What does aggregate investment income include?

In general terms, “aggregate investment income” of a CCPC includes net taxable capital gains (i.e., half of capital gains, net of allowable capital losses), most forms of income from property like interest and rent, and portfolio dividends (dividends received from “non-connected” corporations).

How do you calculate aggregate investment income?

ITA 129(4) “Aggregate Investment Income” has the details of the AII calculation, but the basic formula is as follows:

1. Taxable capital gains net of allowable capital losses for the year. I.e. the amount in 3(b) when calculating NITP – 129(4)(a)(i) & (ii)
2. Property income for the year (Canadian and Foreign) – 129(4)(b)

What is adjusted aggregate investment income?

The starting point for calculating AAII is aggregate investment income (“AII”) as defined in the Income Tax Act (“the Act”). Generally, a company’s AII is made up of: • Interest. • Taxable capital gains, net of allowable capital losses from current or previous years. • Passive rental income.

What is the tax rate on aggregate investment income?

The federal tax rate of 38.7% on investment income includes a 10.67% (6.67% for taxation years prior to 2016) refundable tax as per s. 123.3 of the ITA, which becomes part of RDTOH. The federal government, in July 2017, brought out proposed tax changes related to private corporations.

Is rental property considered passive income?

Passive incomes include earnings from a rental property, limited partnership, or other business in which a person is not actively involved—a silent investor, for example. Portfolio income is considered passive income by some analysts, so dividends and interest would be considered passive.

Does AAII include rental income?

The starting point for calculating AAII is aggregate investment income (AII) as defined in the Income Tax Act (ITA). Generally, a company’s AII is made up of: passive rental income; passive foreign income, including foreign accrual property income (FAPI); and.

What is eligible Rdtoh?

1. Eligible RDTOH. Eligible RDTOH = Opening Balance. + Refundable taxes paid under Part IV on eligible portfolio dividends received by a corporation (i.e., dividends from non-connected corporations).

What is eligible and non eligible dividends?

Eligible dividends are “grossed-up” to reflect corporate income earned, and then a dividend tax credit is included to reflect the higher rate of corporate taxes paid. Non-eligible dividends. Non-eligible dividends are received from small business corporations that earn under $500,000 of net income (most companies).

What does Rdtoh mean?

Refundable Dividend Tax on Hand (RDTOH) is an important tax concept that applies to investment income earned in a corporation. It’s referred to in many of our life insurance concepts, such as the Corporate Retirement Strategy and the Corporate Investment Strategy.

What is the capital gains exemption?

You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. This exemption is only allowable once every two years.

What income is eligible for SBD?

$500,000 eligible for the SBD for federal purposes and all provinces and territories, except in Saskatchewan ($600,000). In all jurisdictions, the SBD is progressively reduced when paid-up/taxable capital of all associated corporations is greater than $10M and is eliminated when it reaches $15M.

Who qualifies for small business deduction?

CCPCs that have taxable capital of between $10 million and $15 million in the previous tax year are eligible for the Small Business Deduction but their business limit is reduced on a straight-line basis.

What is the tax rate for investment income?

All earnings in an investment bond are taxed at the corporate tax rate of 30%. If no withdrawals are made in the first 10 years, no further tax is payable. They can be tax effective for investors with a marginal tax rate higher than 30%.

How is equity income taxed?

Is Equity Income Taxable? Equity Income is taxable. An Equity Income Calculation will give you a glimpse into how well your investments have done for you, but both dividends and capital gains are subject to tax. So that’s another thing to consider as it dips into your profits.