2015 Tax Tips

Every April I put out a short list of the changes to the Tax Rules and here is this year's list. Check the bottom of the article for links to additional resources and information.   CRA goes High Tech MyCRA is a mobile app from the Canada Revenue Agency. Using this app, you can view your notice of assessment, tax return status, benefit and credit information, and RRSP and TFSA contribution room.   If you self-file using the software packages available, you may have noticed that this year, you can download your T4, T4A, T3, T5 and RRSP slips (by signing into your CRA MyAccount) and you no longer need to enter the information manually. Don't forget to double-check the CRA's data before you file.   Tax Brackets and Tax Rates Check the table below to see if you are impacted by the changes to the tax brackets and to the rates. Note - these are Federal rates only,   Personal income tax brackets   2015 income 2015 federal tax rate 2016 federal tax rate 2016 income $44,701 15% 15% $45,282 $44,401-$89,401 22% 20.5% $45,282-$90,563 $89,401-$138,586 26% 26% $90,563-$140,388 more than $138,586 29% 29% $140,388-$200,000 33% more than $200,000       TFSA limit change The limit for 2016 is a return to $5,500, down from 2015's limit of $10,000. If you have been eligible for the TFSA since its inception and never contributed, your total contribution room is $46,500. Don't forget that you cannot replace money taken out until the following calendar year (unless you still have contribution room).   Child tax credit and UCCB  The child tax credit, worth an average of $337 per child, is gone and parents must pay tax on the Universal Child Care Benefit (UCCB) they started receiving last summer. The UCCB amounts are $160 a month for every child under age six and $60 a month for children aged six to 17 since last July. If you had a spouse or common-law partner in 2015, the partner with the lower income claims the UCCB as income on line 117.   On July 1, 2016 this will change again, when the new CCB (tax-free and tied to income), replaces the UCCB, the Canada Child Tax Benefit (CCTB) and the National Child Benefit Supplement (NCBS, part of CCTB).   Foreign income verification statement Over the last several years there have been several revisions to form T1135. These changes have increased the amount of information that people were required to disclose about their foreign property and income.   For 2015, the reporting requirements have been simplified for people who own more than $100,000, but less than $250,000 in foreign holdings, including rental properties, trusts and investments. If you own $100,000 to $250,000, you need to report only the total income from property held and any gain or loss from its disposition.  If you hold more holdings, you must give more detailed descriptions of each type of investment in each country.   Links and Resources For more information, check out the following links: CRA Mobile App CRA MtAccount CRA Tax Changes CBC Tax Changes

Do you need travel insurance?

We all know that medical expenses in the USA are expensive, but they are in other parts of the world as well.  Here is an example of costs in Mexico due to appendicitis.  14-year-old Male: Abdominal Pain Led to Appendicitis in Mexico Tomas was in Mexico during spring break. After a few days, he started having severe abdominal pain and saw the hotel doctor. He was diagnosed with appendicitis and sent to the hospital by ambulance. Tomas was in the hospital for two days before he was released with various prescriptions and caught a new flight home. Hotel doctor fees ......................................$950.50 Ambulance fees ........................................$1,200.00 Hospital fees .............................................$22,530.47 Doctors' fees .............................................$7,165.00 Prescriptions .............................................$47.11 Provincial medical ....................................- $330.16 Amount paid by TuGo (the insurance company)  ......$31,562.92   If you have a group plan, Emergency Medical coverage may be included in your plan.

New Year’s Financial Resolutions

Every year, I make resolutions about the areas of my life that I would like to improve. The changes often never even get started and rarely make it to December 31.  I’d like to help you be successful if your goals are financial.

In a recent Sun Life Financial survey, 66% of Canadians said their debt level was the same or worse than a year ago.

Step 1 – Make a Goal.

It doesn’t matter if it’s saving 10% of your gross (or net) income, saving $1000 so that next Christmas the expenses do not need to go on your credit card (due to lack of cash flow), paying off your credit card every month, putting aside 3 months income for a rainy day, or saving money for a special vacation.  All that matters is that it’s your goal and that it means something to you.

Step 2 – Determine your Cash Flow

You cannot save even $50 each month, unless you know where that money is going to come from.  So this step involves reviewing your income and expenses.  Most experts suggest that 3 months is a good snapshot.  Note: If you pay for items such as insurance on an annual basis, you need to average those costs and add them to your 90 day expenses. 

Usually, a good start for this review is by looking through your bank and credit card statements.  Remember – all you bank statement says for cash is that you withdrew it, it doesn’t tell you whether you spent that money on giving your children money for school pizza lunches or on $5 Starbuck coffees.

If you would like a spreadsheet to use for this exercise, let me know and I can supply you with one.  Alternatively check out the one available on the Hello Life website. 

Step 3 – Review your Income and Expenses

So now that you know where your money comes from and where you spend it – you need to determine what you can adjust.  Is it exchanging Starbuck coffees for ones you brew at home or buy at Tim Hortons? Is it decreasing your clothing or eating in restaurants budget?  Does it require an entire review of all of your spending habits?

If you need help with this step, contact me. I can either help you or send you to a professional who can.

Step 4 – Implementation / Action

Money that doesn’t “exist” is easy to save.  If your goal is to pay down credit card debt, you can set up an automatic payment from your bank account to the credit card to occur as soon as your paycheck lands in your bank account.  If your goal is savings, I can help you by setting up an account for the savings and arrange the same automatic transfer.

As we all know, nothing actually happens unless you have an action plan.  Let’s work together to implement your financial goals.

Some money saving tips

One of my clients, Mary recently became an empty nester when her son moved out earlier this year. Mary is single, working and has a married daughter with a toddler. She called me because her credit card debt is slowly creeping up and she wanted to see what she could do before it became a major problem. We sat down and reviewed Mary's income and spending patterns. It turned out that since her son moved out of the house, Mary has stopped going to the grocery store on a regular basis and so doesn't keep fresh food in her home. As a result, she has started to eat lunch out and stop for fast food on her way home from work. Mary was spending about $100 per week on coffee, lunch and take-out dinners. (We're not talking about meals that are social events.) I was at Subway last week and I spent $12.50 for their Chopped Salad and a bottle of water. If I had purchased the equivalent meal (prepared at the grocery store), it would have been about $6. If I purchased the component parts in the grocery store and assembled it myself, we're probably looking at $3 or $4 per salad. (We're talking bagged salad, pre-cooked chicken, some extra vegetables, some salad dressing and a bottle of water.) Mary is back to going to the grocery store and bringing lunch to work (most days) and is now taking advantage of the employer sponsored coffee and tea and has cut her $100 down to about $50 a week for these groceries and some fast food. (Mary still buys some lunches out - when she goes out with a co-worker, and one night a week eats fast food between work and a scheduled activity.) Mary told me that a side effect is that she's lost a few pounds. We also noticed that Mary's spending on her grandchild was climbing every month. She would go out with her daughter shopping and then pay for everything, even though her daughter could afford to buy the items herself. Mary now takes out $200 a month cash, puts it in an envelope in her purse and only buys "treats" until the money runs out each month. Do some of these spending patterns look familiar? Are there simple things that you can change? Give me a call and we can review your spending and saving patterns.

 

Books educate, movies inspire, people cause change.  This was the take-home message from a number of the Q & As with the directors from the movies I saw at TIFF (Toronto International Film Festival) this year.

TIFF started as a small “Festival of Festivals” in Toronto in 1976 collecting the films from other film festivals around the world and showing them to eager audiences in Toronto.¹ That first year, 35,000 enthusiasts watched 127 films from 30 countries.  Today TIFF shows around 400 movies (most 3 times) to over 400,000 people over the course of 10 days in September. Many of these movies are International or North American Premiers.  In addition, to the public screenings, there are screenings for the press and industry insiders.

I have been going to TIFF and seeing around 20 movies each year since 2007.  For 4 or 5 years before that, I went to 2 or 3 movies each year.  I’ve been fortunate that each year I see a couple of great movies that often don’t play for years (if ever).

Several of the movies I saw promote the values of transforming the way people see the world and the way that we interact. 

Music of Strangers: Yo-Yo Ma and the Silk Road Ensemble will be released in the spring of 2016.  Yo-Yo Ma does not see himself as a musician, but as an agent of change. The Silk Road Ensemble's aspiration is to "create unexpected connections".  In the movie, we hear the magnificent results of blending musical cultures; If you’re into music or exploring the variations in culture, this movie is for you.

I saw two environmental movies – Return of the Atom and This Changes Everything.  Return of the Atom explored the issue of nuclear energy from multiple perspectives (scientific, safety, pro and con opinions) and encouraged the viewer to draw their own opinion.  This Changes Everything (based on the book by Naomi Klein) encourages people to take action to change the world.   No matter your opinion on the environment (or your business), it is important to continuously educate yourself and be true to yourself.  This was also the theme of Michael Moore’s new movie – Where to Invade Next. Michael Moore travels the world looking at what he refers to “American solutions” being used around the world for American problems.

There’s always a way to get to your goal.  You may be a movie director in Iran who has been banned from making movies, so you drive around Tehran in a cab recording everyday life as Jafar Panhai did in his movie Taxi.  You could also live in a small village in Tibet and decide to go on a “bowing” pilgrimage (laying your bodies flat on the ground after every few steps) along the 2000 kilometre road to Lhassa in Paths of the Soul (a fictionalized true story). Or a 70 year old man who has never left his village, driving 3000 miles to Darwin, Australia to participate in assisted suicide in Last Cab to Darwin.  These movies depict human perseverance in a positive light and reaffirm your belief in other people and in the helping relationships that we all develop though our lives.

I tell people that going to TIFF isn’t a vacation.  I consider that seeing movies is a way to get a fresh perspective on my life and my business (especially when you see 20 films in a 10 day period).  If you missed TIFF and don’t want to wait until next September, Toronto is very fortunate to have many film festivals throughout the year - https://www.facebook.com/TorontoFilmFestivals  or http://www.blogto.com/toronto/the_best_film_festivals_in_toronto/

Check out the full list of movies that I saw (with short summaries).  The ones that I recommend are marked with an “*”. If there are 2 “*” it is a highly recommend and I think that you should see it when it plays near you. 

¹ Check this link for the history of TIFF - http://tiff.net/explore/history and https://en.wikipedia.org/wiki/Toronto_International_Film_Festival

Alphabetical List of 2015 TIFF Movies I Saw

ARABIAN NIGHTS TRILOGY – This art trilogy, won many awards. 

BABA JOON - Chronicling the burgeoning conflict between father and son in a hard-working Iranian-Israeli family.

*CROMO – an Environmental / Thriller TV series that will be airing in Argentina.        

*JAFAR PANAHI'S TAXI – Jafar Panahi is an Iranian filmmaker who is banned from making movies, so I guess this isn’t a movie.  It shows a side of Iranian life that is the same as everywhere else in the world.

*JOURNEY OF A THOUSAND MILES: PEACEKEEPERS – a documentary about female Peacekeepers from Bangladesh that are sent to Haiti for a year.

**LAST CAB TO DARWIN – Assisted suicide was briefly available in Australia. This is the moving story of one man’s journey.

*LEN AND COMPANY – The story of how we are influenced and changed by the people around us

*LOOKING FOR GRACE – An Australian film, about parents looking for their teenage daughter

*MAGGIE'S PLAN – a chick flick about a women who needs to control everything     

**MUSIC OF STRANGERS: YO-YO MA AND THE SILK ROAD – This ensemble is the result of a workshop at Tanglewood and is a microcosm of the world.  If you’re into music, the blending of cultures or how blending different points of view can be much better than its parts.  This will be released Spring 2016

*PATHS OF THE SOUL – a documentary about members from a Tibetan village who go on a pilgrimage    

PROMISED LAND -  A Chinese film discussing the movement of the young people to the big cities       

*P.S. JERUSALEM – This is an autobiography of Danae Elon (daughter of Amos Elon) on her return to live in Jerusalem with her family after an absence of 20 years. They are currently living in Montreal.

*RETURN OF THE ATOM - A documentary showing all the viewpoints of the construction of a nuclear power plant on the remote Finnish island of Olkiluoto.

SONG OF SONGS - The film recreates the idyllic village life of a Hasidic community in a turn-of-the-century Ukrainian shtetl.  

SHORT CUTS PROGRAMME 10   

Quiet Zone

Clouds of Autumn

Nulla Nulla

Hide & Seek

Tuesday

Oslo’s Rose

A Tale of Love, Madness and Death

*THIS CHANGES EVERYTHING - Directed by Avi Lewis and based on Naomi Klein's bestselling book of the same name, This Changes Everything is an urgent dispatch on climate change that eschews the abstract and rhetorical in favour of the personal and immediate. Can be seen everywhere – check their website

WAVELENGTHS 1 - FIRE IN THE BRAIN

3D Movie

Fugue

Prima Materia

A Fire in My Brain that Separates Us

Something Horizontal

The Exquisite Corpus

**WHERE TO INVADE NEXT –Michael Moore’s latest movie. He travels the world (mostly Europe) to find solutions to the problems in the USA (e.g. gourmet school lunches in France, 8 weeks of vacation in Italy, free college education [including for Americans] in Slovenia, etc.}

*WHITE KNIGHTS – The story of an NGO trying to rescue 300 children from the civil war in Chad. Or are they?  You get to write the ending.

 

Your Assets (including digital)

 

 

Monetary Assets, Sentimental Assets and Digital Assets   What should you include in your Last Will and Testament and Power of Attorney documents?   For years, you have heard that you need the following documents: Power of Attorney for Personal Care Power of Attorney for Property Last Will and Testament Through the Power of Attorney documents, you grant the ability of a named alternate to make decisions on your behalf should you not be capable of making them while you are alive. Information about these documents can be found on the Government of Ontario website.     Your Last Will and Testament is a written document that sets out your wishes about how your estate should be taken care of and distributed after your death. It takes effect when you die. The Government of Ontario website is a great resource.     Traditionally, Power of Attorney for Property and Last Wills and Testament only dealt with real assets. What if you only do electronic banking or get all of your bills each month as e-bills or you have a Netflix or other monthly electronic subscription?   I don't know about you, but I inherited a box of family photos when my parents died. Most of my photos are stored electronically - either on a hard drive or in the cloud. I also have Facebook, LinkedIn, Twitter accounts, a web site, and many other online footprints.   Can the person that you name as Power of Attorney for Property or Executor of your Will access all of these accounts? Do they have access to all of your Usernames and Passwords? Do they know if you want these accounts closed or maintained?                                                                                                      To ensure that you have the proper documentation, you should consult with an attorney and ensure that all of your documentation is up to date.   For more information, you may want to check out this article on the Manulife web site put together by their Tax, Retirement and Estate Planning Services Group.

Estate Planning - it's never too early

In a recent article in The Toronto Star, Gordon Pape talked about tax efficient investments. Depending on whether your investments generate interest, dividends or capital gains, their tax rates vary. For example, if your income is from Canadian dividends, you could save $157.10 of tax for every $1,000 received, compared to interest income.

As per Wikipedia,

Estate planning is the process of anticipating and arranging for the disposal of an estate during a person's life. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses.

In reality, we should start estate planning early in life, as building your estate is step one of estate planning.

I often get asked by people where they should invest their money - paying off debts, paying off their mortgage, in an RRSP, in a TFSA, in real estate, etc. There is no correct answer, as many factors contribute to estate planning.

From a retirement perspective, your sources of income vary by how flexible they are. That is true based on when you can take the money, the flexibility of taking the money and how tax efficient during both the accumulation and withdrawal phases they are. In order of least to most flexible at retirement, most advisors would itemize them as follows:

1. OAS - money may be claw-backed starting at incomes of $71,492
2. CPP - can be started between age 60 and 70; can be shared by spouses; is considered taxable income
3. Annuity - once started, it continues for life; there may be guarantees; tax rates vary depending on the source of the original funds (e.g. registered or not)
4. Employment Income - is always taxed, but you may be able to decide how much you work and earn; if you are under 65, you may need to pay CPP on this earned income
5. Work Place Pensions - both Defined Benefit and Defined Contribution; can be shared by spouses
6. RRSP - at 71 must be converted to a RRIF or Annuity or cashed in (not recommended); watch the attribution rule for Spousal RRSPs
7. Non-registered investments - you paid tax through the accumulation phase, but they are normally not taxed when you spend the money
8. TFSA - growth is tax free. Current limit if you have not opened an account yet is $36,500; they are normally not taxed when you spend the money

At any stage of life, you want to minimize the amount of tax you pay. You really need to contact a Tax Accountant for complete advice.