Passive Income Rules 2019

Passive income typically enables your money to work for you.

Passive income rules 2019. As illustrated in the table below the passive income rule change will result in the company paying 40 000 more tax than it would have before the cra passive income tax changes. Beginning in 2019 as your passive income increases there is a corresponding decrease in the amount of your active business income that can be taxed at the small business tax rate. Passive income includes interest dividends mutual fund income capital gains and most rental real estate income. Let s assume she earns a 5 annual rate of return which produces 100 000 of annual investment income.

The new rules take effect this year for corporations whose year end is on or after january 1 2019. If you have net passive income including prior year unallowed losses from renting property in a rental activity and less than 30 of the unadjusted basis of the property is subject to depreciation you treat the net passive income as nonpassive income. How to mitigate these passive income changes. The new rule means that starting in 2019 marni s corporation would be entitled to the sbd tax rate only on her professional income of 250 000 calculated as 500 000 100 000 50 000 x 5.

Passive income is defined as income that requires minimal effort or perhaps even zeroeffort to earn.