TAXATION.docVIP

Chapter 13 – Financial Planning Taxation Financial Planning Six Financial Planning Steps Data Collection - personal data, net worth, budget Identify Objectives - personal circumstance, investment objectives, life cycle analysis Identify financial problems constraints Develop a written plan Implementation Review revise Life Cycle Analysis Stage 1 - Getting Started (20 –35) (Early Earning Years) Personal situation - low income, low/negative savings level - priority - job, education - build up cash reserves Financial planning - initial goal setting -start saving later – home purchase, family formation - insurance planning Stage 2 - Building Assets (35 –50) (Middle Earning Years) Personal - income increasing – growth focus - home, savings, investments Financial planning - wealth accumulation - insurance planning -- - start tax estate planning - later - reassess retirement situation Stage 3 - Investing Years ( 50 – 65) (Late Earning Years) Personal - savings increasing, income high, expenses decreasing - focus on growth, increasing assets, retirement planning Financial Planning - financial asset accumulation - retirement planning, estate planning Stage 4 Retirement Years ( 65+) Personal - little employment income, need investment income Financial Planning - focus on income safety - estate planning Ethics Standards of Conduct TAXATION -tax paid depends on 1) tax rate 2) deductions 3) type of income received TAX RATES - progressive tax rates (increase as income increase) - Federal Tax rates Taxable Income Federal Tax Rate Provincial (Ontario) (2006) $36,378 or less 15.25% 6.05% $36,378 – 72,756 $5,548 + 22% 9.15% ($34,758) $72,756 – 118,285 $13,551 + 26% 11.16% ($69,517) $118,285 $25,388 + 29% - 29% $118,285 $25,388 - tax from blocks 1, 2 3 26% 26% $72,756 $13,551 - tax from blocks 1 2 22% 22% 22% $36,378 $5,548 - tax fro