Annie's Place

ONTARIO’S ENERGY PLAN

2011-08-04T20:54:00.000-04:00

ONTARIO’S ENERGY PLAN

What is the ONTARIO CLEAN ENERGY BENEFIT (OCEB)?

The Ontario Clean Energy Benefit (OCEB) is helping Ontario families, farms and small businesses through the transition to a cleaner, modern electricity system. Thanks to the OCEB, Ontario families can expect stable bills this summer and fall with 10% off their monthly electricity bills.

Who is eligible for the Ontario Clean Energy Benefit (OCEB)?

All families, farms and small businesses in Ontario hat receive an electricity bill is eligible for this benefit.

How much is the Savings?

The OCEB provides a 10% rebate off your total electricity bill – including electricity costs, regulatory charges, the debt retirement charge and taxes.

What are the Benefits for Families?

A typical residential consumer will see annual savings of approximately $153.60.

What are the Benefits for Farms and Small Businesses?

Typical farm and small business savings could range between $1700 and $2050, depending on size and electricity usage.

How does one get the OCEB?

You don't have to do anything – the OCEB will be automatically added to every eligible consumer's bills for the next five years. The Ontario Clean Energy Benefit applies to electricity charges incurred as of January 1, 2011.

How Can You Save?

• Ontario Clean Energy Benefit

Provides a 10 per cent benefit to help consumers manage rising electricity prices for the next five years.

• Northern Ontario Energy Credit

A new, permanent energy credit designed to help families and individuals in the North who face higher energy costs.

• Ontario Energy and Property Tax Credit

Up to $1,025 for eligible Ontarians paid quarterly, beginning in 2011.

The Ontario Energy and Property Tax Credit (OEPTC)

What is this Ontario Energy and Property Tax Credit Program?

The Ontario Energy and Property Tax Credit (OEPTC) is designed to help low- to middle-income Ontario residents with the sales tax on energy and with property taxes. The maximum credit for 2010 is $1,025 for seniors and $900 for non-seniors.

A 2010 personal income tax return must be filed and the credit will be paid as a lump-sum as part of the 2010 tax refund or reduce taxes otherwise payable. For 2011, the maximum credit is $1,044 for seniors and $917 for non-seniors. The 2011 OEPTC will be paid in four installments starting in July 2011 and will be based on the personal income tax return filed for 2010.

Who is Eligible to receive the Ontario Property and Tax Credit?

• Ontario residents who are 18 or older, or had a spouse or common-law partner on December 31, 2010 (for both the 2010 and 2011 credits), or are parents who lived with their child in 2010 (for the 2010 credit) or who live with their child on the first day of the payment month (for the 2011 credit).

• People with low- to middle-income who pay rent or property tax for a principal residence in Ontario.

• People living on reserves are generally eligible for the energy portion of the credit, as are those people living in public long-term care homes.

How do you qualify for this Credit?

To receive the OEPTC, you have to apply for it by completing and attaching Ontario forms “ON-BEN” and “ON479” to your personal income tax return. These forms are included in the Ontario T1 general personal income tax and benefit package.

If you qualify to receive the 2011 OEPTC, based on your 2010 return, your payments will be issued in July and December 2011, and in March and June 2012.

For more information:

http://www.rev.gov.on.ca/en/credit/oeptc/index.html

Watch this video on Ontario Clean Energy Benefit (OCEB)

This article is for general information only. Please consult your financial/tax advisor about your specific financial situation.

Tax Cuts Working for You .......Reach out and Claim Yours

2011-01-20T21:58:00.003-05:00

Get the Tax Cuts Working for You ------ Reach out and Claim yours (Canadian Taxation)

Tax cuts are an essential part of the Government of Canada's effort to stimulate the economy and to create and maintain jobs

You may be able to save money by claiming any of the following tax credits:

• Children's fitness tax credit :The children's fitness tax credit is a non-refundable tax credit of up to $75 based on eligible fitness expenses (maximum $500) paid for each child who is under 16 years of age.

• First-time home buyers' tax credit: First-time home buyers can claim a non-refundable tax credit of $750 for the acquisition of a qualifying home.

• Pension income splitting: One of a wide range of tax cuts available. By choosing this option each tax year, pensioners can split up to 50% of eligible pension income with their spouse or common-law partner and reduce their overall tax paid.

• Public transit tax credit: The public transit tax credit is a non-refundable tax credit that helps individuals covers the cost of public transit.

• Tradesperson's Tools Deduction: Trades people can deduct from their income part of the cost of tools purchased throughout the year.

For more information visit Canada Revenue's web page for : Individuals

http://www.cra-arc.gc.ca/tx/ndvdls/menu-eng.html

Watch the enclosed video for information on tax credits.

This article is presented for general information only, please consult your financial advisor for advice regarding your financial situation.

The New Ontario Harmonized Sales Tax (HST)

2010-06-05T16:09:00.020-04:00

The New Ontario Harmonized Sales Tax (HST), an Update.

Starting on July 1, 2010, you'll see a new harmonized sales tax (HST) in Ontario. The 13% HST combines the 5% GST and the 8% PST into one tax to be collected by the federal government.

This is a big, important change that will make Ontario more attractive to businesses. And, these changes include a number of personal and business income tax cuts, credits and benefits that could affect you.

For more information/details on how these tax changes will affect you as individual, please follow the News Updates on the right hand column of this blog, or vist Ontario's page:

http://www.rev.gov.on.ca/en/taxchange/index.html

Watch this informational video (click on the play button) on the new Ontario HST explaining the details of this new tax structure: What you need to know about the New HST?

This update is presented for general information only, please consult your financial advisor on how this tax change will affect your specific financial situation.

Yes - - - A Tax Free Savings Account (TFSA) Can Work for you !

2010-05-05T12:30:00.012-04:00

Yes - - - a Tax Free Savings Account (TFSA) can work for you !
One year ago, the federal government introduced the Tax - Free Savings Account (TFSA). It has been called the single most important personal savings vehicle since Registered Retirement Savings Plans (RRSP) was launched in the late 1950’s.

Is the TFSA really that good – and should you have one? The answers are yes and yes – but only if you are just starting out in life, retired or anywhere in between. Is that you?

Then here’s why you should have a TFSA:

Tax-free growth: As a Canadian over the age of 18, you are eligible to save up to $5,000 a year in TFSA investments that grow in a tax-free basis.

Tax-free withdrawals: You can make TFSA withdrawals at any time for any reason – and the money you withdraw is tax free.

Make the most of your contribution room: You can contribute $5,000 a year plus the total of withdrawals made in the prior year. And if you don’t use all of your contribution room right away, it accumulates year after year – fill it at any time you choose. By the way, a contribution to investments held within a TFSA does not affect RRSP contribution room.

Investment flexibility: Investments that are TFSA eligible can be the same as those available for investments held within RRSPs, including mutual funds, money market funds, Guaranteed Investment Certificates (GICs), publicly traded securities, and government and corporate bonds.

Personal financial flexibility: A TFSA works well for short- or long-term financial goals such as:

• A ready source of emergency funds.
• Saving for a new car, cottage or dream vacation.
• Saving for the down payment on a new home or starting your own business.
• Reducing taxes on your non-registered investments.
• Adding to your retirement savings.
• Adding to education savings beyond Registered Educational Savings Plan (RESPs).
• Splitting income with your spouse to minimize taxes.
• And TFSA withdrawals don’t affect your eligibility for income-tested federal benefits such as Old Age Security (OAS).

There are other ways in which a TFSA could work for you. Your professional advisor can take a close look at your personal situation and help you get the most from a TFSA and every other element in your overall financial plan.

This is presented for general information only, please consult your professional advisor on your specific personal financial situation, and how a TFSA can fit into your financial plan.

Play this video on how you benefit from a TFSA. For more information on TFSA, visit:

TFSA.gc.ca

Press the play button to watch this informational TFSA Video from TFSA.GC.CA

TFSA informational video from Government of Canada:

What is new for Canada's Federal Tax Filing for 2009?

2010-03-30T10:12:00.036-04:00

What is new for Canada's Federal Tax Filing for Tax Year 2009?

Tax Cuts at your Fingertips, Reach out and Claim Yours!!

Claim the new home renovation tax credit (HRTC) administered by the Canada Revenue Agency. Keep all your receipts to prove it! That will give you a a home renovation maximum tax credit of one thousand, three hundred, and fifty dollars ($1,350).

And that's just for starters.

The new maximum for the HBP (Home Buyers Plan), one is able to withdraw twenty-five thousand dollars ($25,000) from your RRSP under the Home Buyers' Plan to put towards the purchase of a new home.

That's good news for the housing market.

And, with the new Home Buyer's Tax Credit, you are also eligible to claim another non-refundable tax credit of $750!

And then, of course, there are increases to many of the non-refundable tax credits that all of us may be able to claim.

For instance, amounts relating to dependents, and spouses or common-law partners.

There's a higher age amount too.

Check out the CRA Web site. http://www.cra-arc.gc.ca/menu-eng.html

The site has a ton of information. Just click on "Individuals" and get info that's specific to your tax situation, no matter who you are! Or, click on "Online services" to get all the info about the CRA's quick, easy, and secure services.

And some of the biggest news items are always in the Key Information, Announcements and Highlights sections right on the Home page.

You can file your return using NETFILE-certified software, and just filed it through NETFILE on the CRA Web site.

It is easy, secure, and barely took any time.

And, if you owe money, there's a new way to pay called My Payment.

What are you waiting for, visit the site now. http://www.cra-arc.gc.ca/menu-eng.html

This is presented for general information only, consult your financial advisor on how these tax changes will affect your situation.

Informational video from Canada Revenue Agency on what's new for tax filing 2009

Play this video of what's new for federal tax filing for tax year 2009. Check it out now....................

Canada's Federal Budget 2010- What is in it for you?

2010-03-12T19:47:00.024-05:00

Canada's Federal Budget 2010-----What is in it for you?

Canada's Federal Budget 2010- A Summary Update

On March 4, 2010, the Honourable Finance Minister James Flaherty presented Canada's 2010 Federal Budget which contains several key measures of interest to you as a taxpayer. This budget summary contains highlights of these proposals, which are not yet law. Contact your Financial Advisor to ask advice or guidance on how these proposals may affect your financial plans.

Parental Government Benefits – Shared Custody:

Currently, when parents share custody of a child, only one individual can receive the Canada Child Tax Benefit (CCTB) and Universal Child Care Benefit (UCCB) amounts in a particular month and the child component of the GST/HST credit in respect of a particular quarter. The Budget proposes to allow two eligible individuals to receive CCTB and UCCB amounts and to receive GST/HST credit amounts when a child lives more or less equally with two individuals who live separately. These individuals will each receive 50% of the annual entitlements effective for benefits payable starting in July, 2011.Universal Child Care Benefit for Single Parents:
The (UCCB) is $100 per month for every child under the age of 6 years. For parents in a married or common-law relationship, this payment is taxable to the spouse with the lower income.
Single parents are required to include the amount in their income and effectively be taxed at their marginal tax rate.
The Budget proposes to allow a single parent receiving the benefit the option to include all amounts received under the UCCB in either the parent’s income or in the income of the child for whom an Eligible Dependant Credit is claimed. If included in the income of the child, this will reduce the Eligible Dependant Credit the parent can claim. If the single parent is unable to claim an Eligible Dependant Credit, he or she will have the option of including the aggregate UCCB amount in the income of one of the children for whom the UCCB was paid.

Changes in Stock Option:

Repeal of Stock Option Tax Deferral for Publicly Traded Securities - If an employee acquires a share of his or her employer’s corporation under a stock option agreement, the difference between the fair market value of the share at the time the option is exercised and the amount paid by the employee to acquire the share is taxable as employment income in the year the option is exercised. If certain conditions are met, the employee is also entitled to a stock option deduction equal to one-half of the employment benefit, which results in the taxation of stock options at capital gain like tax rates.
Since the year 2000, employees exercising stock options of publicly traded companies could elect, within limits, to defer the taxation of employee stock option benefits until the year in which the shares were sold. This election was available on up to $100,000 of options vesting in a particular year (based on the option strike price). The purpose of this measure was to reduce the incidence of employees being forced to sell shares of their employer in order to pay the income tax triggered by the exercise of the option.
The 2010 Budget proposes that this tax deferral election be repealed with respect to options exercised after 4:00 PM Eastern Standard Time on March 4, 2010.What are the proposed reliefs for the repeal of this tax deferral election?Some taxpayers who took advantage of the tax deferral election on stock options have experienced declines in the value of their optioned shares to the point that the value of their shares is less than the tax liability that would be owing should they decide to sell the optioned shares.
To provide relief, the Budget proposes an elective tax treatment that would limit the tax liability on the employee stock option benefit to the proceeds realized from the disposition of the shares.

Elective Tax Treatment:

For individuals who disposed of optioned shares prior to 2010, they will have to make an election for this special tax treatment on or before the filing due date for 2010 (generally April 30, 2011). Individuals who have not disposed of their optioned shares must do so before 2015 in order to be eligible for this elective tax treatment.
Stock Option Cash Outs – As mentioned above, the 50% stock option deduction results in the taxation of employee stock option benefits at capital gain like tax rates. Unlike other remuneration paid to employees, the corporate employer does not get a deduction for the stock option benefit if the employee exercises the option to acquire shares. However, some stock option plans have been structured to provide the employee with the option of receiving cash instead of shares at the time of exercise. In situations where the employee elects to receive cash, under the existing law, it is possible for the employer to deduct the payment made to the employee and for the employee to also claim the 50% stock option benefit deduction. For options exercised after 4 p.m. EST Time on March 4, 2010, the Budget proposes measures to prevent both the 50% stock option deduction and a deduction by the employer from being claimed for the same stock option employment benefit.

US Social Security Benefits:

The Budget proposes that Canadian residents who started receiving U.S. Social Security benefits prior to 1996, and who have continuously received those benefits since that time, must only include 50% of those benefits received on or after January 1, 2010 as taxable income.These rules may also apply to survivors.

Canadian residents who started to receive benefits on or after January 1, 1996 must continue to report 85% of the benefits received as taxable income as per the Canada-US Tax Convention.

Scholarship exemption:

Currently, post-secondary scholarships, fellowships, and bursaries are fully exempt from tax.The Budget proposes to make post-doctoral fellowships taxable.The Budget also proposes that if the educational program is part-time and the student is not disabled, then the exemption will be limited to the amount of tuition paid for the program plus the costs of program-related materials. These measures will apply to the 2010 and subsequent taxation years.

Medical Expense Tax Credit:

The medical expense tax credit provides a non-refundable tax credit for eligible medical expenses that exceed the lesser of the annual threshold ($2,024 for 2010) and 3% of net income.

The Budget proposes that expenses incurred for purely cosmetic procedures (including related services and other expenses such as travel) would not be considered eligible medical expenses for the purposes of this credit. Purely cosmetic procedures would generally include surgical and non-surgical procedures purely aimed at enhancing the individual’s appearance.

A cosmetic procedure that is required for medical or reconstructive purposes will continue to qualify for the medical expense tax credit. This measure will apply to expenses incurred after March 4, 2010.

Registered Disability Savings Plan changes:

A Registered Disability Savings Plan (RDSP) allows families and friends to save for the long-term financial security of a person with a severe disability. Where an RDSP has been established for an eligible beneficiary and their family meets certain income tests, the government may contribute Canada Disability Savings Bonds (CDSBs) of up to $1,000 annually ($20,000 lifetime).

Where eligible contributions are made, the government may also contribute Canada Disability Saving Grants (CDSGs) of up to $3,500 annually ($70,000 lifetime) to the plan.CDSG and CDSB room will now carry forward - Currently, if a contribution is not made or an RDSP is not established during a year of eligibility, the CDSG and CDSB “room” for that year is lost.

The Budget proposes to allow CDSG room and CDSB room to carry forward for up to 10 years. The amount of the CDSG and CDSB that will be awarded in any given year will be based on the family income during each of the prior 10 years (but not before 2008, the year RDSPs became available). There is no limit on the CDSB amount that can carry forward, but CDSG will only be paid on unused entitlements up to an annual maximum of $10,500. The carry forward will be available starting in 2011.

Rollovers from RRSPs/RRIFs to RDSPs - Currently, upon an individual’s death, if their RRSP/RRIF proceeds are payable to the individual’s financially dependent infirm child or grandchild, they can be transferred to that child or grandchild’s own RRSP/RRIF on a tax-deferred basis. The Budget proposes to extend these rollover provisions to include transfers to the child or grandchild’s RDSP. The amount transferred to the RDSP would count against the RSDP beneficiary’s lifetime $200,000 contribution limit, but these “rollover contributions” would not be eligible to receive the CDSG and would be taxable when withdrawn. These measures will be effective for deaths occurring on or after March 4, 2010. Special transitional rules will apply for deaths that occurred after 2007 (when RDSPs became available) and before 2011, effectively allowing the proposed measure to apply as of January 1, 2008. To allow time for financial institutions and the government to adjust their RDSP systems, RDSP contributions benefiting from the proposed RRSP/RRIF rollover measures cannot be made before July, 2011.

Requirement to Report Aggressive Tax Planning Transactions:

The Budget introduces proposals requiring taxpayers to report aggressive tax planning transactions. Under the proposals, a reportable transaction is defined as a tax avoidance transaction that bears at least two of the following three features:

1. The promoter or tax advisor is entitled to fees that are contingent on the tax results achieved or the number of participants;

2. The promoter or tax advisor requires “confidentiality protection” in respect of the transaction;

3. The taxpayer or the person who entered into the transaction for the benefit of the taxpayer obtains “contractual protection” in respect of the transaction.

Discovery of a reportable transaction that has not been reported could result in the denial of the tax benefit resulting from the transaction. If the taxpayer elects to claim the tax benefit, a penalty for not reporting the transaction would apply. Subject to modifications from public consultations, these proposals would apply to avoidance transactions entered into or completed after 2010.

This Canada Federal budget 2010 summary update is presented as a source of general information only, and is not unintended as a solicitation to buy or sell specific investments, nor is it intended to provide legal or tax advice. Please consult your Financial Advisor for advice based on yourspecific circumstances.

play the video of "Canada's Economic Action Plan" or visit: actionplan.gc.ca for more information on the federal government initiatives for growth stimulus.

actionplan.gc.ca video 1

actionplan.gc.ca video 2

Tax Cuts at your Fingertips - Reach Out and Claim Yours

2010-01-26T22:48:00.004-05:00

Beat the tax with these year-end tax tips for tax year 2009

Tax-planning should be a year round activity but even if you’ve been otherwise occupied this,year, you still have time to save money on your 2009 taxes by using strategies like these.

Be deadline savvy: File your tax return and make tax payments on time to avoid penalties and interest. Payments that qualify for tax credits and deductions should be made by December 31.

Deduct to save: Take full advantage of all tax deductions including the most important – your Registered Retirement Savings Plan (RRSP) deduction. Be sure to fill up all your RRSP
contribution room.

Give yourself all the credit: Make full use of tax credits to reduce your tax bill by:

• Pooling medical expenses on the tax return of the lower earning spouse.
• Pooling charitable donations or carrying them forward for up to five years to surpass the
$200 threshold that increases your credit.
• Using the spousal credit for the higher-earning spouse.
• Transferring the age, disability, tuition and/or education credits to a spouse or supporting
relative when not used by a dependent.
• Don’t forget the first time homebuyer, home renovations and moving expenses credits.

Split to save: Income-split by sharing pension income with a spouse, through a spousal RRSP or by paying a salary to (eligible) family members.

Be RRSP savvy: If you’re turning 71 this year, you must wind up your RRSP and need to
decide whether to take the cash (poor choice) or transfer the funds to investments held within a Registered Retirement Income Fund (RRIF) or annuity (much better choices). If you have earned income, you can continue making contributions to a spousal plan until your spouse reaches age 71.

Save tax-free: Make up to a $5,000 contribution to a Tax-Free Savings Account (TFSA). The contribution isn’t tax deductible but money and interest inside your TFSA is tax-free and so are withdrawals that you can make at any time for any purpose. Amounts withdrawn are added to your TFSA contribution room for the following year.

Make down investments pay off: Plan to sell money-losing investments by the December 31 settlement date, which creates capital losses than can offset capital gains.

Buy now to save: If you’re self-employed and claiming the capital cost allowance (CCA) on
depreciable assets, buy them before year end to speed up tax write-offs.

Move to save: If you’re moving to a province with a lower tax rate, do it before December 31 and you’ll pay the lower rate for the full year. If you’re moving to a province with a higher tax rate, try to delay until 2010.

And here’s the best tax-saving tip of all: Talk to your financial advisor/tax advisor to be certain you make the most of these and other tax-reduction strategies that are available to you.

For more information on how to reach these tax cuts visit: canada.gc.ca/taxinfo

Canada's Economic Action Plan : actionplan.gc.ca

This article is presented for general information only, and not a solicitation to buy or sell any financial products. Consult your financial advisor for advice regarding your financial or tax situation.

Informational Video from Canada Revenue Agency

Informational Video from Canada Revenue Agency

Canada's Economic Action Plan - Support for Workers

2010-01-21T22:17:00.001-05:00

Canada’s Economic Action Plan – Support for Workers

(play the enclosed video)

· Retraining programs for laid-off workers
· Work sharing programs
· Extended Employment Insurance benefits
· New benefits for the self-employed
· Apprenticeship Programs and Incentives for workers who wants to change careers.

Apprenticeship Grants are designed to encourage more apprentices to complete their training.Through the Apprenticeship Incentive Grant and the Apprenticeship Completion Grant, registered apprentices who complete their apprenticeship training and receive their journeyman/journeywoman certification in a designated Red Seal trade could be eligible to receive up to a maximum of $4,000.

The Apprenticeship Incentive Grant (AIG) is a taxable cash grant of $1,000 per year, up to a maximum of $2,000 per person, available to registered apprentices once they have successfully completed their first or second year/level (or equivalent) of an apprenticeship program in one of the Red Seal trades.Apprentices should be aware that there is a deadline to apply.
Apprenticeship Completion Grant (ACG)

The Apprenticeship Completion Grant (ACG) is a $2,000 taxable cash grant designed to encourage apprentices registered in a designated Red Seal trade to complete their apprenticeship program and receive their certification. Eligibility is retroactive to January 1, 2009.

The completion grant will be offered to apprentices who complete their training, become certified journeymen/journeywomen in a designated Red Seal trade and who obtain either the Red Seal endorsement or a provincial or territorial Certificate of Qualification.
Apprentices should be aware that there is a deadline to apply.

For more information on the Canada’s Economic Plan for workers, visit this site:
http://www.servicecanada.gc.ca/eng/goc/apprenticeship.shtml

For more information on Canada’s Economic Plan support for workers, visit:

actionplan.gc.ca

Support for workers and unemployed, visit this site: HRSDC web link

This article is presented for general information only, please consult your financial advisor for advice for your specific financial situation.

Please contact Service Canada for more details of the program, and the deadlines to apply for the apprenticeship grants and incentives.

Informational Video from Government of Canada: actionplan.gc.ca

Tax Strategy: Spousal strategies – income-splitting can still work!

2009-12-28T11:26:00.002-05:00

Spousal Tax Strategies – income-splitting can still work !

The new Tax-Free Savings Account (TFSA) and other federal tax changes may have you wondering about the value of one of the most basic tax-saving strategies for couples: “Income-splitting through a spousal Registered Retirement Savings Plan (RRSP)”. A spousal RRSP can still be a worthwhile way to reduce your family tax bite in certain situations. Here’s how income-splitting can work for you:

It provides a means of reducing a family’s overall tax bill by shifting income from a higher earner to the lower-income earner so that family income is taxed at a lower rate. It may allow a couple to avoid a claw-back of Old Age Security (OAS) benefits by keeping each partner’s income below the prescribed threshold. Recent tax changes now allow Canadian retirees to split up to half of their eligible pension income (i.e. income that qualifies for the federal Pension Income Tax Credit) with their spouses or common-law partners. In addition, income-splitting with ‘non-spousal’ RRSPs is also permitted, but only after the contributor reaches age 65.

Here’s when a spousal RRSP can be a valuable addition to your personal financial plan:
If you and your spouse intend to retire before age 65, the higher-earning spouse can contribute to a spousal RRSP but stop making those contributions three years before retirement. After retirement, the lower-earning spouse makes withdrawals from the spousal RRSP. Because no contributions had been made to the spousal RRSP during the previous three calendar years, none of the spousal RRSP income paid to the lower earning spouse is attributed to the higher earning spouse for taxation purposes. If a lower-earning spouse exits the workforce to take a parental leave or an educational leave, he or she can receive a payment from a spousal RRSP. In a year of little or no additional income, that person will pay little or no taxes. If one of you continues to work after age 71 and generates “earned income” for RRSP purposes, that person can no longer contribute to their RRSP but can contribute to a spousal RRSP until the end of the year that the spouse attains age 71. If a person dies and has unused RRSP contribution room, no contribution can be made to the deceased’s RRSP. However, a final RRSP contribution that is made to a new or existing spousal RRSP within 60 days following the end of the year of death is deductible on the deceased’s final tax return.

Is a spousal RRSP a worthwhile income-splitting strategy for you?

Ask your professional advisor about income-splitting and other tax planning and retirement savings strategies that can benefit you and your family.

This article is for general information only, not a solicitation to buy or sell any financial products. Consult your professional financial advisor for advice regarding your specific financial circumstances.

For more information on Canada's Economic Action Plan visit: actionplan.gc.ca

Year End Tax Tips

2009-11-27T19:11:00.005-05:00

Tax Tips - 2009

Tax-planning should be a year round activity but even if you’ve been otherwise occupied this year, you still have time to save money on your 2009 taxes by using strategies like these.Be deadline savvy: File your tax return and make tax payments on time to avoid penalties and interest. Payments that qualify for tax credits and deductions should be made by December 31.Deduct to save: Take full advantage of all tax deductions including the most important – your Registered Retirement Savings Plan (RRSP) deduction. Be sure to fill up all your RRSP contribution room.

Give yourself all the credit: Make full use of tax credits to reduce your tax bill by:
• Pooling medical expenses on the tax return of the lower earning spouse.
• Pooling charitable donations or carrying them forward for up to five years to surpass the
$200 threshold that increases your credit.
• Using the spousal credit for the higher-earning spouse.
• Transferring the age, disability, tuition and/or education credits to a spouse or supporting
relative when not used by a dependent.
• Don’t forget the first time homebuyer, home renovations and moving expenses credits.

Split to save: Income-split by sharing pension income with a spouse, through a spousal RRSP or by paying a salary to (eligible) family members.
Be RRSP savvy: If you’re turning 71 this year, you must wind up your RRSP and need to decide whether to take the cash (poor choice), or transfer the funds to investments held within a Registered Retirement Income Fund (RRIF) or annuity (much better choices). If you have earned income, you can continue making contributions to a spousal plan until your spouse reaches age 71.
Save tax-free: Make up to a $5,000 contribution to a Tax-Free Savings Account (TFSA). The contribution isn’t tax deductible but money and interest inside your TFSA is tax-free and so are withdrawals that you can make at any time for any purpose. Amounts withdrawn are added to your TFSA contribution room for the following year.
Make down investments pay off: Plan to sell money-losing investments by the December 31 settlement date, which creates capital losses than can offset capital gains.Buy now to save: If you’re self-employed and claiming the capital cost allowance (CCA) on depreciable assets, buy them before year end to speed up tax write-offs.Move to save: If you’re moving to a province with a lower tax rate, do it before December 31 and you’ll pay the lower rate for the full year. If you’re moving to a province with a higher tax rate, try to delay until 2010.

And here’s the best tax-saving tip of all: Talk to your advisor before year-end to be certain you make the most of the other tax-reduction strategies

This column presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. Together with your financial advisor, you can explore strategies that is best suited to your financial situation.

Informational video from Canada Revenue Agency

“Tax Relief” the theme of Federal Budget 2009 –" What is in it for you as a Taxpayer"?

2009-10-10T23:31:00.000-04:00

Changes in the Federal Government’s January 2009 budget will help a broad cross-section of Canadians keep more money in their pockets. That’s welcome news amidst the market turmoil we’ve felt over the past year, though most of the savings won’t be realized until 2010 when you file your 2009 tax return.

Here are the most important highlights of some of the changes affecting individuals that in 2009 Federal Budget: however, some of these changes have not yet passed into law. If you want to learn more about how any of these changes may apply to your personal situation, contact your financial advisor for advice and guidance.

Increase in the Basic Personal, Spousal, and Eligible Dependant Amounts –These amounts which were $9,600 in 2008, will all increase from the previously announced $10,100 to $10,320 for the 2009 Taxation Year.

Increase in the Income Tax Brackets – The maximum threshold of the two lowest personal income tax brackets for 2009 will be raised. This increases the income levels at which income testing begins for the base benefit under the Canada Child Tax Credit and the National Child Benefit supplement The current and new tax brackets for 2009 are:

Previous 2009 Revised

15% Up to $38,832 Up to $40,726

22% $38,833 to 77,464 $40,727 to 81,452

26% $77,665 to 126,264 $81,453 to 126,264

29% over $126,264 over $126,264

Age Credit Increase – The amount of age credit that can be claimed by individuals over the age of 65 on their 2009 income tax return will increase. More Canadians will also be able to benefit from the credit as, thanks to the increased amount ($6,408), clawback at 15% starts at $32,312, the net income level at which the age credit is fully phased out will also increase from $68,365 to $75,032.

Home Renovation Tax Credit (HRTC) - This temporary credit will provide a 15% non-refundable income tax credit (maximum credit of $1,350) on certain home renovation expenses incurred after January 27, 2009 and before February 1, 2010. The credit may be claimed in the 2009 tax return for the portion of total eligible expenditure that exceeds $1,000 but are less than $10,000. There are a few limitations, so be sure to carefully review the details of the eligible renovations before you start your renovations.

RSP Home Buyers Plan (HBP) – the maximum withdrawal will increase from $20,000 to $25,000. The HBP allows first-time home buyers to make a withdrawal from their RRSP tax-free, provided that it is repaid within 15 years.

First-Time Home Buyers’ Tax Credit – First-time home buyers will be eligible for a new tax credit of up to $750 on homes acquired after January 27, 2009. This new tax credit will also be available to assist individuals eligible for the disability tax credit to purchase a home that is more accessible or better suited to their needs.

Extended Employment Insurance (EI) Benefits – Employee premium rates for 2010 will be frozen at $1.73 per $100 of insurable earnings; the same rate as 2009. Regular EI benefit entitlements will increase by five extra weeks to a maximum of 50 weeks for the next two years.

Re-Contribution of RRIF Minimums – Up to 25% of a RRIF owner’s 2008 RRIF minimum can be re-contributed to a RRIF (or to an RRSP if the RRIF owner has not yet reached the end of the year in which he or she turns 71). The deadline for the re-contribution was Tuesday April 14, 2009.

RRSPs and RRIFs at death – If there is a loss in value in an RRSP/RRIF after death but before the final distribution of the account, and the final distribution occurs in 2009 or later, then the decrease can be carried back to the deceased’s terminal return so that the deceased reports the lesser of the FMV at death and the FMV at distribution.

Small business limit – The small business limit is increased from $400,000 to $500,000 as of January 1, 2009.

RDSP deadline – The deadline for 2008 Registered Disability Savings Plan contribution is officially extended to March 2, 2009.

This information is written for informational purposes only, and a not a solicitation to buy or sell a financial product. Consult your financial advisor on how these tax changes will affect your specific financial situation.

WHAT IS A FINANCIAL PLAN, AND HOW DO I GET ONE?

2009-10-01T19:34:00.000-04:00

What is a financial plan and how do I get one?

Financial Planning is a general term used by most professional advisors – but not all financial plans are created equal … and they shouldn’t be. Your financial plan should be a perfect fit for your life as it is today, easily and quickly adaptable to the constant changes life throws at you, and always focused on achieving your longer term life goals. That’s a big – and important – deal.

So, the first question you must ask yourself is, Do I need a financial plan? The simple answer is yes – if you have an income, a family (or the hopes of one), dreams of a comfortable retirement, and any of the dozens of other financially-rooted reasons that are unique to you.

The next question is, What are the elements of a sound financial plan? There are two answers to that question: the general and the specific.
In general, every financial plan should include: investment planning, cash flow planning, education planning, estate planning, insurance planning, retirement planning, and income tax planning.

The key to a successful financial plan is making sure that each of those elements is made specific to you and your needs – and to do that, a competent professional advisor will take you through this six step planning process:

1. Goal setting – to determine and prioritize your goals and concerns.

2. Data gathering – assembling the relevant financial information to understand your current financial situation.

3. Financial analysis – using your current and projected financial situation to identify and answer questions like: "How much tax must I pay?" How can my taxes be reduced?" Will I have enough income to cover my expenses during retirement?" "How can I better meet my income needs?" "How can I protect my family and income if I should become disabled or die unexpectedly?"

4. Plan formulation and recommendations – discussing, reviewing and deciding on various alternatives and solutions for achieving your financial goals and improving your overall financial life.

5. Plan implementation – providing you with a written report summarizing the steps you need to take to make your plan work.

6. Monitoring and plan review – financial planning is not a one-time event. You should review your plan at least annually or when major life events occur.

Comprehensive financial planning is complex and necessary. To be sure you get exactly the right one for your situation, it’s a good idea to put a professional advisor on your financial team – an advisor with the qualifications, tools and track record you can count on to develop a personalized financial plan that will the job for you – today and tomorrow.

This column presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances.

Taxes and Your Retirement Income

2009-06-26T12:02:00.002-04:00

Managing taxes on your retirement income

Making the most out of your retirement income
Are you maximizing your retirement income? What are the sources of your retirement?

Living the retirement lifestyle you want means making the most of your retirement income over a longer and healthier span of years. And that definitely demands that you establish effective tax planning and tax management strategies aimed at maximizing your retirement income by reducing/minimizing your taxes and potential Old Age Security (OAS) ‘clawback’ pressures. When your net income reaches a certain threshold, then the OAS clawback kicks in. For 2009, the threshold starts at $66,335.

Here are three strategies to consider in your tax planning:

Income-splitting

This basically means structuring your investments and sources of income to lower your family’s total tax liability by shifting income from the hands of the spouse (or common law partner) in a higher tax bracket to the spouse in a lower tax bracket. You can do this in two ways:

Pension income-splitting. Allocate up to 50 per cent of your ‘eligible pension income’ (which includes income that qualifies for the federal Pension Income Credit and Registered Retirement Income Fund (RRIF) income for those over age 65) to your partner for taxation purposes.
Share Canada Pension Plan, Quebec Pension Plan (CPP/QPP) benefits. Applying to share your benefits with your partner can result in significant tax savings.

Tax Free Savings Account (TFSA's) for those 71 or older

At the end of your 71st year, you will be required by the government to wrap up your RRSPs and convert the proceeds, usually to a RRIF. A certain amount of RRIF income must be taken every year – but if you don’t need all of it to live on, consider putting the extra money into a TFSA where it can grow tax-free.

Monthly income portfolio

This mutual fund option is more flexible and tax-advantaged than other non-registered options. For example, a Guaranteed Investment Certificate (GIC) locks in money for a period of time in return for a fixed, guaranteed rate of return. That can lock you out of potentially higher future returns as well as creating an immediate tax bill on redemption.

On the other hand, a Monthly Income Portfolio (MIP's) is designed to provide maximum investment returns along with a monthly income. A portion of the monthly income is treated as a return on capital – a tax-deferral strategy that can provide you with increased after-tax monthly income.

There are plenty of Monthly Income Portfolio funds to choose from, depending on your investment preferences and tolerance for risk. There are also many other solid strategies for maximizing your retirement income by managing taxes. Talk them over with your professional advisor. This portfolio is commonly referred to as a T-series fund or tax efficient investments since a siginificant portion of the fund's cash distributions are return of capital (ROC).

This is presented for general information only and not a solicitation to buy or sell any investment product.. Consult your financial advisor for advice regarding your specific financial situation.

How will you finance the downpayment of your new home-- Home Buyers Plan (HBP) or TFSA?

2009-05-11T22:04:00.002-04:00

Options to Finance the Down Payment for your Home

When you are ready to buy a home. What are the options open to you to finance your downpayment?

You are now thinking seriously about buying your first home. Among your early considerations for this home purchase are: how much home you will be able to afford and how you are going to finance your purchase? You’ve heard about the Home Buyers Plan (HBP) and the new Tax-Free Savings Account (maybe you are among the early adopters who already have a TFSA) and you’re wondering which of these might be the best home financing option for you.

Let’s us take a look at the options:

• The HBP allows a first time homebuyer to make a tax-free withdrawal of up to $20,000 from a Registered Retirement Savings Plan (RRSP) for the down payment (the 2009 Federal Budget proposes to increase this amount to $25,000). There are strict eligibility requirements including meeting the definition of ‘first time home buyer’ and the amounts withdrawn from the RRSP must be repaid over a 15-year period to avoid being taxed on the full amount of the RRSP withdrawal.

• Your RRSP contributions are tax deductible but your TFSA contributions are not, so the funds you need for a down payment can accumulate more quickly in an RRSP than in a TFSA. Here’s an example:

Your marginal tax rate is 30% and you can afford to contribute $4,000 to your RRSP because of the tax deduction you receive but you can afford to contribute only $2,800 to your TFSA in after tax income because your TFSA contribution is not tax deductible and does not create any tax savings.

Assuming your RRSP and TFSA investments both earn a 5% annual return, after five years, you will have accumulated $23,800 in your RRSP and just $16,245 in your TFSA.

• On the other hand, there are no ‘first-time home buyer’ restrictions when you use a TFSA withdrawal to fund your down payment, there are no dollar limits on the amount you can use, and there is no requirement to repay your TFSA withdrawal so you won’t encounter tax issues down the road. Your TFSA withdrawal will create more contribution room in the year following the withdrawal and that could be a benefit.

• If you are able to maximize your RRSP contributions, you might consider using those tax savings to make TFSA contributions and eventually make your down payment using a combination of the HBP and a TFSA withdrawal. But because the TFSA is new, it could take you a number of years to build up enough of a TFSA balance to fund or partially fund your down payment.

These are your choices – whether it’s buying your first home, figuring out how to pay for it … or any other aspect of your financial life, a professional advisor can help you make the right choices for your situation.

This is presented for general information only. Consult your financial advisor for advice on the right choices for your financial situation.

Did you a get a Tax Refund? What to do with your Tax Refund Money

2009-05-01T14:25:00.000-04:00

Did You Get a Tax Refund this Year- What can you do with your tax refund money?
April 2009

It’s great to get a tax refund, isn’t it? Tempted to buy that latest technical toy or a vacation? Think again. So, what are you going to do with it? In past years, you might have been sorely tempted to spend it on a guilty pleasure but maybe not in this more economically year. Remember this year is the year of the "pink slips", take a second look and see what you can do with your tax refund money.

However – ‘if’ you want to improve your personal economy in the longer run, here are a few options for making the best use of your tax refund.

· Accelerate your RRSP: Get a head start on your next year’s Registered Retirement Savings Plan (RRSP) contribution. You’ll benefit from almost an extra year of potential long-term RRSP tax-deferred growth, plus a tax deduction against your taxes next year.

· Check out new investment opportunities: If your RRSP is topped up, use your refund to:

• Open a Tax-Free Savings Account – you’ll enjoy tax-free earnings and growth and you can make tax-free withdrawals at any time for any use you can imagine.

• Add to your non-registered investments. The best tax-reducing strategy is to hold stocks and equity mutual funds outside an RRSP. Any gains on these investments are taxed at the more favourable capital gains inclusion rate and Canadian dividends received from these types of investments qualify for the dividend tax credit.

· Build an education fund: Fund your children’s future education costs with a Registered Education Savings Plan (RESP). RESP contributions are not tax deductible, but their growth is tax deferred and they qualify for Canada Education Savings Grants* of 20 per cent or more of your contribution.

· Pay down your most costly debt. The interest rate on credit card debt can range from 15 to 29 per cent per annum – so be sure to reduce or eliminate that debt first.

· Pay down your long-term debt: Taken care of your high-cost debt? Then pay down nondeductible debt like your mortgage. Every pre-payment will reduce your repayment schedule and could save plenty in interest payments.

· Zero next year’s refund: Why give the government an interest-free loan of your money for a year and have to wait for a refund cheque? Apply to have less tax withheld from your pay cheque and you’ll have a little more money for your own use every pay period. Apply to lower your withholding tax using File Form T1213, available from your local CRA office or from the CRA Website, www.cra-arc.gc.ca. [Québec clients also have to file the Québec form TP- 1016-V.]

It’s great to get a tax refund – but it’s even better to have a comprehensive tax and financial plan.

This article is presented for general information only, and not a solicitation to buy or sell any investment products.

A professional financial advisor can help develop the right plan for you.

Consult your financial advisor for your specific financial situation.

This is the Year of The Pink Slip - What it means to your pension?

2009-04-30T20:02:00.000-04:00

Are you being "downsized", changing jobs, or retiring - what it means to your pension?

Are you being ‘downsized’, changing jobs or retiring? If so, you’ll have some important financial decisions to make – especially when it comes to your pension plan. Here are some important facts you need to know.

The Essentials

You are entitled to all the money you contributed to your pension plan plus your investment earnings. After a certain period (determined by provincial legislation), you also become entitled to your employer’s contributions to your pension plan. This is referred to as being “vested.” When you leave your employer, you can choose to leave your money in the pension plan and draw a pension when you are ready. Many plans allow you to transfer your accumulated cash value to your own locked-in plan that will give you greater control over how your money is invested and when you withdraw it as income. However, deciding to transfer to a locked-in account could result in the loss of other employer benefits like extended health care, dental care or pension increases that offset inflation.

Types of Plans

There are two basic types of employer-sponsored registered pension plans (RPPs):

Defined Benefit (DB) pension plans guarantee a specific pension amount paid to you regularly from retirement through the rest of your life. The amount of your DB pension benefit is set according to your length of service and average salary. If you plan to take early retirement, assess the financial impacts such as when you could receive an unreduced pension and whether your pension plan includes a “bridging” benefit to provide slightly higher benefits until you reach age 65 and Canada Pension Plan (CPP) and Old Age Security (OAS) benefits kick in.

Defined Contribution (DC) pension plans, also known as money purchase plans, do not guarantee the amount of future benefits. Your retirement income will depend on accumulated contributions and the investment returns earned by these contributions.

Retirement Incentives and Severance

You may have been offered an attractive financial package to take early retirement. If you were “downsized,” you probably received some severance pay. You may also be entitled to some or all of the pension benefits you’ve accumulated at the company.

The most important factor is that the total amount is usually fully taxable in the year you receive your severance -- although there may be ways to defer tax on some or all of it.
Your pension plan decisions can have a major impact on the quality of your retirement or your standard of living while seeking a new opportunity. Make the best choices for your situation by assessing alternatives with the help of your professional financial advisor.

This article is presented for general information only. Consult your financial advisor for your specific financial situation.

Tax Free Savings Account (TFSA) and Estate Planning

2009-02-19T15:38:00.000-05:00

Tax Free Savings Account (TFSA) and Estate Planning

Death of the TFSA holder - Who can be named as the successor-holder in a TFSA contract?

A TFSA holder can only name a spouse or common-law partner as the successor holder in the TFSA contract. On the death of the TFSA holder, the spouse becomes the new holder of the TFSA investment, maintaining the tax exempt status of the TFSA. This will not affect the TFSA contribution room of the spouse or common law partner. Whether or not a beneficiary can be named in a TFSA contract depends on provincial legislation. As of the date of this writing, Ontario had not passed a legislation regarding the naming of a beneficiary in a TFSA contract. Some of the provinces have already revised their legislation to allow for the designation of a beneficiary. Some TFSA application forms may not be updated until later in 2009, until the provincial legislation have been enacted. If you are not able to designate a beneficiary when opening a TFSA account, check back with your financial institution within a couple of months.

What are the tax rules upon death of the TFSA holder?

Where no successor holder is named for the TFSA, the proceeds of the account will become part of the estate of the deceased. If a surviving spouse/common-law partner receives proceeds from the TFSA, the proceeds can be used to make an exempt contribution to the survivor's TFSA, and not affect the contribution room of the survivor as long as:

It is done before the end of the first calendar year following the holder's death (rollover period);
And, it is designated as an exempt contribution in the survivor's income tax return for the year the contribution is made.

Where there is no spouse or common-law partner named as the successor holder, the TFSA will not lose its tax-exempt status:

Until the the earlier of the time it ceases to exist (completely paid out to beneficiaries);
Or, end of first calendar year following the holder's death.

Any payments to beneficiaries, including during this exempt period, will be taxable to the beneficiaries, to the extent that the payment includes income or capital gains earned after the death of the holder. Take note that the income earned within the TFSA after the death of the TFSA holder becomes subject to tax.

TFSA Scenario - Death of TFSA holder

TFSA holder dies with TFSA valued at $90,000. By the time the assets are distributed to the beneficiaries, the value has grown to $92,000. $2,000 will be taxable income to the beneficiaries. The $2000 income was earned after the death of TFSA's holder.

TFSA and Probate

Assets with named beneficiaries such as life insurance policies or RRSPs are excluded in determining the value of an estate for purposes of probate. It is likely that a TFSA with a named successor holder would also be excluded from probate. This is a very good reason for anyone with a spouse/common-law partner to ensure that they name that person as a successor holder when setting up the TFSA.

This article is presented for general information only. Consult your financial advisor for advice regarding your specific financial situation.

Tax Free Savings Accounts (TFSA) - Benefits for Seniors

2009-02-14T18:03:00.000-05:00

Tax Free Savings Account (TFSA) and Seniors

The TFSA provides seniors with a tax-efficient savings vehicle to help meet ongoing savings needs, even after they reach age 71. Whereas for RRSP, seniors when they reach age 71, are required to convert their registered retirement savings into another type of retirement income vehicle (with annual minimum withdrawal requirement), TFSA has no age requirement. Seniors can hold TFSA past the age of 71, hence the product is referred to as a savings vehicle for all Canadians above the age of 18, a Canadian resident, and with a social insurance number.

Neither the income earned in a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits such as Old Age Security, Guaranteed Income Supplement benefits and the Goods and Services Tax Credit. The income earned has no effect on federal income-tested benefits at all, in short the product may be referred to as "transparent" unlike RRSP, and RRIF wherein the withdrawals may trigger claw-backs of federal income benefits.

Scenario 1- Senior Couple:

Mark and Patricia are retired and living comfortably on Mark’s pension. Patricia also receives a small work pension based on her years of work after raising their children. They would like to save Patricia’s pension each month and use the money it to spend the winter season in Florida (the couple are snowbirds). The TFSA will provide them with an effective means to save for their trip south each year, without paying tax on the interest earned on those savings

Impact of a TFSA on Federal Income-Tested Benefits and Credits

TFSA - savings incentive for low and modest-income seniors:

A TFSA improves savings incentives for low- and modest-income individuals since neither the income earned in a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as the Canada Child Tax Benefit, the GST credit, the Age Credit, Old Age Security and Guaranteed Income Supplement benefits.

Scenario 2 – where the Senior Couple receives Federal Income Benefits

Walter and Mary, a modest-income couple, expect to receive the Guaranteed Income Supplement (GIS) in addition to Old Age Security and Canada Pension Plan benefits when they retire. They have saved for a number of years in their TFSA and now earn $2,000 a year in interest income. Neither this income, nor any TFSA withdrawals, will affect the GIS (Guaranteed Income Supplement) benefits (or any other federal income-tested benefits and credits) they expect to receive. If this $2,000 were earned on an unregistered basis, it would reduce their GIS benefits by $1,000.

To find out the comparatives of TFSA with an open (non-registered investment vehicle) follow this link to the TFSA calculators of Federal government website:

http://tfsa.gc.ca/cal-eng.html

Learn More about the Tax-Free Saving Account:

Visit the Finance Canada website at:http://www.fin.gc.ca/fin-eng.asp

Visit the Canada Revenue Agency website at:http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

Visit the Budget 2008 website at:http://www.budget.gc.ca/2008/plan/chap3b-eng.asp

This article is presented for general information only. Consult your financial advisor for advice regarding your specific financial situation.

Tax Free Savings Account (TFSA) or RRSP, what is right for you?

2009-02-02T22:41:00.000-05:00

Tax Free Savings Account (TFSA) or RRSP, what is right for you?

Most investors have short-term goals, which may include a major purchase, vacation or establishing an emergency fund. There are several options available for your personal Tax Free Savings Account (TFSA) depending on the “term” of short-term and the your overall plan. Explore how a TFSA can help you save for these goals faster and tax free. You can put $5000 in a variety of investment options.

Your financial advisor can help you incorporate your short-term, long-term and tax planning needs into you financial plan.

Watch your savings grow tax-free throughout your lifetime.

To analyze which savings option is right for you, there are top five differences between RRSPs and TFSAs:

1. An RRSP is a savings plan mostly aimed at saving for retirement. this savings vehicle is a tax deferral savings plan. A TFSA is for all your other savings goals. Your goal can be to save for a car, improvements for your home, a vacation, for education, and can include so many other savings goals you may have.

2. RRSP is tax deductible, you don't pay tax on the money you save in an RRSP until you take it out (fully taxable). With a TFSA, it is not tax deductible, this comes from your after tax money. You don't get to deduct your TFSA contribution from the income you report on your tax return.

3. Whenever you take money out of an RRSP, the amount is added to your income and taxed at your current tax rate. With a TFSA, there's no tax on any money you take out – not even the money you made investing, including capital gains. You put your money in, then you get your money and growth out --tax free, it is that simple....

4. You have to close/collapse an RRSP after age 71. There is no time limit for contributing to a TFSA, contributions allowed past age 71.

5. With both plans, TFSA and RRSP, you can name your spouse or common-law partner as a beneficiary. However, only the spouse or common law partner can be the successor to the TFSA plan. The money will roll over to them upon your death. But with an RRSP, after your spouse or partner dies, there will be taxes due on any money left in the account. So if your children inherited the money, they would have to pay that tax. A TFSA is different. Your children would get the whole amount tax-free. That's because you've already paid the tax on the money you contributed to your TFSA.

It's also important to note that the maximum allowable RRSP contribution may be significantly greater than the amount that may be deposited in a TFSA. RRSP limits are based on the lower of 18% of earned income or the limit for the year. By comparison, Canadians may contribute up to $5000 to a TFSA in 2009, with future increases in the yearly limit indexed to inflation. This limit is the same for everyone, regardless of income.

The easy access helps make TFSAs a good supplement to RRSPs for people who want to continue saving for retirement but have maximized their RRSP contributions or have reached the age of 71 -- the age limit for RRSP contributions. There is no maximum age for contributing to a TFSA.

Now, let us try to answer the question RRSP or TFSA, which option is right for you?

The answer depends on…

Your marginal tax rate (will your marginal tax rate be lower at retirement?)

Other RRSP opportunities

Will it be enough for you?

Flexibility versus discipline

Your primary savings goal(s)

You also can’t forget the other opportunities of RRSPs such as:

•Pension income credit,
•Income splitting,
•pension income splitting with your partner once you’re 65, or
•Using spousal RRSPs.

If your primary goal is saving for retirement, you need to ask yourself if the $5,000 annual contribution limit that the TFSA offers will provide you with enough savings for the retirement lifestyle you desire.

TFSAs give you the flexibility to withdraw funds anytime you wish. If your primary goal is to save for your retirement, analyze your financial strategy and ask yourself if you have the discipline to put money into a TFSA and not touch it again until retirement. RRSPs have that self-imposed discipline (it is a tax deferral savings strategy – no one wants to take a tax hit if they don’t have to. A TFSA doesn’t offer you that structure/and discipline.

Or, consider that if you have other goals to save for, short term or long term, you may not want to use your entire TFSA contribution room for retirement savings.

There are other variables to consider in deciding which option is right for you. Analyse your personal financial situation, and with the advice of your financial advisor, decide on an option that is right for your financial circumstances.

This article is presented for general information only. Consult your financial advisor for advice regarding your specific financial situation.

Canadian Federal Budget 2009

2009-01-30T16:43:00.000-05:00

Canadian Federal Budget - 2009, a Summary

Canadian Federal Budget 2009 - A Tax Update

On January 27th, 2009, Finance Minister James Flaherty presented the minority government 2009 Federal Budget. This federal budget contains several measures of interest to individuals and businesses. The summary presented in this blog contains highlights of these budget proposals, which are not yet enacted.

Changes/ Measures Impacting Individuals:

Personal Tax Measures

Increase to the Basic Personal, Spousal and Eligible Dependant Amounts:

The basic personal amount, the spousal and common-law partner amount, and the eligible dependant amount increased from $9,600 in 2008 to $10,100 for 2009. The Budget 2009 proposes to further increase these amounts to $10,320 for the 2009 taxation year.

While the basic personal amount is not income tested, the spousal or common-law partner and dependant amounts are reduced by the net income of the spouse, common-law partner or dependant on a dollar for dollar basis.

Increase to Income Tax Brackets

Although no changes were announced to personal tax rates, the Budget proposes to increase the two lowest personal income tax brackets for 2009 beyond previously announced increases (which were based on inflation in 2008).

The personal bracket thresholds will continue to be indexed to account for inflation for the year 2010 and in the future years.

Increase to the Age Credit (a non-refundable tax credit)

The age credit provides a non-refundable tax credit for individuals who are 65 years of age or older. The age credit is calculated by multiplying the lowest personal tax rate (currently 15%) by an amount that is indexed on an annual basis. The 2009 Budget proposes to increase the amount upon which the age credit is based/calculated from $5,408 to $6,408 for 2009, with indexation of this age credit to be continued in the next years.

The net income level at which the age credit begins to be phased out at a rate of 15% remains unchanged at $32,312. With the proposed increase in the age credit amount, the income level at which the credit will be fully-phased out will increase from $68,365 to $75,032.

Tax Relief for Home Owners

Home Renovation Tax Credit

To encourage consumer spending and economic activity during this difficult time, the Budget proposes a temporary Home Renovation Tax Credit (“HRTC”), which will provide a 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant or accordance with agreements entered into after January 27, 2009.

The credit may be claimed on the 2009 tax return for the portion of eligible expenditures that exceeds $1,000 but is less than $10,000, and will provide up to $1,350 in tax relief (i.e., 15% multiplied by ($10,000 minus $1,000)).

Family members will be subject to a single limit based on their pooled expenditures. For this tax credit purpose, a “family” will generally be considered to consist of an individual, his or her spouse or common-law partner, and their children who were, throughout 2009, under the age of 18 years. Eligible dwellings are generally restricted to personal-use homes including houses, cottages, and condominium units.

Expenditures eligible for the HRTC

The HRTC is generally restricted to enduring renovations and alterations. Individuals will need to keep receipts for all expenditures.

RSP Home Buyers’ Plan

The Home Buyers’ Plan (“HBP”) allows the owner of a registered retirement savings plan (“RRSP”) to withdraw amounts from their RRSP on a tax-free basis to purchase or build a home. The maximum amount that can currently be withdrawn from an eligible person’s RRSP under the HBP is $20,000; the Budget proposes that this withdrawal limit be increased to $25,000 with respect to withdrawals made after January 27, 2009.

To be eligible to avail of the HBP, the RRSP owner must be considered to be a “first-time home buyer”. You are not considered to be a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence. (There are special rules apply where the home is being acquired for the needs of a disabled person.)

An HBP participant must repay amounts that were withdrawn under the HBP to his or her RRSP over a 15-year period, or the unpaid amounts will be included in his or her taxable income (unpaid amounts for a particular year will be considered as taxable income).

First-Time Home Buyers’ Tax Credit (a new non-refundable tax credit)

The Budget proposes a new non-refundable tax credit for first-time home buyers who acquire a qualifying home after January 27, 2009. (The closing date for the purchase of the home must be after that date in order for the tax credit to be available.) The amount upon which the tax credit is calculated is $5,000, multiplied by the lowest personal income tax rate for the year (15%).The First-Time Home Buyers’ Tax Credit may be claimed in the year in which the home is acquired.

A “qualifying home” is a home that is eligible under the Home Buyers’ Plan, and which the person or the person’s spouse or common-law partner intends to occupy as their principal place of residence not later than one year after the acquisition.

This new tax credit will also be available for the acquisition of a home acquired after January 27, 2009 either by an individual who is eligible for the Disability Tax Credit (“DTC”) or by an individual for the benefit of a relative who is eligible for the DTC. The home must be acquiredto enable the DTC-eligible individual to live in a more accessible dwelling or in an environment better suited to the person’s needs.

The First-Time Home Buyers’ Tax Credit may be claimed either by the person who acquired the home or by his or her spouse or common-law partner. If a qualifying home is purchased jointly, the total amounts claimed by the couple cannot exceed the credit that could be claimed if only one individual had acquired the home (as mentioned maximum of $5000 multiplied by 15% as federal tax credit).

Other tax changes in Budget 2009 that will benefit individuals:

The National Child Benefit Supplement and Canada Child Tax Benefit

The Budget proposes to increase by $1,894 the amount of income that families may earn before the National Child Benefit Supplement (“NCBS”) is fully phased out, or before the Canada Child Tax Benefit (“CCTB”) begins to be phased out.

Specifically, for the 2009–10 benefit year, the income level at which the phase-out of the CCTB begins will increase to $40,726 (based on combined family income), and the income level at which the phase-out of the NCBS begins will increase by $1,894 such that it is completely phased out by $40,726 for the majority of families. This change is proposed to take effect for the 2009-2010 benefit years, which begins in July 2009.

RRSP and RRIF Losses after Death

Upon the death of the owner of an RRSP or a RRIF, the fair market value of the registered account owner at the date of death is included in the deceased’s income for the year of death. Any increase in the value of the RRSP or RRIF assets from the date of death to the date that the assets are distributed is taxable to the beneficiaries.

However, there is no provision under the Income Tax Act to recognize a decrease in value of the RRSP or RRIF assets that occurs after the date of death to the date the assets are distributed.

In light of the recent market developments, Budget 2009 proposes that, upon the final distribution of the RRSP or RRIF assets, the amount of any post-death decrease in the value of the RRSP or RRIF assets may be carried back and deducted against the RRSP or RRIF amount that was reported as income on the final tax return (terminal return) of the deceased. The amount that can be carried back as a deduction is equal to the difference between the fair market value of the RRSP or RRIF at the date of death and the total amounts paid out of the RRSP or RRIF after the death of the RRSP/RRIF owner.

This measure will apply with respect to a deceased person’s RRSP or RRIF where the final distribution from the RRSP or RRIF occurs after 2008.

Enhanced/Extended Employment Insurance (EI) Benefits

The 2009 Budget proposal:

Freeze Employment Insurance (“EI”) employee premium rates for 2010 at $1.73, the same rate as 2009; and increase all regular EI benefit entitlements by five extra weeks to a maximum of 50 weeks for the next two years to provide relief for individuals.

Temporary Relief Regarding Re-Contribution of RRIF Minimums

Last November 27, 2008 the Minister of Finance proposed that the minimum annual payout for 2008 applicable to a RRIF owner would be reduced by 25% to provide relief to seniors.

The proposal would allow a RRIF owner who had made a withdrawal from the RRIF in 2008 to re-contribute up to 25% of the "normal" RRIF minimum to a RRIF or to an RRSP (subject to age restrictions) and be able to claim a tax deduction for this re-payment amount on account of the market developments.

In the 2009 Budget, the federal government has confirmed its intention to proceed with the introduction of legislation to enact these proposals.

Business Tax Measures

The 2009 Federal Budget included several tax measures that provide relief to Canadian Controlled Private Corporations (CCPC's).

Small Business Limit

The Budget proposes to increase the small business limit from $400,000 to $500,000 as of January 1, 2009. The increase in the limit will be pro-rated for corporations with taxation years that do not coincide with the calendar year.

Accelerated Capital Cost Allowance

Manufacturing and Processing

The Budget proposes to extend the 50% straight-line accelerated capital cost allowance (“CCA”) rate for eligible assets for two more years to include 2010 and 2011. The half-year rule will apply to manufacturing and processing assets subject to this measure.

Computers (accelerated Capital Cost Allowance "CCA")

The Budget proposes a temporary 100% CCA rate for eligible computers and software acquired after January 27, 2009 and before February 2011, an increase from the current rate of 55%.These items will not be subject to the half-year rule, so a business can fully deduct the cost of an eligible computer and the systems software in the first year.

Electronic Filing and Penalties

The Budget 2009 proposes that corporations with annual gross revenues in excess of $1 million for a taxation year after 2009 will be required to file their income tax returns for the year in electronic format.

The Budget proposes to also introduce a penalty for filing a corporate income tax return in an incorrect format, although no penalties will be introduced until 2011.

This article is presented for general information only. Consult your financial advisor for advice regarding your specific financial situation.