on income in the first bracket, 39% (reducing to 36% in the next five years) on income in the second bracket and between about 49% on income in the top bracket.
DEDUCTION OF FEES & CHARGES FOR INVESTING ON YOUR TAX RETURN
There are some deductions available from taxable income for individuals making investments. Some of the deductions permitted are interest on money borrowed to earn investment income, fees for management of save custody of investments, safety deposit box charges, and accounting fees for recording investment income and investment council fees. RRSP administration fees are no longer deductible if paid by an individual to the plan holder. If they are applied from within the plan they will not attract taxable benefits to the plan holder, therefore effectively become a tax free deduction. It is recommended that all administration fees be paid outside of any registered plans.
TAX IMPLICATIONS OF INVESTMENTS
There are many implications on your investments that could affect your tax return. If you are planning new investments in consider this: How much tax will be paid on the income? Different types of investments bear different rates of tax. When you compare two investment decisions you should look at the after tax rate of return on each. Also, interest paid on money borrowed for investments can be tax deductible.