Chapter 3 - Planning your tax strategy

Question 1

4 types of taxes

Answer 1

taxes on purchases - sales tax and excise tax
taxes on property - real estate tax, personal property tax
taxes on wealth - estate taxes, capital gains/losses
taxes on earnings - income tax

Question 2

taxable income

Answer 2

the net amount of income after allowable deductions on which income tax is computed

Question 3

determining income tax

Answer 3

1. determine total income
   - employment income, net business income, investment income, taxable capital gains, other income
2. calculate net income (total income reduced by deductions)
3. calculate taxable income
4. calculate federal taxes owing
5. net federal tax

Question 4

tax planning strategies

Answer 4

TFSA

• can contribute up to $5,500 annually
• unused room carry forward
• contributions grow tax free, withdrawals tax free