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Integrated Tax Rates
For Personal Income Over $115,739 - Alberta
Based On Tax Rates And Projected Tax Rates. Rates and tax brackets are approximate.
Integration is very important in Canadian income taxes. The general idea is that the same amount of tax should be paid on income, regardless of whether that income was earned and taxed at the individual taxpayer level, or the income earned first in a corporation, taxed in the corporation, the net after-tax cash dividended out to the individual shareholder, and then a second level of tax applied to the individual for that dividend.
Perfect integration does not exist. The following charts illustrate tax savings or tax costs associated with income earned in a Canadian Controlled Private Corporation (CCPC) in Alberta versus earned individually. If the number is positive, then it is more beneficial to earn income in a corporation. If the number is negative, it is detrimental to earning income in a CCPC. For Active Business Income in excess of the Small Business Deduction amount, a common tax-plan is to bonus out the excess as a salary to the owner of the company rather than leave it behind to be taxed in the company which avoids the detrimental effects of the various tax rates.
Integrated Tax Savings (Cost) Note 1
Active Business Income Up To $300,000
Active Business Income From $300,001 to $400,000
Active Business Income Over $400,000
Investment Income Except Capital Gains and Dividends
Capital Gains Note 3
Note 1. These are the tax savings or (cost) of incorporating certain types of income instead of earning it personally. Note 2. This rate is the combined rate of first earning the income in a corporation, paying tax in the corporation, and then dividending out the remainder to the individual shareholder where the shareholder then pays tax on the dividend. Note 3. Rate is based on gross gain. Taxable gain is actually 50% of the gross gain.
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