April 21, 2015 Federal Budget Highlights

As you know, Finance Minister Joe Oliver delivered his Federal budget on April 21 in Ottawa.

 

While you've probably seen plenty of media coverage, I thought you would appreciate an overview of how some of the budget items that relate to investments and taxes.

 

This year, the government reported balanced books and wants that to continue. So it's introduced balanced budget legislation requiring Ottawa to stay in the black unless there's a recession, war, or natural disaster. One way the government will do that is by closing certain tax loopholes.

 

Still, this year's budget contains some generous changes

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Foremost is an increase in the TFSA contribution limit from the current $5,500 to $10,000. The proposed change is retroactive to January 1, 2015, and clients over age 18 who have not contributed since the TFSA's creation in 2009 now have $41,000 in contribution room.

 

For some clients, especially those in lower tax brackets, this change means TFSAs can become more advantageous than RRSPs. Many clients nearing retirement also will benefit from the limit increase, because they can take advantage of early RRIF withdrawal benefits and then move the money into a TFSA and keep it sheltered.
 

Or, if you've already contributed the old $36,500 maximum, you could now move some non-registered investments into TFSAs. In cases where large capital gains might apply, this might not be a strategy worth pursuing. But we can talk about whether this strategy is a good idea when next we meet.

 

TFSA limit increases also have been decoupled from the inflation rate, meaning future increases aren't automatic and instead will have to be legislated by the government.

 

Meanwhile, proposed changes to RRIF rules will mean seniors won't have to withdraw as much money from their retirement savings. The budget cuts the required withdrawal amount at age 71 to 5.28% from the current 7.38%. Required withdrawal rates still increase every year, but instead of topping out at 20% at age 94, the cap isn't reached until age 95.

 

Another budget item aimed at seniors and others who qualify for the Disability Tax Credit is a new Home Accessibility Tax Credit. This 15% non-refundable tax credit applies to up to $10,000 of renovations, such as wheelchair ramps, walk-in bathtubs and wheel-in showers.

 

And, small businesses will get to keep more of their earnings. This year's budget proposes to reduce the small business tax rate to 9% by 2019 - or 2% over the next four years. The reduction generally applies to the first $500,000 of business income.
 

Small business owners also will get a tax break if they sell their companies and donate the private company shares to charity. To be eligible, a sale must take place in 2017 or later.

 

Lastly, rules for reporting specified foreign income will be changing, again. Ottawa's announced a revamp of Form T1135 to streamline the process for people with assets between $100,000 and $250,000 in time for the 2015 tax year. But those reporting $250,000 or more will need to follow the existing requirements.

 

I hope you find these highlights useful. If you'd like to discuss these and other Federal budget initiatives and how they affect your financial plan, please don't hesitate to contact me.  

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.

2012 Tax Tips

It’s tax time in Canada.  If you are like most people, in March you assemble all of the required pieces of paper so that you can complete your tax filing by the April 30^th deadline.  Most people who expect money back, file early, while those who owe money wait until the end of April.

In order to help you get ready, here is a list of tax tips I’ve put together, based on my readings of the “experts” and information from Canada Revenue Agency (CRA). 

To ensure that you maximize your deductions, you should always get tax advice from a qualified tax practitioner.

1. Ontario healthy homes renovation tax credit. A new refundable tax credit of 15 per cent of eligible expenses is available for Ontario residents over age 65 who spent money to make their home safer. The deduction is also available to those who live with a family member who is a senior.  

The type of eligible expenses includes changes to make a first-floor or secondary suite for a senior. It also includes grab bars and handrails, wheelchair ramps, walk-in bathtubs, no-slip flooring and hands free taps and hand held showers. Wheelchairs or walkers are not deductible, nor are general repairs incurred to increase the value of the home. 

For more information check this link

2. New Family Caregiver Amount. This is a $2,000 bump to the normal credits if your spouse, child, or other adult dependant has a mental or physical infirmity. Verification is required to indicate when the condition started and its expected duration. Make that appointment quickly to file your returns in time, and remember, if the doctor charges you a fee, claim it as a medical expense.

Additional information can be found on the CRA web site 

3. Are you claiming all of the medical expenses that you are eligible for?  They can be grouped into the best 12-month period ending in the tax year. They can be claimed by the spouse with the lower income, but must exceed the lesser of $2,109 or 3 per cent of your net income.

New medical expense claims. For those who travelled out of their local communities for medical care, a “simplified method” of claiming auto expenses is possible. For a full list of eligible items – check the CRA web site   
 
4. Your safety deposit box is an often missed tax deduction. It’s not the largest amount. Check out the eligible carrying charges and interest expenses.

5. Disability Tax Credit is a lucrative tax credit. It is claimed by someone who is markedly disabled on a permanent basis, or their supporting individual. Especially vulnerable are those with progressive diseases, like Alzheimer’s or cancer.  A doctor or other qualified healthcare professional must fill in form T2201, the Disability Tax Credit Certificate. In many cases, the information provided by the healthcare professional may indicate several years of impairment. Previous tax returns can be adjusted for the tax credit for each year that the Disability Tax Credit Certificate has been approved by CRA. 

To obtain a Form 2201 to apply for the Disability Tax Credit – click here 

For more information about programs available to people with disabilities – click here 
 
6. Qualifying moving expenses include real estate commissions, which can run into the five figures are the most lucrative deduction. You have to move 40 kilometers closer to a new work or business location where active income is earned. If your not sure if your eligible   or what expenses you can claim – click here  

A list of tax relief measures for Canadians are listed on the CRA web site – check the list out.
 

CRA is encouraging Canadians to file electronically, so they have stopped mailing out personalized tax return forms. You can still pick the T1 up at Canada Post or Services Canada or call 1-800-959-8281.

Remember if you Netfile, you must keep all receipts for 6 years.

Where to Find Help with Your Canadian Tax Return

Questions about deciphering the Canada Revenue Agency’s forms? Wondering when you will get your income tax refund or your GST credit? Here is the contact information you need, including toll-free phone numbers, to get the answers you want:

CRA Web site 

•      Have an income tax question? Call  1-800-959-8281     
•      Wondering where your refund is? Call   1-800-959-1956   
•      Waiting for your GST credit? Call     1-800-959-1953   
•      Waiting for your Canada Child Tax Benefit or Universal Child Care Benefit? Call  1-800-387-1193