This letter summarizes recent tax developments and tax planning opportunities; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this letter, which are appropriate to your own specific requirements.
There are major differences between income tax rules and financial accounting rules.
However, in one area, there is significant overlap. That area is the computation of business income or profit.
Thus, for income tax purposes, in most cases the basic rule is that you start with the net income or profit for financial accounting purposes.
If you receive a loan from your employer, you may be subject to tax on an “imputed interest” inclusion in your income.
Basically, the amount included in your income for a year will be the amount by which the prescribed rate of interest on the loan during the year exceeds the amount of interest, if any, that you paid on the loan in the year or by January 30 of the following year. For the current quarter of 2022 (April 1 to June 30), the prescribed rate is 1%.
On April 7, 2022, the Federal government released its annual budget (they missed 2021 because of the pandemic), which included various income tax measures. Below is a summary of some of the more significant measures.
As is often the case, there was no detailed draft legislation (technically a “Notice of Ways and Means Motions”) for many of the tax proposals. As a result, the discussion below relies largely on the comments made by the Department of Finance in the budget documents.
Normally, if you are an employee, you can deduct home office expenses only if:
- You carry on your employment duties primarily in your home office (basically meaning more than 50% of the time during the year); or
You carry on those duties in your home office, which is used only for employment purposes during the year, and you regularly meet clients or customers there on a regular basis.