What’s new in Business Taxes in 2017?

What’s new in Business Taxes in 2017?

With every new budget, the federal government changes something to the tax code. Whether it is raising or lowering the rates, changing the way payroll deductions are charged, or adding or removing tax credits, taxpayers must pay attention to what’s different each and every year. And those changes are why we keep seeing tax accountants every year.

The change that most people won’t even notice is something that was supposed to change, but didn’t. According to the 2015-16 federal budget, the small-business tax rate was supposed to decrease from 11% to 9% from 2016 to 2019. However, the 2016-17 budget announced that the tax rate would remain at 10.5% after 2016. So the rate went down .5%, but isn’t going down further in the future.2017 Tax Accounting BC

The biggest change will be felt by anyone selling a business in 2017. In 2016, when selling something that was intangible, such as a trademark or goodwill (usually something like a business process or market share), half of the gain of the sale was tax free and the other half was taxed at the active business rate (27%). Now, that second half will be taxed as a capital gain (50.67%).

Let’s say you want to sell your business in 2017. You also sell your market share at a value of $100,000 since you’re the only store like yours in Port Moody. In 2016, you would have paid $13,500 in taxes on the taxable half of that sale. Now, in 2017, you’ll be paying $25,335 in tax.

Talking to your CPA every year would have prevented this horrible surprise as they could have warned you of this coming change and advised you to either sell in 2016 or not sell at all. Now, if you want to sell your company, you will have lost about 12% of your net gain compared to last year. If that’s not a good reason to be prepared for 2018, I don’t know what would be.

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