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Trump’s Plan Vs the Canadian Tax Systemin Tax Advice Information and Updates
Here is a quick summary of the comparisons that the mentioned article features.
Tax rates: Trump’s tax plan includes a proposal to reduce the US federal income rate brackets from the current seven to only three – 10%, 25% and 35% top rate which is down from 39.6%.
In Canada, we currently have five federal tax brackets: 0 to $$45,916 at 15%, $45,916 to %91,831 at 20.5%, $91,831 to $142,353 at 26%, $142,353 to $202,800 at 29%, and anything above that being taxed at 33%,
The author mentions that the middle-income tax cut is being paid for by the new 33% high-income bracket. On the other hand, Trump is yet to announce how he plans to pay for lowering the top rate by nearly 5%.
Tax exemptions: In the US, tax filers can choose to claim either a standard deduction or to itemize and claim various eligible expenses. They can choose whichever method results in the least amount of tax owing.
Trump’s tax plan calls for a doubling of the standard deduction which is currently $6,350 for a single person or $12,700 for a married couple filing jointly.
In Canada, we get to do both – claiming a standard deduction and itemizing. Canadian taxpayers can claim a non-refundable federal credit equal to 15% of the basic personal amount. This means a couple can earn $23,270 without paying federal taxes (this is assuming the income was equally distributed between the couple).
Tax simplification: Trump plans calls for the simplification of the US tax system in that it proposes to eliminate various itemized tax deductions. Canada’s system, on the other hand, offers taxpayers both deductions that reduce taxable income and tax credits that reduce taxes payable. Trudeau has also started in its plans to simplify the Canadian tax system by eliminating some tax credits such as the children’s fitness and arts credits, the education and textbook amounts and the public transit credit.
Death taxes: Trump’s plan includes a repeal of the estate tax. Currently, this applies to the fair market value of a US person’s assets upon death. Again, Trump has yet to announce how to pay for this loss of revenue.
Canada, on the other hand, does not have an estate tax on death. Only the unrealized appreciation of assets upon death as well as the fair market value of the RRSP/RRIF are taxed.
To read the full article, you can click on this link: http://business.financialpost.com/personal-finance/how-trumps-tax-cut-plan-stacks-up-against-the-canadian-tax-system
Source: “How Trump’s tax-cut plan stacks up against the Canadian tax system,” by Jamie Golombek, April 28, 2017, Financial Post