How tax brackets affect what you pay in income taxes
Why being taxed, say 22% of your income, is a lot more complicated than you may assume. Here’s a breakdown of what you actually pay in income taxes.
As a most unusual year winds down, here are some of the investment, tax and other money considerations that should be on your radar.
Some, but not all, were shaped by the COVID-19 pandemic and government efforts to ease the financial fallout.
Tax planning for a stimulus payment
A general income-tax planning tip is to defer income into the following year if you can, to delay tax payments if for no other reason. There might be another reason for doing so this month, because of the prospect for an additional round of stimulus payments.
Early in 2020, the Internal Revenue Service sent payments of up to $1,200 per person or $2,400 for married couples, plus $500 per qualifying child, to help stimulate the economy in the wake of COVID-19 business shutdowns and layoffs. The size of those payments phased out for people in certain income ranges.
For example, singles with no kids received the full $1,200 with adjusted gross income up to $75,000, with amounts phasing out 5% for income above that, ending entirely at $99,000. For married couples, those $2,400 payments started to phase out with income of at least $150,000 and ended at $198,000. Payments and phaseouts were based on 2019 income (or 2018 income for people who hadn’t yet filed their 2019 tax returns).
So why bring this up now? Because of the possibility of a second round of stimulus payments patterned at least somewhat on the first.
“It is conceivable that legislation could be delayed far enough into 2021 that the phaseout would be based on 2020 income,” noted tax researcher Wolters Kluwer. “Thus, it might be smart to delay income into 2021” to maximum the size of any new stimulus payments — and assuming you are near the possible income phaseout ranges, which aren’t yet known.
Holding out hope for a payment
For most of us, economic impact or stimulus payments are a distant memory. If we qualified, we were sent disbursements automatically or upon contacting the IRS at irs.gov. But for an untold number of Americans, the checks still haven’t arrived in the mail — or anywhere else.
As of Sept. 30, the IRS and Treasury had processed payments to 166 million people, including 26 million who aren’t required to file tax returns (mostly Social Security recipients). The IRS allowed non-filers to claim stimulus payments on its website, but the deadline for doing that has passed.
“It is not clear how many eligible individuals missed the deadline and remain at risk of not getting a payment in 2020,” said the Government Accountability Office in a recent report examining the IRS’ stimulus-payment program.
Many or most of these people likely won’t receive anything over the waning weeks of 2020. But all is not lost: Individuals still can claim their stimulus payment upon filing a tax return by next April 15. These people will want to claim the “recovery rebate credit,” which will be based on 2020 income as determined on tax returns filed next year.
Researching charity groups
This is the time of year when many people make donations to charity, whether to take advantage of tax deductions or just because they’re generous. If you’re going to the trouble, you might as well make sure your gifts go to organizations that use the money wisely.
Be aware that gifts are deductible only if made to qualifying charities, which means that donating to fake or unregistered groups can set you up for an audit down the road if you claimed a deduction.
As alternatives, Guidestar.org and CharityNavigator.org are two websites that provide financial and other information on nonprofits and are easier to use. You also may ask a nonprofit directly for evidence that it is allowed to accept deductible donations.
The big change this year is a new deduction, for 2020 only, of up to $300 for cash donations to charities. You may take the deduction even if you don’t itemize, which now describes about nine in 10 taxpayers.
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Looking ahead to December gains
November was hot for investors. Last month marked the best November for the Standard & Poor’s 500 index since 1928, the best month overall for the Dow Jones Industrial Average since 1987 and the best month ever for the small-stock Russell 2000 index, said LPL Financial.
Can the momentum continue, or are we due for a breather?
Ryan Detrick, chief market strategist at LPL Financial, believes the market can keep rolling, though he cautions that supercharged Novembers sometimes steal the thunder from the following Decembers. Still, the market tends not to reverse course all that quickly, which makes monthly gains of 10%-plus bullish, he said.
“A way-better-than-expected earnings season, a likely split Congress and major breakthroughs on the vaccine front all helped stocks soar last month,” explained Detrick in a prepared commentary. Those factors are still in play.
“The huge gains in November could actually be the start of something much stronger,” he continued. Following a sharp market retreat in late February and March, stocks also notched a 10%-plus monthly gain earlier this year, in April. The only other time that happened was in 1982, near the start of an historic bull market, he said.
Analyzing the political backdrop
Given the change of control in the White House, how might politics influence the investment climate? Assuming Republicans win at least one of the two special Senate runoff races in Georgia in January, Republicans would retain control of the Senate, guaranteeing a split Congress and likely relieving a lot of investors.
“We view a split Congress as market friendly because it probably would take (Joe) Biden’s most ambitious policy proposals off the table,” wrote Jeffrey Buchbinder, equity strategist at LPL Financial, in a post-election recap. “Tax increases to fund Biden’s green energy and infrastructure-investment programs may be nearly impossible to get through the Senate.”
Historically, the stock market has fared well when the two main political parties share power. Since 1950, the S&P 500 index has generated an average annual return including dividends of 15.9% during years when a Democrat sat in the White House and Congress was split, according to LPL Financial. The best combination has been a Democratic president and a Republican Congress (up 18.3% on average). The worst has been a Republican president and Democratic Congress (up 8.7% on average).
In years when Democrats controlled the White House and all of Congress, which would happen if both Georgia Senate seats go blue, the S&P 500 was up 13.2% annually.
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
