Owner: The Personal Finance & Tax Blog URL:blog.taxresource.ca Join Date: Tue, 08 Apr 2008 19:17:37 -0500 Rating:0 Site Description: To discuss personal finance, tax, credit, and estate planning. Site statistics:Click here
Tips to Reduce Credit Card Debt Problems 2008-04-07 16:00:21 The Moneygardener recently published an article defending the assertion that credit cards are a tool for managing discretionary spending and encouraging saving. Three reasons why credit cards are excellent vehicles for getting ahead financially are presented:There are zero transaction costs. Bank fees on your personal chequings accounts can be expensive. Credit cards are widely accepted and convenient to use and reduces the amount of cash lying around (and therefore spent). Credit cards have excellent tracking that you simply do not have with cash. The caveat is that a credit card with no annual fee is obtained and that the monthly bill must be paid in full when due to avoid the higher interest on the credit card. So What? You may by asking yourself why bother? You may have a chequing acco
Random Thoughts on Interesting Jobs in Sports 2008-04-05 16:39:51 I was at a major league basket ball game last night and I began to wonder how much money some of the stadium people made for their work. The jobs were varied from dancers, to cheerleaders, to the girls who squeegee the floor after a throw in.I would think some people would do the work for free where other would definitely want pay. But how much pay?As we were leaving my 17 year old daughter told me that she knows one of the girls who squeegee the floor. The girls make $200 per game and work three games a week. So 4-5 hours work and $200. Hmm, I have over 15 years of business experience, a university degree, advanced post secondary, and a professional designation and the squeegee girl makes $200 a day. Granted she probably has no benefits and the growth potential is limited but that would b Read more:Random
, Sports
, Random Thoughts
Renting Property - A Little Tax Planning Can Go A Long Way 2008-04-02 19:10:34 So you have decided to take the plunge. You have a house and lot picked out. The price is right and it looks like you will have a positive cash flow. Perhaps you even have some renters in the pipeline all ready to move in. But you still have questions about the tax implications.A little tax planning now can save you headaches and money down the road.The Home Buyers Plan (HBP)The home buyers plan (HBP) allows each taxpayer to withdraw up to $20,000 tax free from their RRSP to purchase a home in Canada. To qualify you must be a first time home buyer (i.e. you have not owned a home that you lived in as your principal residence in any of the five preceding calendar years before the withdrawal) and the home acquired must be your principal residence. For more information, see my article on the H Read more:Renting
Tax on the Principal Residence After Death 2008-04-02 19:09:48 I had a visitor send in an e-mail with a rather interesting scenario to which I am completely perplexed.The visitor was the executor of an estate where the deceased’s principal residence was included in the assets of the estate. At no point during the life of the deceased was the property rented nor was it ever used for anything but the deceased’s principal residence. However, the CRA has reassessed the estate and determined that there is a taxable capital gain on the difference between the date of death and the subsequent sale date.When a taxpayer dies their principal residence is deemed to have been sold at the date of death. The estate of the deceased therefore acquires the property at the property’s value at the date of death.If the terms of the Will leaves the property to an adu Read more:Principal
, Residence
Tips to Save Money & Build Wealth 2008-04-02 13:20:11 I have put together a list of ideas you can use to save money.Save Interest - Pay your credit card balance in full when it is due. The cost of credit card debt is extremely high and is not tax deductible. One simple and often overlooked technique is that you should never spend more than you make!Buy Used - Consider buying a used vehicle instead of new. With the popularity of leasing, good quality used vehicles are always available. In most cases the cost is much less than what you would pay for a new car. However, be sure to check the vehicle out with an independent mechanic before you buy.Insurance - Shop around for insurance. Normally you will realize better discounts on your insurance if you consolidate to a single carrier. I recently saved $300 by switching my home insurance to Read more:Money
, Build
, Wealth
The Tax Free Savings Account (TFSA) 2008-03-28 15:04:42 Excerpt from the Government of Canada Budget Presenation.How the Tax-Free SavingsAccount
Will WorkStarting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward. Contributions will not be deductible. Capital gains and other investment income earned in a TFSA will not be taxed. Withdrawals will be tax-free. Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits. Withdrawals will create contribution room for future savings. Contributions to a spouse’s or common-law partner’s TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death. Qualified investments include a
Tax Savings for Everyone 2008-03-12 14:30:19 The Canada Revenue Agency just released Tax Savings
For Everyone. This handy guide provides information on personal tax credits, the new pension income splitting initiative, the Working Income tax benefit, and the Tradespersons' Small Tools Deduction.
Rethinking tax website 2008-03-12 14:20:44 If you were reading my posts, I'll direct you to my Canadian income tax website
at Tax Resource Canada.I have written an article on selecting a business structure that you might find interesting as well as articles on Pension Income Splitting in Canada and other Income Splitting Opportunities in Canada.EnjoyDean
Should I Invest or Pay Off Personal Debt? 2008-03-12 14:15:39 One question that I am often asked is whether it makes more sense to invest or pay off loans and other debt. The general answer to this question is to pay off your debts first because you will pay more in interest on your debts than you will earn on investments. A variation on this is to pay of non-deductible interest first. However, these "general answers" do not necessarily hold true in all cases.The actual answer depends on the rate of interest you pay on the debt after tax and the after tax rate of return on your investments. Now it is important to note that in Canada that the interest you pay on debt is only deductible if the borrowed funds were used to earn income. Therefore, investment loans will have a lower after tax interest rate as compared to interest on personal loans or credi Read more:Personal
, Personal Debt
Capital Gains 2008-03-12 13:35:50 When you sell an investment for more than you paid for it, the difference between the selling price and purchase price is called a capital gain. Conversely a loss is called a capital loss. In Canada, capital gains offer a tax advantage because only 1/2 of the net capital gains are included in taxable income.Note that I have said "net" capital gains. Capital gains generated in the year must be offset by any capital losses incurred in the year. Capital losses can only be used to reduce net capital gains to zero and cannot be used against other income. All is not lost however! Any unused capital losses can be carried back three years or forward indefinitely.If you own your own small incorporated business or qualified farm property, the government in 2007 increased the lifetime capital gains e Read more:Capital Gains
What is an RRSP? 2008-03-12 13:34:58 What is an RRSP?A registered retirement savings plan or RRSP is government sanctioned tax shelter that allows you to deduct amounts you contribute to the RRSP from your current taxable income. You can deduct amounts you contribute to your own RRSP as well as to your spouses RRSP (know as a spousal RRSP). However, the total deductions claimed cannot exceed your RRSP deduction limit.Contributions may be made to an RRSP up to and including the year you turn 71 (as of 2007). At age 71, you must either:withdraw the entire amount held in the RRSP and pay the tax the amount withdrawn,purchase an annuity contract, orconvert the plan to a registered retirement income fund or RRIF. Any amount withdrawn from an RRSP before you turn 71 is included in income and taxed at the time of the withdrawal unle
RRSPs 2008-02-19 18:43:02 I'm in the process of publishing RRSP information on my website, Tax Resource Canada. Stay tuned.
Why Have a Will? 2008-04-09 23:30:15 Why Have A Will?The Will is a legal document that serves three essential and important purposes. First, the Will documents who you have identified as beneficiaries in your estate. Second, the Will appoints who will administer your estate after your death by appointing an executor. Finally, the Will documents how you would like your estate to be passed along to the beneficiaries you have identified.Other items that can (and should) be included in your Will are to identify and appoint a guardian of you children, document investment discretion of the executor, and to set up any trusts to be carried on to care of beneficiaries of your estate.If you die with out a Will, a situation called intestate, your remaining assets will be distributed by the courts according to the statues and laws in you
Up to The Eyeballs in Debt 2008-04-10 15:25:20 You go out to your mail box to see if there is a birthday card from your aunt Sue but low and behold the only thing in the box is your monthly credit card statement. The envelope is really fat this time and you cringe as you reach inside your mailbox to retrieve the monster. You go back into the house and place it on your desk without opening the envelope. Perhaps you put some other papers on top of the envelope so that it just doesn't look that important. Frankly you are terrified of what it will say!Consumer credit card debt is at an all time high in North America. Banks and other lenders are eager to lend money and many of us want more than we can afford and it is a recipe for disaster. Couple credit card debt with large mortgages, car loans, and possibly other consolidation loans
Studio Tax - Electronic Tax Return at the Right Price 2008-04-14 15:16:45 Being an accountant my friends always ask me to prepare their returns for them. I'm not a public accountant so I don't use the latest and greatest tax software used by public tax accountants. Frankly those packages are really expensive. So I've always prepared my personal returns and friends returns using Quick Tax.I've heard about many programs over the years and as far as I'm concerned, if the CRA certifies them and my calculations are the same as the software then it really makes no difference who made the software. I had used QuickTax because it was reasonably priced and easily obtained. Well this year I started to hear about a program called Studio Tax. I was a little sceptical because it was being touted as free. Anyway, I decided to check it out and down loaded the program and Read more:Electronic
, Return
, Right
Bank of Canada Cuts rates 0.5% to 3.0% 2008-04-22 08:10:16 The Bank of Canada
announced at 9am EST that it is cutting the overnight lending rate by one half of one percent. The rate has been reduced now 1.50% since last fall indicating an expectation of a slowdown in growth over.The overnight lending rate is the target lending rate established by the Bank of Canada for overnight loans between institutions. Canada's chartered banks establish their prime lending rates based on the overnight rate. However, the banks are not required to change their prime rates following changes in the Bank of Canada's overnight lending rate.If Canada's banks lower their prime rates, the cost of borrowing funds becomes less expensive. If you hold a variable rate mortgage your cost of borrowing will be lowered considerably and your term to maturity will be reduced as w
Inheritance From The U.S. 2008-04-22 07:58:30 I received an e-mail recently from a U.S. citizen with landed immigrant status in Canada asking about the tax implications of an inheritance to be received when his parents (who are U.S. citizens living in the U.S.). The question raises several interesting points regarding taxation in Canada.Status of Inheritance
In Canada inheritances are considered taxable income regardless of the location of the source. So in this case the distribution from a U.S. estate is not taxed when distributed because the recipient is a Canadian resident.This article only addresses the tax implications to Canadian residents. Any U.S. citizen should confirm their tax status with the IRS as the determining factor for tax in the U.S. is based on citizenship and there may still be U.S. tax implications on the receipts
What Are In-Trust Accounts? 2008-04-22 22:57:53 We often hear of "in-trust" bank accounts established at banks and brokerage houses. What are in-trust accounts and how are they used?An in-trust account is an informal trust that you can create at a bank or investment dealer of your choice on behalf of a minor. The bank account is established because a minor is not allowed to accept gifts under a will or enter into binding financial contracts. An adult then assumes responsibility for investing funds on the child's behalf.Parents and grandparents typically establish these informal in-trust bank accounts to save money for the child's education or other purposes. The bank accounts and brokerage accounts can be funded with gifts, birthday money, the Child Tax Benefit (CTB), or inheritances not governed by a testamentary trust.Note that an Read more:Accounts
No Income No tax Return? 2008-04-22 15:45:47 Well not exactly. Generally speaking if you are a resident in Canada for income tax purposes do not have to file a return with the Canada Revenue Agency (CRA) unless you owe taxes or the CRA asks you to file a return.Note that If you are new to Canada you are required to pay tax on your "worldwide" income but only on income from point you became a Canadian resident for tax purposes.There are benefits to filing a return even if you are not required to do so. You should file a tax return if:You want to claim a refundYou would like to claim the GST creditYou have unused tuition and education credits to carry forwardIf you had earned income for the purposes of your RRSPIf you have non-capital losses to carry backOr if you are a senior and want to receive GIS or OAS payments
Read more:Income
, Return
Joint Accounts 2008-04-24 14:43:56 This discussion concerns joint accounts in all provinces except Quebec. The rules in Quebec are different than in the rest of Canada and the information contained in this article should be discussed with your tax advisor.Why Have Joint
Bank Accounts
and Brokerage Accounts?There are two common reasons for establishing joint accounts. First is to create an easily administrative account accessible to both parties. The second reason is as a tool to reduce probate taxes upon the death of one of the accountholders.Issues and Pitfalls of Joint Accounts & PropertyThere may be negative consequences of transferring assets to a joint account that is with someone other than your spouse.Capital gains may be triggered if the assets are transferred to an account held with someone other than your spou
Net Capital Losses On Your Notice Of Assessment 2008-04-25 11:30:28 I had a visitor write me a question yesterday who did not leave an e-mail address to respond. Since the question was non-specific, I've chosen to publish the question verbatim and provide my answer here.Question...I have just received a notice of assessment from CRA and it says that I have unused net capital losses from other year. I haven't got the records for these, how can I find them and when I do how do I apply them?J.C.Answer...When you sell an investment or property during a given tax year you may incur either a capital gain or capital loss. In a very general sense the capital gain or loss is calculated as the difference between what you received from selling the investment less what you originally paid (actually the calculation can be more complicated but essentially this is how Read more:Losses
, Assessment
The Countdown To The Tax Deadline 2008-04-28 10:48:16 As the April 30th deadline draws near you may be rushing to prepare your return and file your taxes. If you are looking for tax preparation software, try Studio Tax. It will save you time and minimize mistakes. Best of all it's free! If you are self-employed, have a business or your spouse (or common law partner) has a business, you do not have to file until June 15th! However, any taxes you may owe are still due April 30th. If you are going to get a refund, the sooner you file, the sooner you will receive your refund. The CRA will not pay you interest, so you are best to file, get your return and invest it (or pay off your debts) right away. You need to file a return to receive the child tax benefit and the GST credit.
Read more:Countdown
, Deadline
Living Abroad & Becoming a Non-Resident 2008-04-30 18:47:55 From time to time I get questions from visitors to www.taxresource.ca that are interesting and valid questions. I respond directly to all e-mails and although I don't give advice, I can clarify and interpret the income tax act for you.The QuestionIf I am a Canadian, living and working overseas for 3-4 years, am I tax exempt on the first $100,000 and then pay tax on anything beyond that amount?ResponseFirst, there is no $100,000 exemption for Canadian residents leaving Canada nor are there any exemptions for non-residents.A person is liable to pay Canadian income tax based on their residency and merely leaving the country for a period of time does not necessarily mean you do not have to pay Canadian income tax on your worldwide income. The CRA considers a number of factors including wheth Read more:Living
, Becoming
, Resident
Living Abroad & Becoming a Non-Resident 2008-04-30 18:47:55 From time to time I get questions from visitors to www.taxresource.ca that are interesting and valid questions. I respond directly to all e-mails and although I don't give advice, I can clarify and interpret the income tax act for you.The QuestionIf I am a Canadian, living and working overseas for 3-4 years, am I tax exempt on the first $100,000 and then pay tax on anything beyond that amount?ResponseFirst, there is no $100,000 exemption for Canadian residents leaving Canada nor are there any exemptions for non-residents.A person is liable to pay Canadian income tax based on their residency and merely leaving the country for a period of time does not necessarily mean you do not have to pay Canadian income tax on your worldwide income. The CRA considers a number of factors including wheth Read more:Living
, Becoming
, Resident
The Countdown To The Tax Deadline 2008-04-28 10:48:16 As the April 30th deadline draws near you may be rushing to prepare your return and file your taxes. If you are looking for tax preparation software, try Studio Tax. It will save you time and minimize mistakes. Best of all it's free! If you are self-employed, have a business or your spouse (or common law partner) has a business, you do not have to file until June 15th! However, any taxes you may owe are still due April 30th. If you are going to get a refund, the sooner you file, the sooner you will receive your refund. The CRA will not pay you interest, so you are best to file, get your return and invest it (or pay off your debts) right away. You need to file a return to receive the child tax benefit and the GST credit.
Read more:Countdown
, Deadline
Net Capital Losses On Your Notice Of Assessment 2008-04-25 11:30:28 I had a visitor write me a question yesterday who did not leave an e-mail address to respond. Since the question was non-specific, I've chosen to publish the question verbatim and provide my answer here.Question...I have just received a notice of assessment from CRA and it says that I have unused net capital losses from other year. I haven't got the records for these, how can I find them and when I do how do I apply them?J.C.Answer...When you sell an investment or property during a given tax year you may incur either a capital gain or capital loss. In a very general sense the capital gain or loss is calculated as the difference between what you received from selling the investment less what you originally paid (actually the calculation can be more complicated but essentially this is how Read more:Losses
, Assessment
What Are In-Trust Accounts? 2008-04-24 14:50:34 We often hear of "in-trust" bank accounts established at banks and brokerage houses. What are in-trust accounts and how are they used?An in-trust account is an informal trust that you can create at a bank or investment dealer of your choice on behalf of a minor. The bank account is established because a minor is not allowed to accept gifts under a will or enter into binding financial contracts. An adult then assumes responsibility for investing funds on the child's behalf.Parents and grandparents typically establish these informal in-trust bank accounts to save money for the child's education or other purposes. The bank accounts and brokerage accounts can be funded with gifts, birthday money, the Child Tax Benefit (CTB), or inheritances not governed by a testamentary trust.Note that an inf Read more:Accounts
Joint Accounts 2008-04-24 14:43:56 This discussion concerns joint accounts in all provinces except Quebec. The rules in Quebec are different than in the rest of Canada and the information contained in this article should be discussed with your tax advisor.Why Have Joint
Bank Accounts
and Brokerage Accounts?There are two common reasons for establishing joint accounts. First is to create an easily administrative account accessible to both parties. The second reason is as a tool to reduce probate taxes upon the death of one of the accountholders.Issues and Pitfalls of Joint Accounts & PropertyThere may be negative consequences of transferring assets to a joint account that is with someone other than your spouse.Capital gains may be triggered if the assets are transferred to an account held with someone other than your spou
No Income No tax Return? 2008-04-22 15:45:47 Well not exactly. Generally speaking if you are a resident in Canada for income tax purposes do not have to file a return with the Canada Revenue Agency (CRA) unless you owe taxes or the CRA asks you to file a return.Note that If you are new to Canada you are required to pay tax on your "worldwide" income but only on income from point you became a Canadian resident for tax purposes.There are benefits to filing a return even if you are not required to do so. You should file a tax return if:You want to claim a refundYou would like to claim the GST creditYou have unused tuition and education credits to carry forwardIf you had earned income for the purposes of your RRSPIf you have non-capital losses to carry backOr if you are a senior and want to receive GIS or OAS payments
Read more:Income
, Return
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