Posted by Tim Stobbs on November 1, 2007
Ok, perhaps ‘love’ would be a bit strong of a word, but I really like the adjustment they have made to the basic tax exemption for Canadians. See here for details. The general gist of it is they have raised the exemption this year to $9600 and plan to raise it again to $10,100 per person in 2008 (or a 5% increase). What gets me excited about this is if they keep raising it off and on until I retire in pace with inflation I should really be paying no tax if I can split my income between my wife and I in early retirement.
For example, let’s say I want to spend $24,000/year in retirement (today’s dollars). With the new rates I wouldn’t get taxed on $20,200 of it between my wife and I. Which leaves $3800 a year to be taxed. Yet if that $3800/year income is dividend based I should have no tax bill at all (since at lower income levels the dividend tax credit is more than the dividend itself). So I guess we need to start shopping for some more dividend income for my wife’s portfolio and mine in the coming years.
So that is today’s short lesson. Regardless of where you live, you have to be interested in your tax bill and changes that effect it. After all the less tax you pay the earlier you can retire.