For business owners, passive income will impact the amount of tax that has to be paid by reducing the small business deduction. This area allows you to enter the data that determines if the small business deduction is going to be reduced leading to an increase in the taxes payable on any corporate investment income. Two areas are used to determine if the small business deduction is going to be reduced, namely Small Business Income and Other Passive Income.
Small Business Income
Enter the amount of small business income the clients’ corporations are currently generating. This amount provides RazorPlan with an indication of how much (if any) of the small business deduction is available to the clients.
Income Amount: Enter the current amount of Small Business Income.
Income Index: Enter the percentage at which the Small Business Income is being indexed at.
End At: Select ‘Retirement’ to stop the Small Business Income at the planned retirement age, select ‘Age’ and then enter the age Small Business Income will end if different from the planned retirement age.
Other Passive Income
Passive income includes any interest, taxable capital gains and dividends, both Canadian and foreign, that are earned in a corporate investment account. Also, in addition to investment income, rents and royalties are also considered passive income. RazorPlan will automatically calculate the passive income from the values entered in the corporate investment account so in this area you should only enter passive income from other sources.
Income Amount: Enter the current amount of Other Passive Income outside of corporate investments.
Income Index: Enter the percentage at which the Other Passive Income is being indexed at.
End At: Select ‘Retirement’ to stop the Other Passive Income at the planned retirement age, select ‘Age’ and then enter the age Other Passive Income will end if different from the planned retirement age.
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