written on behalf of Feigenbaum Law
It has been a big week for tax news on both sides of the United States and Canadian border. The Canadian government has tabled its proposed 2021 federal budget, while in the United States, President Joe Biden has signaled his desire to implement a higher tax on the wealthy in order to bring in more revenue. We wanted to take a moment this week to cover some of those changes.
Tax implications of Canada’s federal budget
Canada’s first budget since the outbreak of the COVID-19 pandemic continues to see the government plan to introduce new spending (over $100 billion) in order to help the country recover economically.
One of the flagship pieces of the budget includes $30 billion over five years to help create a national childcare program that will cap daily costs for parents at $10 per child. In addition, $18 billion has been dedicated to Canada’s indigenous communities.
Businesses suffering from pandemic-related losses have been told that business and income support measures, including wage and rent subsidies will continue throughout the fall.
Of course, any spending from the budget has to be provided for through taxes. One of the more significant ways the government plans to add to its coffers is through new taxes.
One of the new taxes includes a 1% tax on homes owned by non-Canadians that are “vacant or underused.” A CBC story reports that the government has not announced how a home will be determined to be vacant or underused.
On the sales tax front, the budget also says a new luxury tax will be applied to cars and personal aircraft that sell for over $100,000, as well as boats that retail for $250,000 or more.
The CRA has also been promised $230 million to improve its ability to track down tax that has not been paid, as well as $155 million to help identify fraudulent HST refund and rebate claims.
United States President Joe Biden plans wealth tax
While the United States government has not yet introduced a new budget, President Biden has announced measures to increase taxes on the wealthy. One of the most significant changes is a near-doubling of capital gains taxes to 39.6% from a current ceiling of 20%.
An article published on Yahoo Finance states that people earning more than $1 million could have a tax rate as high as 43.4%, including investment income taxes and a marginal tax rate of 39.6%. This is an increase from the current base rate of 20%
It should be noted that none of the Biden administration’s plans are official yet, but we will be sure to let our readers know once more official news is available.
Accountants and lawyers in both the US and Canada routinely seek assistance from our tax team on complicated tax compliance issues. We prepare personal tax returns for high net-worth individuals in both Canada and the US. Our expertise in both countries allows us to manage the unique issues presented by owning multiple properties and having multiple revenue sources. As always, our services are confidential and customized to meet your situation. Contact us to learn more about how we can help or call us at (416) 777-8433 or toll free at (877) 275-4792.