Sunday, July 4, 2010

Web Sites to assist in your vacation plans

July is here and finally, it’s summer and we all switch into “Vacation mode” or at least “I’d like to be in Vacation Mode”.

Here are some on line resources to help make your planning easier and to save you some money. I’ve divided them into categories and included some pre-travel tips at the end.

The Fine Print
This is just a list of sites. I have not used most of them and do not warranty or recommend the services that they provide. Note – the fine print on this list is upfront and in large print – just like the services I provide.

If you plan to stay in Ontario
Here are some web sites to get great bargains: - this site includes discount coupons for a range of Toronto and Ontario attractions - Bargain Moose finds you the best deals in Canada, and keeps you up-to-date with Canadian coupon codes, freebies and hot deals. You can even sign up to get their newsletter. - Get 50 to 90 percent off the best stuff your city has to offer. This link is for Toronto, but many other cities are available. - Find bargains and warehouse sales in the Greater Toronto Area - Restaurants, is North America's ultimate Restaurant dining guide. It includes discount coupons.

If you’re looking for things to do, try these sites: – for a list of what’s on in the city.
• You can also try the event listing in Now magazine – for what’s coming up in the next week
• if you’re looking to go to the Stratford or Shaw festivals – their websites are:
• If you prefer to check out the smaller summer theatre festivals – a listing can be found at

Looking to Travel

Looking for web sites that offer good deals? How about checking the following:

Looking just for a rental car –
How about specials on air fares - – a Danish site with low air fares

Some sites with Cruise specials include:

Looking for places to stay? – links travelers looking for places to stay with people who have rooms to spare. It bills itself as a budget B&B – a home-swapping site – is 18 years old and assists people looking to swap homes. They have 36,000 homes worldwide – you must be at least 40 years of age, have a permanent residence, and be able to provide clean, comfortable, and private sleeping quarters and either full or continental breakfast for two or more guests. - A site that scans the other web sites to find the best deal in hotels

Looking for a bike tour -

Looking for a guide abroad?

General Tips
Do you have Travel Insurance if you’re traveling out of Ontario? Give me a call and I can point you in the right direction. Note – most group plans include Emergency Medical Travel Insurance as one of the benefits.

If you are going on an extended trip – let your credit card company know. You also need to have a trusted friend or neighbor check your house or your home insurance policy may not be valid should something go wrong.

Finally, don’t forget about potential Roaming charges on your cell phone if you travel out of the province. Check with your service provider for your options.

Do you know of additional web sites? Let me know and I will add them to this list.

Sunday, June 13, 2010

Estate Planning 101

If you’re like most people, getting your personal financial plan started can be a challenge. And what about planning your estate? Well, that subject might really make you shudder. But why? Too dreary? Too complicated? Too intimidating? Or simply not on your list of priorities?

Estate planning should be a financial priority at almost any stage of life. In fact, an estate plan can be essential for organizing your financial affairs and providing for the well being of your family members.

Simply put, an estate plan is a road map for planning your estate and should be updated on an ongoing basis - particularly as your circumstances change throughout your life. Why is it important to have a plan? To ensure a simple, tax-efficient and organized transfer of your assets to loved ones.

When you start your plan, there's a lot to think about. You want to live your life to the fullest, and ensure that your heirs will get the most out of the assets you're setting aside for them. Here are a few of the things you'll need to know:

Your Will
The will is a legally enforceable declaration of how a person wishes his/her property to be distributed after death. A will can be quick and easy to produce and will generally cover the following:
• Naming the executor — the individual(s) or organization chosen to administer the estate. If you should die without a will (referred to as dying intestate), the province you reside in will step in to administer your estate. In this case, you've essentially forfeited your say on how things are divided and who will be in charge of the process.
• Naming beneficiaries of the estate (e.g. immediate or extended family, institutions, etc.)
• The distribution of assets within the estate (e.g. investments, real estate, possessions)

What is probate?
Probate is the process by which a provincial court confirms the validity of your will. Potentially, it can be quite time consuming, tying up your assets for months or longer.

Probate fees are essentially the taxes that must be paid to the provincial government before your executor can begin to administer your will. The fees vary from province to province and are based on the value of the assets in your estate. In most provinces, the fee structure is tiered.

In addition to probate fees, there are fees payable to the executor for administration services and fees payable for legal and accounting services. In the end, the cost of probate can be significant.

Reducing Taxes
We all know the old cliche that the only two certainties in life are death and taxes, but how much do we really know about taxes after death?

If you have a will, upon your death it is your executor's responsibility to file a tax return for you. The government will consider you to have sold all your assets immediately before your death and any capital gains/losses will be crystallized. That may lead to a big tax bill.

Depending on your individual needs, there are strategies you can employ within your estate plan to minimize the amount of taxes you have to pay and to avoid probate. Below are a few key examples:
• Maximize asset "roll-overs" - transfers to your spouse that defer capital gains
• Get advice on setting up a trust to ensure your beneficiaries are well looked after
Give gifts of cash or possessions while you are still alive
• Consider charitable donations to create valuable tax benefits
• Buy life insurance that is paid out to a named beneficiary on a tax-free basis
Restructure investments with insurance companies to avoid probate on death

The reassurance of having a strategy in place to preserve the value of your estate for loved ones is something to value. After all, why pay if you don't have to? Work with your financial advisor to determine what exactly is in your estate, and then devise your plan.

Wednesday, May 5, 2010

Five suggestions for what to do with your tax refund

Last year, the average Canadian got back approximately $1,400 on their 2008 income taxes.

Tina Di Vito, director, retirement strategies, BMO Financial Group, offers the following advice on how to make the most efficient use of your 2009 tax refund:

“Maximizing your 2010 income tax refund by contributing to your RRSP this year is always a good option,” says Di Vito.

“However, depending on your personal situation, there may be several ways to make the most efficient use of the money you get back. Meet with a financial planner to determine the best approach for you.”

Pay down RRSP loans

If you took out an investment loan to maximize your RRSP contribution and generated a larger refund, you should use your tax refunds to pay down the loan.

Pay down credit card debt

High interest on some credit cards can eat away at savings. Reduce the cost of credit by using your tax refund to reduce or pay down your credit card balances, targeting the highest rates first and transferring the balances to a lower rate credit card.

Lump sum mortgage payment

If you have a mortgage, it may be good idea to use your tax refund to make a lump sum payment. Applied directly to the principal, a lump some payment could save you thousands of dollars in interest costs over the life of the mortgage.

Top-up a TFSA

If you are not carrying any extra debt, contribute to a Tax-Free Savings Account (TFSA) to let you grow your money tax free. If you who maxed out your TFSA contribution in 2009 you have room for an additional $5,000 this year.

Save for education

Saving for a child’s education can be an expensive thing. Contributing to a Registered Education Savings Plan (RESP) can help alleviate some of the pressure that all parents feel when planning for their children’s future. If you have children, you should consider opening an RESP using their income tax refund. A $2,500 dollar contribution to an RESP can earn a $500 grant from the government. By maximizing contributions every year, you could earn up to $7,200 in grants for every child.

from BMO offers advice on how to maximize the return of tax refunds

Sunday, April 11, 2010

Tax Planning Strategies

Give me a call for more information about any of these points.

Newly announced changes to CPP, increases to small business deductions, and eco-friendly grants have ushered in fresh opportunities to maximize tax refunds.

Thanks to significant changes in 2008 and 2009, in addition to dependable, long-standing tax planning strategies you now have many approaches to defer taxes and save and for years to come.

Are you green?

EcoEnergy retrofit program
Are you going "green" at home? Cash grants are available to homeowners making eco-friendly renovations to their residences. The annual grant (up to $5,000 with a lifetime maximum of $500,000 is based on the effectiveness the upgrade—not the cost. The home must be assessed by a certified Natural Resources Canada energy advisor in order to be eligible. Check out www.ecoactic for more information.

Public transit passes
A non-refundable, eco-friendly tax credit is available for dedicated public transit riders. Total annual costs for travel passes one week or longer are multiplied by the lowest personal tax rate to calculate the credit.

Thinking about Retirement?

Retirement income

In June 2009, the federal government announced significant changes to how the Canada Pension Plan (CPP) will be paid out to Canadians. Effective January 2012, you will no longer have to prove that they've stopped working in order to receive CPP benefits. This new rule could be beneficial to seniors who ease slowly into retirement through part-time and consulting work.

The collection of CPP benefits will continue to be available as early as age 60 and as late as age 70. But the recommended changes will reduce benefits received prior to age 65 by 6% per year as opposed to the current 5%. They will also increase benefits received after age 65 by 7% versus 5% beginning January 2011 for those selecting later retirement, and starting January 2012 for those selecting earlier retirement.

Until January 2012, though, it’s still a good idea to select earlier retirement whenever possible. After that, the decision to apply for CPP early and accept the lower income should be based on other factors such as whether your client needs the income to cover lifestyle expenses and longevity in their family.

Corporations and income splitting

Small business deduction increase
The 2009 federal budget increased the small business deduction to $500,000 from $400,000. Several provinces have also raised their deduction limit to match. The increased deduction increases the amount of business income earned by Canadian-controlled private corporations that can be taxed at lower rates.

Salary to spouse can increase retirement income
Many corporation owners already take advantage of the ability to split income by paying their spouse a salary. Take further advantage of this opportunity by increasing your spouse's salary to the Yearly Maximum Pensionable Earnings (YMPE), which this year is $47,200. This simple step will increase the spouse's opportunity to earn the maximum available CPP income in retirement as well as the higher RRSP contribution room created by the extra income.

Personal and corporate savings
When the higher-income-earning spouse owns a holding company and makes the majority of the income, they should plan ahead for income splitting in retirement. Maximizing contributions to the lower-income spouse's spousal and personal RRSP while saving the balance to the holding company (owned solely by the higher-income-earning spouse) will allow for tax-deferral and reduced taxation pre-retirement. Retirement income from the corporation will be attributed to one spouse and Registered Retirement Income Fund income can be attributed to the other, allowing for reduced individual taxation.

Loans to family members
The CRA’s prescribed interest rate for family loans fell to 1% in April 2009 and continues to cruise at a low altitude (rates change every quarter, so look these up). Locking in a family loan at this low rate and thereby shifting income earned on the investment of these funds to a spouse or other family member—including a minor child—who has little or no other income could provide significant tax savings for your clients. Ensure that any loan is governed by a written agreement outlining repayment terms as well as the interest rate at the time of the loan to ensure attribution rules do not apply.

Tax credits and grants

First-time Home Buyers’ Tax Credit
Worth up to S750, this credit applies to all homes purchased after Jan. 27, 2009. The credit is calculated by multiplying the lowest personal income tax rate by $5000. The first time home buyer (and spouse) must not have owned a home for any of the four preceding years. If the home buyer qualifies for the Disability Tax Credit (DTC), they do not have to meet this rule to qualify for the credit

Capital losses
The recent economic turmoil may provide a tax-savings opportunity. Capital losses in stock portfolios may allow you to claim back some of the taxes you paid on capital gains in sunnier times.

Transfer of unused tax credits to spouse
Some non-refundable tax credits can be transferred to a spouse if you are unable to claim them. Do not allow those credits to go to waste. Transferring the credits for age amount, pension income amount, disability amount, and tuition and education amounts to a spouse will maximize the tax savings available to the whole family.

Tax-efficient accounts

Open a Registered Disability Savings Plan
The Registered Disability Savings Plan (RDSP) provides individuals with disabilities, and their family members, the opportunity to save in a tax-deferred environment. Like a Registered Education Savings Plan (RESP), the RDSP tax-shelters the invested funds until withdrawal. Anyone eligible for the DTC may establish an RDSP. Parents and guardians can establish RDSPs on behalf of minor children. The maximum lifetime contribution limit is $200,000, but there is no annual contribution limit. The Canada Disability Savings Grant and the Canada Disability Savings Bond provide additional contributions to RDSPs for those who pass the income tests. More information on this useful plan is available at and

RRSPs and Spousal RRSPs
You know them and you love them. The RRSP may be a comparatively old dog, but it's loyal and dependable. Encourage the higher-income-earning spouse with the greatest contribution room to contribute to a spousal RRSP. Whilethe federal government now allows income splitting on RRIF income, one never knows when a tax law could be repealed.

Tax-Free Savings Accounts
Maximum annual contributions are $5,000, with no lifetime limit. While contributions are not tax-deductible, the growth is tax-sheltered and funds from the account can be withdrawn tax-free at any time. What's best is that withdrawals create new contribution room the following year; with an RRSP, if the client's contribution is used, it's gone, regardless of withdrawals. Withdrawals will also not affect eligibility for federal tax credits or income-tested benefits, something seniors who benefit from pension income credits and Old Age Security will want to be aware of.

Adapted from an article published March 2010 in AE Report

Thursday, April 1, 2010

10 Tax Filing tips

Tax-planning should be a year-round activity. There are strategies each of us can employ to make sure we pay no more tax than we need to. Below are the top ten tax filing tips.

1. Report all your income - Don't let a missing tax slip or receipt prevent you from filing on time. The CRA states that if you're unable to provide a slip by the due date, simply attach a note to your return stating the name and address of the payer, type of income involved and what you're doing to get the slip to help avoid any penalties.

2. Pool your donations - Last year's goodwill may result in both federal and provincial donation tax credits. While all donations under $200 are credited at 15% federally plus between 4% to 11% provincially, donations over the $200 threshold are eligible for a 29% federal credit plus 11% to 21% provincially (ignoring additional provincial surtax savings, where applicable). So pool your donations with your spouse or partner when filing a return to receive the higher donation credit.

3. Split that pension - Pension splitting is a tax planning technique that you can only take advantage of come tax filing time and allows Canadians who received eligible pension income to split up to half of that income with their spouse or common-law partner. Aside from benefiting from a spouse or partner's lower rate of taxation, you may also be able to preserve some or all of the age credit and avoid or minimize the Old Age Security benefits claw back.

4. Write off your kids - While you can't actually "deduct" your children for tax purposes, you may be eligible to claim the "child amount" - $2,089 per child - entitling you to a 15% credit against taxes payable. If your minor child worked part time during the year, consider filing a tax return on their behalf which will start to establish RRSP contribution room for use in future years. Be sure to explore the many opportunities for tax savings available to post-secondary students and children with lower incomes.

5. Claim those renovations - As the dust settles on home renovations completed before February 1, 2010, now is your one and only chance to collect your Home Renovation Tax Credit (HRTC), a 15% non-refundable tax credit for eligible renovation expenditures made to your home or vacation property. The credit applies to any eligible expenses over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350. If you own a condominium, common expenses may be eligible for this tax credit as well.

6. Claim legal fees - If you lost your job in 2009, you may be able to make a claim for legal fees that you paid last year. The Income Tax Act permits employees to deduct legal expenses "to collect or to establish a right to salary or wages owed by an employer or former employer." You can also deduct legal expenses paid to collect or establish a right to a pension benefit or retiring allowance. The term "retiring allowance" is broad enough to include damages or settlements for wrongful dismissal.

7. Defer stock option benefits - If you exercised employee stock options to acquire shares of your publicly traded employer's stock in 2009, this may be your last chance to defer paying any tax liability on the stock option benefit until the year of sale. A stock option benefit deduction equal to 50 per cent is available to tax the stock option at capital gains-type rates, even though it's still classified as taxable employment income. Note that the ability to defer paying tax on future stock option exercises is restricted after March 4, 2010, as a result of the recent 2010 Federal Budget.

8. Report any offshore property investments - If you owned any foreign property investments, outside of a registered plan, totaling more than $100,000 in 2009, be sure to complete the T1135 or the "Foreign Income Verification Statement" as the penalties for failing to disclose are severe: $25 per day, to a maximum of $2,500. While historically the CRA used to waive these harsh penalties for first time, non-filing offences, in recent years it has been assessing them on first time offences.

9. Don't be late! - Those owing tax must pay remaining balances by midnight on Friday, April 30th to avoid a 5% penalty on unpaid balances and an additional 1% each month thereafter to a maximum of 12%. While the majority of Canadians must file by the April 30th deadline, self-employed individuals and their spouses or partners have until June 15th, 2010 to file a return, but any balance owing is still due by April 30th.

10. Avoid that refund! - Last, but not least, if you've already filed your 2009 tax return, chances are it's because you're expecting a refund. To help pay less tax all year round, complete a Form T1213 from the CRA which, once approved, will enable your employer to reduce the amount of tax withheld at source.

Adapted from

Friday, March 5, 2010

Propsed Federal Budget March 4, 2010

It's being touted as a jobs and growth budget, with neither tax increases nor major new tax relief. Aside from some targeted measures that should benefit the disabled, charities and families, there's little to attract the attention of advisors in Finance Minister Jim Flaherty's latest economic blueprint.

"The government was pretty clear that there weren't going to be any significant tax giveaways or special spending and true to their word, there really isn't much here to write home about," says Doug Carroll, vice president, tax and estate planning at Invesco Trimark, who was in the Ottawa budget lock-up with

Still, Carroll says there are a number of minor, but useful adjustments to Ottawa's taxation rules included in Thursday's budget.

Improving the RDSP
Changes to the Registered Disability Savings Plan (RDSP) will allow a ten-year carry forward of Canada Disability Savings Grant and Canada Disability Savings Bond entitlements "in recognition of the fact that families of children with disabilities may not be able to contribute regularly to their plans," the budget documents state.

"The carry over otherwise would have been lost from year to year," says Carroll. "So if the financial circumstances are such that you can't start up an RDSP at an earlier age, when you start up later, the accumulated amount will be available to catch up. It won't go back any earlier than when the RDSP program was implemented [in 2007]. But if they decide they are not in a position to open up an RDSP today, they know they are not giving up on the grant and bond money altogether."
(For an example, see Benefits of the RDSP Carry Forward below)

The carry forward is estimated to come with a price tag of $20 million in 2010-11, and $70 million in 2011-12. In addition, current RRSP rollover rules will be extended to allow a rollover of a deceased individual's RRSP proceeds to the RDSP of a financially dependent infirm child or grandchild.

"They won't attract the bonds or grants on this rollover and it will reduce the contribution room, but it does provide an additional source of money for funding up an RDSP for parents who are concerned about making choices: Should I be funding the RDSP or should I be putting money into my own RRSP?" Carroll explains. "This allows parents a little more flexibility and the knowledge that they can eventually get that money rolled over into their RDSP."

Payments made to an RDSP or to a Registered Education Savings Plan through a program funded by a province will be treated the same way as federal grants, meaning they will not be eligible for federal grants or bonds.

Help for charities
Ottawa is proposing to basically scrap the disbursement quota, introduced in the 1970s and intended to ensure a significant portion of a charity's resources be devoted to charitable purposes. Specifically, the amount a charity spends each year on charitable activities must be at least the sum of 80% of the previous year's donations (the charitable expenditure rule) and 3.5% of all assets (the capital accumulation rule).

Charities argued the rules imposed a complex and costly administrative burden. This year's budget proposes to eliminate the charitable expenditure rule and to modify the capital accumulation rule.

"The budget suggests that the government is comfortable that the Canada Revenue Agency's ability to monitor charities may very well be sufficient; that taking away the disbursement quota will not mean that those charities will either intentionally or unintentionally abuse their status as charities," Carroll notes.

The removal of the quota will be helpful for charities, he adds, allowing them to do what they want without having the overlay of regulatory monitoring on their day-to-day activities.

"From an estate-planning standpoint, this could very well change how people decide they are going to make a donation to a charity," Carroll says, because the disbursement quota will no longer be an issue that has to be worked around. "Estate planners will be looking at this part of the budget very carefully, particularly for high net worth clients who may be making large donations and looking at ways to make those donations more effective."

Child care support
Ottawa is also changing the rules regarding the Universal Child Care Benefit (UCCB) so that single parents receive comparable tax treatment to two-parent families.

"When there are two parents, the UCCB is taxed to the lower income parent, when you are a single parent you could be facing higher effective taxation on that benefit," says Carroll. Under the budget proposals, single parents will be allowed to include the benefit as part of the income of the dependent child. "In most cases, that child will not be taxed, so that should assist single parents, who are dealing with different issues than two-parent families."

For 2010, Ottawa estimates, the change will provide up to $168 in tax relief for single parents with one child under six years of age. In shared-custody situations, the UCCB taxable benefit will be split between the two parents.

Closing loopholes
The budget contains several initiatives Ottawa says will protect the integrity of the Canadian tax system; essentially the closing of tax loopholes. For instance, new rules on stock options are intended to address tax planning practices which have allowed stock-based employment benefits to escape taxation when such options are cashed out.

"Stock options are not supposed to be tax-free," Flaherty said at a news conference, noting Ottawa loses as much as $300 million a year in tax revenues from "a loophole used by some relatively well-off people."

Ottawa will also begin consultations on a new reporting regime for so-called aggressive tax avoidance schemes.

The bigger picture
Flaherty's decision not to increase taxes, and to hold the line on scheduled future personal and corporate tax reductions, will have an impact on government coffers.

Personal income tax revenues, the largest portion of budgetary revenues, are projected to decline to $108.2 billion in 2009-10, down $7.8 billion or 6.7%. Corporate tax revenues will drop even more: 24.3% to $22.3 billion. Flaherty doesn't appear to be worried.

"Unlike other countries, we are in a position to ensure our deficit will be temporary," the minister said in his budget speech. "We can meet our current needs without jeopardizing our long-term growth. Reducing the tax burden is a key part of Canada's advantage in the global economy."

This and that
The thorny and perennial issue of a national securities regulator appears to be moving forward. The government says it will release draft securities legislation this spring, to be considered by the Supreme Court of Canada, which in turn will offer an opinion on whether Ottawa has the constitutional authority to enact and implement a federal securities regulatory regime.

A transition office is scheduled to provide an organizational plan for a new national regulator by the summer.

The Red Tape Reduction Commission — an initiative described by one reporter as "Monty Python-esque" — will be established to review federal regulations in areas where reform is needed to reduce the compliance burden. The Canadian Federation of Independent Business estimates that businesses in Canada spend more than $30 billion per year complying with regulations.

Finally, the government will introduce legislation to enable credit unions to incorporate and operate federally.

US Social Security Benefits
Prior to 1996, Canadian residents receiving US social security benefits were only required to include 50% of these benefits in income, pursuant to the Canada-United States Income Tax Convention. Tax changes in 1996 increased the inclusion rate for these benefits to 85%. The Budget proposes to reinstate the 50% inclusion rate for Canadian residents who have been in receipt of US social security benefits since before January 1, 1996 and for their spouses and common-law partners who are eligible to receive survivor benefits. This measure will apply to US social security benefits received on or after January 1, 2010.

Budget 2010: Benefits of the RDSP Carry Forward
Roger, a low-income adult who has been eligible for the Disability Tax Credit his whole life, opens a Registered Disability Savings Plan (RDSP) in 2011.

In each of 2008 (the year RDSPs became available), 2009, 2010 and 2011, Rogers will have accumulated $500 in grant entitlements at a 300% matching rate, $1,000 in grant entitlements at a 200% matching rate and $1,000 in Canada Disability Savings Bond (CDSB) entitlements based on his family income.

When Rogers opens his RDSP in 2011, his RDSP will automatically receive $4,000 in CDSBs.

After the RDSP is opened, Roger's family contributes $400 to his plan in 2011, for which his RDSP receives $1,200 in Canada Disability Savings Grants (CDSG). Roger carries forward $1,600 in unused grant entitlements at the 300% rate and $4,000 in unused grant entitlements at the 200% rate. When these unused entitlements are added to his grant entitlement for 2012, Roger has $2,100 in grant entitlements at the 300% matching rate and $5,000 in grant entitlements at the 200% matching rate.

In 2012, Roger's family contributes $3,000 to his RDSP. The first $2,100 of this contribution uses up Roger's grant entitlements at the 300% matching rate. The next $900 is matched at the 200% matching rate. In total, Roger's RDSP receives $8,100 in CDSGs in 2012. In addition, his RDSP receives a CDSB of $1,000 based in his bond entitlements for 2012.

Doug Watt / March 04, 2010 –

Saturday, January 16, 2010

TFSA or RRSP? Which should you use?

Which mix of savings vehicles is right for you? There are Registered Retirement Savings Plans (RRSPs)and Tax-Free Savings Accounts (TFSAs. Determining which savings plan, or combination of savings plans, is best depends on your personal situation and your objectives.

Until 2009, most Canadians held their retirement savings in an RRSP, where they could claim a deduction for their contributions and then defer tax on withdrawals until retirement. The introduction of TFSAs has provided another powerful savings vehicle that allows investment growth to accumulate and be withdrawn at any time tax-free. Unlike an RRSP, you cannot claim a tax deduction for the contributions you make to a TFSA. On the plus side, if you need to withdraw money from your TFSA, you have an opportunity to replace that money because all TFSA withdrawals are added back to your unused contribution room in the following year.

The Savings Dilemma

If you are saving for retirement, then you may be torn between an RRSP and a TFSA. Ideally, you would maximize contributions to both, but if that's not an option here are some thoughts to consider.

Whether the best choice is to save in an RRSP or a TFSA depends on your savings needs, as well as your current and expected future financial situation and income level.

Generally, an RRSP is used for saving for retirement, while a TFSA can be used for both saving for retirement and other shorter-term purchases. Because TFSA withdrawals are added back to your available TFSA contribution room in the following year, there is very little downside to using your TFSA savings for mid-sized to large purchases.

If you are in a low tax bracket, saving in a TFSA may be more advantageous than saving in an RRSP since TFSA withdrawals have no impact on federal income-tested benefits and credits such as child tax benefits and Old Age Security. On the other hand, RRSPs may be a better option if your tax rate at the time you contribute is higher than it will be when you withdraw your savings. You'll benefit from a tax deduction when you make your contribution and withdrawals will be taxed at your lower future rate. If the reverse is true, a TFSA can provide better results.

Would you like to receive a table that outlines the differences in these plans? Send me an email.

Sunday, January 10, 2010

Employment Insurance for Self Employed

Are you self employed? Do you know some one who is self employed?

Beginning in January 2011, self-employed Canadians will be able to access Employment Insurance (EI) special benefits.

There are four types of EI special benefits:
maternity benefits;
parental benefits;
sickness benefits; and
compassionate care benefits.

If you enter into an agreement between January 31, 2010 and April 1, 2010, you will be able to make a claim for EI special benefits as early as January 2011. However, if you enter into an agreement with the Canada Employment Insurance Commission after April 1, 2010, you will have to wait 12 months before you will be able to make a claim for EI special benefits.

To determine if you should consider enrolling into this program, speak to your accountant.

If you would like to book an appointment to discuss these or other strategies, please don't hesitate to contact me directly.

For more information on this program, check out the Government of Canada web site.