IFSE - CIFC - Unit 10 Latest Update Rated A

IFSE - CIFC - Unit 10 Latest Update Rated A Payroll taxes are paid to support: 1. Federal spending on employment insurance and the CPP benefit programs 2. Provincial spending on worker's compensation benefits for injured workers Marginal tax rate - represents the amount of tax an individual pays on their dollar of income Average tax rate - represents how much tax is payable as a percentage of income Alberta income tax rate - flat tax of 10% is applied to all taxable income Tax deduction - lowers taxable income Tax credit - lowers tax payable 2 types of tax credits - refundable - non-refundable Refundable tax credit - a tax credit that can reduce one's income tax liability to below zero with the excess being refunded to the taxpayer Non-refundable tax credit - the portion of the credit that is not needed to reduce your tax liability will not be paid to you and cannot be carried forward to reduce your tax liability in the future (except for things like medical expenses, tuition, charity) Unused dividend tax credit - must use it or lose it, cannot be carried forward Dividend gross-up - dividend x gross-up = grossed-up taxable dividend - marginal tax rate x grossed-up taxable dividend = tax payable - grossed-up taxable dividend x dividend tax credit = X - tax payable - X = federal tax payable Purpose of dividend gross-up and credit mechanism - to minimize double taxation on dividends Taxation of Capital Gains and Losses - 50% of either is taxable Carrying capital losses - carried back 3 years - carried forward indefinitely ... to reduce taxable capital gains Distribution of capital losses of mutual funds - never distributed - used to offset capital gains within the fund If a mutual fund trust does not distribute all its income - it is taxed at the highest rate Income generated from a mutual fund corporation is reported on a... - T5 slip When should and investor avoid purchasing shares? - End of the year when the fund pays out capital gains dividends as this will be additional taxable capital gains