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Your Remuneration - Tax Savings
Your corporation can pay you a salary or dividend or a combination of the two. Careful analysis is needed to calculate the best mix of salary and dividends for your case. Click HERE for a comparison of personal tax rates for Alberta. It will depend on your cash flow needs, your income level, the corporation’s income level, the corporation’s status for tax purposes, etc.
In most cases, the best strategy for a small business corporation is to pay enough salary to reduce the corporation’s taxable income to the small business limit. Click HERE for a comparison of this limit in Alberta. This maximizes the amount of income that is taxed at the "small business rate", while avoiding having corporate income taxed at the high rate that applies to income beyond the small business limit. Click HERE for a comparison of corporate tax rates at different corporate income levels in Alberta.
An additional consideration is that you will usually want to pay yourself (and any family members a reasonable amount for the work they do) enough salary to allow the maximum possible contribution to an RRSP.
Careful planning with a Chartered Accountant is warranted. Contact Keith Anderson CA at (780) 447-5830 if you need advice.
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