What Tax Changes are in Store for Small Businesses in 2019?
It seems every year brings about new tax changes, and 2019 is no exception. The 2019 taxes for small business have come with some changes, so keep reading to learn about some of the small business tax changes that came into effect this year.
Some Good Changes
Not all tax news and changes have to be bad news. For 2019, there are actually some good changes for small businesses. First, the federal small business tax rate has been reduced. Previously this was set at 10%, but for 2019 this has slightly dropped to 9%. For British Columbia this creates a combined rate of 11% once the 2% provincial tax is added in.
In other good news, the amount that both employers and employees will pay for EI premiums has been reduced. The number of people drawing upon this service has dropped in recent years, due to a low unemployment rate. This means savings for both the small business and its employees.
The Bad Changes
Unfortunately, 2019 also brings some bad tax changes that may end up offsetting the good news.
First, CPP has gone up. Some CPP changes have come into effect to change the potential earnings from one quarter to one third of your income once you begin to collect. For small businesses this means a higher employer contribution for each employee.
If you have a small business and a significant stream of passive income (eg dividends), you may be affected by new rules for 2019. Any passive income over $50,000 per year will take a bigger bit into your small business tax rate. For every dollar of passive income over $50K, you lose $5 off the small business limit of 500K. For example, if you have $100,000 in passive income, you will now start paying the higher corporate tax rate over $250K. For some small businesses this could be a major change that may cost a lot of money.
With so many tax changes in 2019, you will want to be prepared and learn how to beat structure your small business to reduce your tax burden. Talk to an expert at Naicker today, to help you understand the changes and find out what will be best for your business.