Reference no: EM132406557

Ashley Fung earns $120,000 per annum. She would like to take one year off to travel all over the world. She can take one year unpaid leave from her job starting January 1, 2014 or starting June1, 2014. From an income tax point of view, which date should she choose if she finances her time off by 

1. Cashing $120,000 of her savings from an unsheltered (non RRSP) account 

2. Withdrawing money from her RRSP account 

Use the following tax rates to determine after tax amount under each option: 

Federal and Ontario Personal Tax Rates, Brackets and Surtaxes 

Jurisdiction Bracket ($s) Tax Rate 

Federal $42,707 or less 15% 

$42,708 -85,414 $6,406.05 + 22% on next $42,707 

$85,415-132,406 $15,801.59 + 26% on next $46,992 

Over $132,406 $28,019.51 + 29% on income over $132,406 

Ontario $39,020 or less 5.05% 

$39,021-78,043 $1,970.51 + 9.15% on next $39,023 

$78,044-500,000 $5,541.11 + 11.16% on next $421,957 

Over $500,000 $52,631.51 + 12.16% on income over $500,000 

No Surtax at Federal level. 

Ontario Income Tax < $4,213 surtax =$0 

Ontario Income Tax $4,213-5,392 surtax = 20% 

Ontario Income Tax > $5,392 surtax = $236 + 56% of Ontario Income Tax above $5,392 

Dividend Gross up is 38%. Dividend tax credit is 20.73% at the federal level and 8.83% at the Ontario level of the actual dividend.