Update To Tax Changes for Business Owners

As we enter the last quarter of 2018, more than a year after the proposed federal tax changes that impact entrepreneurs and business owners, a reminder of the changes is helpful especially for those that have an investment implication. These impacts include:

  • After the 2018 tax year, the small-business deduction limit will be reduced by $5 for every $1 of investment income above the $50,000 threshold, which is equivalent to $1 million in passive investment assets at a 5% return.
  • The small-business deduction limit will be reduced to zero at $150,000 of investment income, which is equivalent to $3 million in passive investment assets at a 5% return.
  • Income-splitting rules came into effect on Jan. 1, 2018. A tax on split income now applies to dividends paid out of a private corporation to family members.

For a fulsome review, the Investment Executive Article offers a number of resources HERE.