Tax Return Filing Tips for 2014 Taxes

Filing a tax return isn't always an easy task. You want to ensure you claim every credit and deduction that you are entitled to, whether you do it yourself or give it to a tax preparer.   The following notes are designed to highlight some federal deductions and credits that may be of interest.     Home buyers' amount: Did you buy a home in 2014? You may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750. Medical expenses threshold: For the 2014 tax year, the maximum is 3% of net income or $2,171, whichever is less. NOTE: If your medical expenses exceed 4% of your household's combined net income and are due to a medical condition, you may want to check out the Ontario Government Trillium Drug Program  Donation tax credits: after March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017 Lifetime capital gains exemption:The lifetime capital gains exemption is $813,600 in 2015. Low-interest loans: The current family loan rate is 1%. Children's Fitness Amount - Is now $1000 (it was $500) for children under 18 enrolled in a prescribed fitness program. Maximum RRSP contribution:The maximum contribution for 2016 is $25,370, and for 2015 is $24,930.  However, you should check your Notice of Assessment from your 2013 taxes TFSA limit: The TFSA limit for 2015 is $5,500, for a total of $36,500 in room available for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009.       Maximum pensionable earnings: For 2015, the maximum pensionable earnings is $53,600, and the basic exemption amount is $3,500. Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2015 is $49,500. Turning 65 this year? - There are a number of credits that take effect. Turning 71 this year? -In the year you turn 71, you must convert your RRSP to a RRIF Did your children turn 18? - Many credits and deductions may no longer be available to the parents For more information, the Canada Revenue Agency web site can be found here.

 

You and Your Dental Benefits

One of the areas people often ask me questions about are dental benefits.  I’m not an expert.  However, the Ontario Dental Association has a great web site with explanations written for the non-dentist.  Check it out here.

This web site covers a number of areas regarding your dental plan including the differences between your plan and the fees that your dentist may charge, claim forms, billing, what to do if your dental claim was denied, the ODA suggested fee guide and more.

If you are having any major work done (i.e. more than routine cleanings, x-rays or small cavities filled), you may want to have your dentist submit a pre-treatment determination to your insurance company.  This way, you will know in advance what the insurance company will cover.  If you are having a bridge, crown or inlay, there may be laboratory fees in addition to the dental fees.

The ODA site also explains many of the common dental procedures.  Click here to read about them. 

They even have an IQ test that you can take. 

New Estate Information Return

Ontario releases new Estate Information Return

Effective January 1, 2015, estate trustees (i.e., executors) in Ontario have additional duties, with Ontario’s release of its Estate Information Return.   Part of the probate process, this new return must be filed within 90 calendar days after a certificate of appointment of estate trustee is issued.  This return is not required where an application for probate was made prior to January 1, 2015.

On the Estate Information Return, the estate trustee will need to provide information on the Fair Market Value of the assets forming part of the estate for estate administration tax (i.e., probate fee) purposes.

In the FAQ, Ontario has confirmed that certain assets are excluded from the value of the estate for purposes of the tax.   Excluded assets include “RRSPs, RRIFs, TFSAs and life insurance policies where there is a living named beneficiary”. (Please see the 8^th point in the section entitled, "Value of estate assets" in the FAQ)

The return, as well as the Guide for completing it, can be accessed from the Ontario Ministry of Finance’s web-site.

Also, in 2012, when the proposed changes had been tabled, we prepared a summary of the changes to the Estate Administration Tax Act in Probate Process – Ontario (7193).  Here, you will also find an example of how the legislation has impacted estate executors’ responsibilities.

More than ever, it’s the right time to discuss segregated funds’ advantages, which include estate bypass when a named beneficiary is designated.   Contact your sales office for more details.

Information provided by Standard Life 

Your Legacy

Your legacy is more than a bank balance. It's the impact you make on your community and your family. Here are six tips for turning a nice thought into a powerful reality:

1) Get Organized - Ensure your personal information - bank account and investment contract numbers, insurance policies, tax information, etc. - are up to date and stored somewhere safe and accessible by your advisor, attorney, beneficiaries or family members.

2) Check your Will - Make sure you have a will and it reflects your current intentions. Do the same with any power of attorney or other legal documents. If you don't have a will, or need to change it, contact me or someone you trust to obtain the name of an estate lawyer ho can help draft yours.

3)  Name Names - Select an executor for your estate and ensure that all beneficiary designations complement those outlined within your will.   

4) Consolidate your Finances - Streamline your investments and bank accounts to simplify administration. Having joint accounts makes it easier to ensure resources are readily available.

5)  Minimize Taxes - Consider investments and strategies that allow your estate to bypass probate and minimize the tax bill for the next generation.

6) Discuss your Plans with your Family - Keeping them informed can help them understand your decisions.    

Over time, situations change.  Your children become adults, tax laws change, your executor ages.  It is important to review your plans every few years to ensure that they are still appropriate. 
 

Review of financial markets

I would like to wish you a happy, healthy new year. This post will provide you with a brief update on financial markets and my thoughts on what may lie ahead.

The global economy in aggregate continued to strengthen in 2014, although the improvement, as has been the case through most of the current recovery, was uneven. After shrinking in the first quarter, the U.S. economy grew at a much stronger rate than expected in the second half of the year. While not as robust, Canada’s economy also registered encouraging signs of improvement during 2014. In other regions, geopolitical events such as conflict in Ukraine and the Middle East, slower growth in China and the risk of deflation in Europe affected financial markets. Overall, the global expansion moved cautiously forward.

Global financial markets also started the year on a hesitant note, but benefited from improving economic trends and strong corporate profits through the spring and summer months. Most equity indexes were positive through the end of the third quarter, but volatile conditions surfaced in the fourth quarter as investors began to focus on the slowing pace of growth in emerging markets, particularly China. Concerns about oversupply in the energy market caused a sharp drop in the price of oil and other commodities, which was felt broadly across many markets and sectors. The price per barrel of crude dropped to less than US$50 at the start of 2015, the lowest since 2009.

Canada’s commodity-heavy S&P/TSX Composite Index was particularly volatile in the fourth quarter, staging a series of sharp declines and rebounds. The Canadian index finished the three-month period with a loss of 1.5%, but registered a respectable gain of 10.6% for the year. The falling price of oil, which is a major Canadian export product, also caused the Canadian dollar to lose value relative to the U.S. dollar. The loonie finished the year about 8% lower at 86.2 cents U.S.

The MSCI World Index, which measures large and mid-cap equities across 23 developed markets, gained 5.5% for the year in U.S. dollar terms. Accounting for the Canadian dollar’s decline, however, this gain was magnified to 15.1% for Canadian investors. The performance of the World Index reflected generally weaker results in emerging and developed markets outside North America and the robust gains for U.S. equities. The benchmark S&P 500 Index benefited from strong U.S. economic trends, growing consumer and business confidence and healthy corporate profits, adding 13.7% in 2014. Again, Canadian investors in U.S. stocks benefited from the decline in the value of our own currency, with the U.S. market up 24% in Canadian dollar terms.

 
Turning to fixed-income markets, the moderate pace of global economic activity in 2014 meant that monetary policy remained highly accommodative to growth. Although the U.S. Federal Reserve officially ended the asset purchase programs it had used to stimulate the economy since 2009, central banks in Europe, China and Japan took steps to keep interest rates low, their currencies weak and their export markets competitive. Bonds performed well in this environment. The FTSE TMX Canada Universe Bond Index, a measure of Canadian government and investment-grade corporate bonds, added 2.7% in the fourth quarter for a gain of nearly 8.8% for the year.

As we head into 2015, the global economy continues to slowly expand. Although interest rates remain low, there are some indications that rates, at least in North America, could begin to move higher in the coming year, which could be a headwind for fixed-income investments. Nearly six years after the financial crisis, equities have delivered generally positive results, but markets are cyclical, and it is always difficult to predict their direction in any given year. While the sharp drop in oil prices has weighed on the Canadian equity market in particular, it is important to remember that asset classes, industry sectors and geographic markets often move in divergent directions. Lower oil prices, for example, can be positive for other sectors as they strengthen consumer confidence and reduce costs for manufacturers, transportation companies and related industries.

In my view, recent market events support the case for maintaining a portfolio that is well diversified across asset classes, geographies and industry sectors. Diversification will help to maximize returns for your portfolio, while mitigating risks as they occur, including currency and interest rate movements.

I hope you find this overview helpful. We work hard to develop the portfolio that best reflects your long-term financial goals and tolerance for risk. Should you have questions about your investments or any other issue, please feel free to give me a call. I wish you all the best in 2015.

 

The information in this post is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

Diversity in your investment portfolio

I will periodically be posting information that I think is of interest and that I have received.

 

Canadians who diversified their equity exposure and invested in US Equities in 2014 made a wise decision.  The S&P 500 is up 12% YTD while the S&P TSX has done roughly 6% (price only).  With 2015 around the corner this trend looks likely to continue.  The Canadian consumer remains highly leveraged, our housing market is overvalued and a slumping oil price means eastern provinces will be under pressure to pick up the slack from those in the west.  By contrast, the US housing market looks stable, unemployment levels continue to fall and as this week’s Muse explains, American consumers are in a better position to spend in 2015 than they have been for years.

Key Takeaways

Widespread spending

• ‘I don’t think there’s a single headwind for consumers, it’s all tailwinds blowing at different strengths’ said Mark Zandi, chief economist for Moody’s Analytics Inc.
• According to a Bloomberg survey, spending is anticipated to increase by 2.7% in 2015, compared to the 2.2% growth seen in the first three quarters of 2014
• ‘We don’t have all our eggs in one basket anymore where we’re just relying on the wealthy to drive spending’ said Ellen Zentner, a senior economist at Morgan Stanley

Broad-based Hiring

• The breadth of industries hiring last month was the most extensive since 1998, a strong sign that the expansion is having widespread benefits on the economy
• Weekly earnings adjusted for inflation climbed 0.9% on average last month, the biggest increase in six years
• Consumers’ incomes are forecast to grow 1.8% over the next 12 months, the most since 2008 according to a Thomson Reuters/U of Michigan consumer sentiment surve

Middle Class

• Research by Goldman Sachs economists shows that middle-income households spend the most on gasoline as a share of total household purchases
• Furniture stores, vehicle dealers, clothing outlets, restaurants and hotels are among the retailers that benefit the most from wage growth and accessible credit, according to Morgan Stanley
• ‘You’ve got your debt down to levels that are reasonable, your labor market conditions are making some really significant gains, so people are feeling much more comfortable and they’re willing to spend’ said Michael Carey, chief economist at Credit Agricole CIB.  Carey forecast a 2.9% increase in spending for 2015

LINK: http://www.bloomberg.com/news/2014-12-19/americans-seen-getting-groove-back-with-spending-burst-in-2015.html

While there are clearly many signs that the American consumer will help to propel the US economy in 2015, especially given the current exchange rate, prudent investors will be careful not to overexpose their portfolios to US stocks.  The unpredictable nature of the markets should be enough to remind investors to focus on their long-term goals and seek a reasonable growth rate. 

Happy Holidays,

Information provided by Great West Life

 

2014 Year end tax tips

It’s that time of year again – Year End Tax Planning.  Each year, Jamie Golombek of Renaisance Investments puts together a list of tips. To see his full list click here .   My abbreviated version follows.

1.     Are you between 60 and 64 and considering taking CPP early?  You may want to apply before Dec. 31, 2014 as the “downward monthly pension adjustment” increases from 0.56% in 2014 to 0.58% in 2015.

2.     Did you turn 71 in 2014?  You must convert your RRSPs to a RRIF or registered annuity before the end of the year.  If your spouse or partner is younger than 71, you can continue contributing to a spousal RRSP.

3.     Review which investments you hold in your RRSP, TFSA and non-registered accounts.

a.      Non Registered Accounts – Canadian dividends are taxed more favourably than interest income.

b.     RRSP – 2014 maximums (assuming that you have used all of your previous contributions) is limited to 18% of your income to a maximum of $24,270 less any pension adjustments.

c.      TFSA – You can contribute up to $31,000 in 2014 (if you have not contributed before).  If you have withdrawn funds from your TFSAs, make sure to check when you did it, as re-contribution room is not available until the following calendar year.

4.     Registered Education Savings Plans (RESP) and Registered Disability Savings Plans (RDSP) – the government has matching grants for both of these programs.  The RESP is designed to save tax efficiently towards children’s post secondary education. The RDSP is designed for people who qualify for a Disability Tax Credit and are under 49 years of age.  Contact me for information on both of these programs.

5.     Charitable Donations, Investment Expenses, Childcare Expense, some Business Expenses should be done before the end of the year to use the expenses on your 2014 taxes.  You have until March 2, 2015 to make your 2014 tax year RRSP deduction.

6.     As of 2014 Safety Deposit Box fees  are no longer deductible

There are many additional tax planning activities that you may be able to use to decrease your taxes.  Speak to your accountant or give me a call.