Budget fun

[danaeris]

Figuring taxes in makes a pretty huge difference.

Taxes and CPP in my income bracket will come to about 31%, in part because self employed people are required to contribute 9.9% of their income to CPP (!).

My basic expenses range from $12,360 ($100 a month for food, etc.) - 17,160 ($500 a month for food, etc.).

The basic tax credit is $8,648. Do I understand correctly that the self-employed must either use this, OR deduct, but not both?

If I used the basic credit instead of deducting, and kept my expenses to the bottom of my range, I'd need an income of $21,776 where I'm currently living.

If I didn't keep those expenses down, I'd need an income of more like $28,727.

I would need to either deduct more than $8648, or make more money, or move somewhere cheaper as soon as the lease is up.

...

These numbers are pretty ugly. I really gotta question whether I could make this work.

Thoughts? Advice?

I guess the silver lining is that, if I've got this right... at least it means I don't have to worry about launching into this when I don't feel ready yet. But I WILL have to deal with the incoming CEO, an unknown. One of the things I'm thinking I should do to prep for this is to book the vacation days I want ahead of time. I can always unbook them, or convert them to banked "summer hours" if that policy doesn't disappear.

Thanks to freefloat's comment, I fixed my numbers. Turns out that the range is a much more reasonable $16,300-22,771, which a contract COULD cover, potentially.

Comments

[freefloat.livejournal.com]

I don't know if it helps any, but...

Tha Basic Personal Exemption for Federal taxes for 2006 is $9039 and for Provincial taxes (don't forget them!) is $8377. These figures are off the TD1 forms we use here at work - I suspect you're looking at the 2005 exemptions which are $8148(Federal) and $8196(Prov).

This means that you are allowed to earn up to this amount per year without paying taxes on it. Any amount over these amounts is taxed.

I suspect it wouldn't be much use to you, but just for fun, here's how my taxes from 2005 broke down:

Tax amount: 22.7%
EI: 1.9% on earnings up to $39,000: any earnings above $39,000 are not subject to deduction
CPP: 4.5% on earnings up to $41,100

I suspect that EI is paid on your behalf by your employer, as is CPP - these may be things you should consider in working out your earnings/employment plan.

[danaeris.livejournal.com]

Thanks for pointing that out. I was leaving out important details, apparently, such as the personal amount for provincial taxes.

[freefloat.livejournal.com]

Once upon a previous military finance course, we clerk-types were taught how to manually calculate federal and provincial deductions for our members.

With the advent of automated pay systems, this knowledge is no longer taught and thus my memory is too incomplete for me to give you much more than I have already. Now I feel very old indeed, since I still remember the days of manually tabulating hours (on paper! what a novelty!) and paying members (by cheque!) their net wages.

There ya have it :D