Tax Savings in Lower Income Group
In response to several queries on the specific topic of the tax benefits of investing in the Growthworks Commercialization fund for an individual earning an average income in the Ontario tax bracket of 31.15% - i.e Federal tax 22% and Ontario tax 9.15% (see end of article for salary range and tax brackets) - please read the following.
Basically, the tax credits and dividends are unaffected. What changes are the normal RRSP tax returns.
The illustration that pops up when you click on the Growthworks icon on the www.mybindi.com website shows the tax breaks and dividends for an RRSP investment of $7,500 if you are in the $82,000 tax bracket.
For the individual who is in the 31.15% tax bracket (for a person making a net income between $42,000 and $75,000 - approximate figures, for exact figures see table below) and for an average-sized investment of $5,000 in a Growthworks Commercialization Fund RRSP, we have:
Basically for an investment of $5,000 you get back in year 1: $3,307.50;
Year 2: $500; year 3: $500
Total benefit $4,307.50
For an individual in the 20.05% tax bracket we have:
Year 2: $500; year 3: $500
Total benefit $4,307.50
For an individual in the 20.05% tax bracket we have:
Basically for an investment of $5,000 you get back in year 1: $2,775.00;
Year 2: $500; year 3: $500
Total benefit $3,775.00
As is clear from the above two illustrations, the tax credits and dividends remain the same, only the RRSP tax returns differ depending on the individual’s tax bracket.
Tax bracket table (taken from CRA website)
Year 2: $500; year 3: $500
Total benefit $3,775.00
As is clear from the above two illustrations, the tax credits and dividends remain the same, only the RRSP tax returns differ depending on the individual’s tax bracket.
Tax bracket table (taken from CRA website)
Federal tax rates for 2011 are:
- 15% on the first $41,544 of taxable income,
- 22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088),
- 26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800),
- 29% of taxable income over $128,800.
Provincial/Territorial tax rates for 2011 are:
Ontario 5.05% on the first $37,774 of taxable income, + 9.15% on the next $37,776, + 11.16% on the amount over $75,550
For financial planning information please contact Nita or Lachman Balani at 416-902-3580 or lbalani2000@yahoo.ca
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