Home Accessibility Tax Credit

The Home Accessibility Tax Credit is a non-refundable federal tax credit of 15%, for expenditures made to a maximum of $10,000 on home renovations made to an eligible dwelling that improve accessibility, mobility or security for a senior or a person with disabilities.

Do keep all supporting documents and receipts as Canada Revenue Agency may ask for review to validate amount claimed.   Details of the tax credit and its eligibility click here.

It appears the same expenditures may also qualify as medical expenses if they qualify.

And for BC residents … you’ll probably also benefit from the provincial Home Renovations Tax Credit of 10% for the same expenditures, as mentioned in my earlier blog from November, 2016.

Truly a rare occurrence on spending where you may potentially have a triple win from the taxman!

Emergency fund primer

The need for an emergency fund is essential and cannot be overemphasized.

This fund should be in very liquid form and can be readily accessible.

So how much should be set aside for emergency living expenses?   Financial experts all agree it needs to be a minimum of 3 months’ worth, increasing to as many as 9 months’ worth of living expenses.  That is because the last thing you want is to borrow at a high rate (like credit card charges) for living expenses, or draw from long term investments at the wrong time.

Depending on your circumstance and lifestyle, here are some factors to take into consideration when determining how much and for how long the fund should support you –
1)  size of your household you are supporting and dependent on you;
2)  other cash that’s readily accessible, like money saved in your TFSA (tax free savings account);
3)  how much of other sourced income will be coming in, like EI (employment insurance) and short term disability benefits.

Ask yourself –
1)  am I in a high risk, vulnerable area of employment where replacement work may be difficult to come by?
2)  do I lack other sources of income during this period?
3)  do I lack other savings to access during this period?
If the answer is yes to these questions, you will need to consider a larger emergency fund.

My suggestion on how to estimate the fund amount:
– determine your basic monthly living expenses;
– multiply by the number of months you will likely need to access this fund;
– add 10% contingency to the total;
– less any liquid savings you can access;
– this will equal to the fund size you should consider setting aside for your rainy day account.

 

TFSA accumulated savings – an update

Here’s an update of my post from January 2015 on TFSA (Tax Free Savings Account) accumulation.
Since 2009, one can contribute to a TFSA and any investment income earned is tax free.

Assuming a 4% annual return, and the maximum is contributed each year at the beginning of each year, one can expect to have almost $63,000 by the end of 2017!   The magic of compounding and accumulation.

 

Year Maximum allowed Year-start balance Contribution on Jan 1st Interest    rate Interest earned Year-end balance saved
2009 5,000.00 0.00 5,000.00 4.0% 200.00 5,200.00
2010 5,000.00 5,200.00 5,000.00 4.0% 408.00 10,608.00
2011 5,000.00 10,608.00 5,000.00 4.0% 624.32 16,232.32
2012 5,000.00 16,232.32 5,000.00 4.0% 849.29 22,081.61
2013 5,500.00 22,081.61 5,500.00 4.0% 1,103.26 28,684.88
2014 5,500.00 28,684.88 5,500.00 4.0% 1,367.40 35,552.27
2015 10,000.00 35,552.27 10,000.00 4.0% 1,822.09 47,374.36
2016 5,500.00 47,374.36 5,500.00 4.0% 2,114.97 54,989.34
2017 5,500.00 54,989.34 5,500.00 4.0% 2,419.57 62,908.91

CPABC’s RRSP tips for 2016 tax year

As a public service, CPABC is providing resources to assist individuals and businesses prepare their income tax returns, invest in RRSPs, and plan their finances. CPABC’s RRSP and tax tips for the 2016 tax year include important information pertaining to income, deductions, and tax credits.

Here’s the link on everything RRSP: www.rrspandtaxtips.com

Stop the waste and save more money

Studies have found that as much as 35% of our household groceries end up in our landfills and sewer.  This is obscene considering that so many people globally are going hungry.  It also means that not only are we throwing away good food, we’re literally pouring good money down the drain to the tune of $1,600 a year!

I love to eat and love to eat-out.   I very rarely let food go to waste and that include my leftovers from restaurant meals.   Often I’m able to make a ‘fresh’ meal for myself from good bits of leftover steaks, or burgers, or even salads.   It is quite simple, really.   All that is required is a bit of knowledge and throw in some flexibility with your cooking hat.

Here are some ideas that often work for me –

  1. Leftover BBQ or roast chicken – de-bone what’s left of the chicken; freeze the bones to make broth later (when you have collected enough bones).
    What to do with the leftover chicken meat?
    – slice the chicken meat and stir fry with whatever vegetables that’s in the fridge, garlic, salt, pepper, and whatever sauce you can drum up.  Use tomatoes, soy, bbq, lime juice, pesto, etc. to make the sauce … the sky’s the limit and Pinterest is a good place to look for inspiration.   Serve with a side of starch for a healthy simple meal;
    – slice the chicken meat and saute with onions and garlic.  Add to prepared spaghetti sauce and serve over pasta for an Italian meal;
    – slice the chicken meat, add chopped red onions, and mix with a bit of mustard and mayonnaise.   Put between 2 slices of toast with sliced tomatoes for a great sandwich;
    – pan fry the chicken leftovers.  Serve it with a sauteed mushroom cream sauce (using sliced mushrooms, a can of condensed cream soup and enough milk to your preferred consistency), and boiled potatoes for a delicious meal.
  2. Leftover french fries, hash browns and potatoes – they’re often hard and gritty after refrigeration.   I found a couple of great ways to use them up without having them end up in the garbage bin.
    – chop up the fries into smaller pieces and add them to soups and stews;
    – soak the hardened potatoes in a bit of milk and water, microwave until soft.    Mash up the mixture, add cooked bacon bits, chives, a bit of flour and a beatened egg.   Pan fry to make savoury potato cakes.   Serve warm with a cool sour cream dip.
  3. Any leftovers that are savory – puree what you have, add broth and cream, heat thoroughly and serve this as a hearty soup.

I recently calculated my actual cost of a cooked supermarket BBQ or roast chicken.   It provides 3 meals for 2 people, and works out to less than $3 per person per meal to completely use up the chicken.  This is based on a $10 chicken, plus $8 for other (portioned) side ingredients like vegetables, starch, broth, dairy and spice products.

Note:  Practise food safety, always re-cook all leftovers thoroughly before serving. 

 

 

It’s time for a year-end tax planning check-up

It’s amazing how time flies, but we’re almost near the end of another year.   And before we start to celebrate another festive season, let’s review some essential planning items and act now for some additional tax saving for 2016.

  • Harvesting tax losses.   Consider selling investment losers in your non registered portfolios to use as offsets to your capital gains.   Any unused losses for the current tax year can also be carried back three years and forward indefinitely.
  • Good to hold off buying any mutual funds until the new year.   This will avoid any possible surprising and unanticipated income distribution even if you owned the funds for a month or less.
  • Pay these bills before the year-end for 2016 tax benefits/credits –
    medical and dental expenses;
    child care expenses;
    spousal support payment;
    political donations;
    charitable donations;
    investment counsel fees.
  • For self employed taxpayers, consider making your intended capital item purchases (such as an automobile) before year-end to maximize your 2016 capital cost allowance.  You are entitled to claim the maximum business deductions for the year even though you actually only owned the item(s) for a month or less.
  • This is the time to see if it makes sense to contribute to your RRSP for the current year.   You probably know how much income you’ve earned for 2016, and whether a contribution will benefit you in tax savings for the year.
  • Adjust your 4th quarter tax instalment to compensate for possible 2016 over or under payment.
  • It’s always wise to contribute to your TFSA if there’s excess cash for savings and investments.   Doing so in your TFSA will help you avoid taxation on any investment income generated from those contributions.
  • The Home Renovations Tax Credit for seniors and persons with disabilities is still available for eligible individuals.   It’s worth 10% of eligible renovation costs to a maximum of $1,000 in tax credit.    All documentation must be available on request to support the claim.  Details available on the BC Government website.  (* please also see my blog of 2017/02/26 for the Feds’ version of this tax credit.)

And new in the CRA pipeline –

  • Disposition of your Principal Residence – new reporting rules for 2016 and beyond.   Individuals must now report their principal residence disposition occurring in the year.  CRA has published new guidance on its website for compliance and essential reporting.

Deadlines –

  • 2016 personal tax filing – May 1, 2017
  • 2016 personal tax filing with self employment reporting – June 15, 2017
  • RRSP contribution deadline for 2016 – February 28, 2017

 

It’s almost time to go back to school, so watch your wallet to keep from overspending now

Can’t believe summer is almost over and Labour Day weekend is just around the corner.  No doubt parents are busy getting their kids ready for back to school.

It is also one of the most lucrative time of the year, aside from Christmas, for retailers.  No question we’re bombarded now with advertising to buy, buy, buy … on back to school deals!

Step back for a moment and give yourself space and time.   Do not do too much impulse buying, especially with persuasive kids.   Pause on your credit cards if there are things you can wait on buying until after mid-September.   You’re bound to save when they go on sale after the back to school rush is over.

For example: –
1)  wait for October sales on trendy back to school clothing.   They will likely be on sale then;
2)  many trendier items (like fashionable lunch bags) go out of favor very quickly.   Resist the urge from your kids to buy now;
3)  head to supermarkets to buy basic school supplies, along with your weekly grocery trips;
4)  check out consignment stores, craigslist and garage sales to buy and sell good quality 2nd hand items;
5)  stick to your shopping list;
6)  stick to your budget.

It pays to be aware and prepared.   You’ll be amazed with your saving results just by being pro-active with your back to school spending.

How much is enough in retirement?

Well, it depends.

The rule of thumb that you only need 70% of your pre-retirement income is too simplistic.   For some people, it is sufficient.   But for many, it is not.

A good start in determining how much you’ll need in retirement is to break down your budget into two categories of spending –

  • necessities (basic food, shelter, clothing, medication, etc.), and
  • discretionary (travel, dining out, entertainment, money for a new car every years, etc.)

If your basic needs add up to 50% of your after-tax income, you will have up to another 50% for discretionary spending.  So if you choose to spend only 25% on discretionary items, then you will need a total of 75% of your current income in retirement.

And remember to take into account in your calculation that certain expenses will decline or even disappear in retirement.   For example, you will no longer have to make CPP or EI contributions, income tax will likely decrease, and the need to buy work clothes will be a thing of the past.

On the other hand, certain costs will likely increase in retirement.    Healthcare and hobby related expenses will likely go up.   So include these items in your retirement budget.

The last bit of planning is to make sure you will have enough income to take care of your retirement needs when you retire, before you retire.

Back From the Future – Savings Basics

 2015Oct-PiggyBank-300px

I came across a recent ad with ex-dragon Arlene Dickinson espousing her goal-oriented strategy for saving money and restoring financial well-being.  Immediately, the book The Millionaire Next Door came to my mind.  This New York Times bestseller was published a number of years ago sharing with readers the surprisingly simple, yet effective secrets to amassing a million dollars or more.  Those strategies then still apply today, as they did for many generations before us.

Both messages are literally the same.  Slow and steady win the day when it comes to responsible saving and budgeting.

For example, you can save as little as $2.75 a day; and that can add up to $1,000 a year.  Think 20 years into the future, that’s $20,000 from just saving the price of a cup of coffee at Starbucks today!  This doesn’t even take into account the compounding effect of investing, which can potentially double (*) this total!

So by giving up a coffee at your favourite Tim Horton’s, walking or taking public transit instead of driving to your local store, and packing your lunch instead of fast food out, they can all add up.

There are many ideas to save.  Just google budgeting, saving tips, etc. and you will be bombarded with thousands of useful websites and ideas.   My book ‘The Personal Budgeting Kit‘ also has many smart saving ideas to help you on your way.

Here are some other strategies to keep in mind. They are simple, basic and logical.

Systematically:
– live below your means
– save your money
– pay down your debt

Always:
– have a plan/goal
– seek advice
– read up on saving ideas

As quoted from the Millionaire Next Door – “Whatever your income, always live below your means.”
And as quoted from Arlene Dickinson in the ad – “Keep at it when you can and it will add up.”

 

(*)  assuming a 6% or higher compounding annual return.

Save your money $$$

Here are some concrete saving ideas to help you keep more of your money.   Read my recent posts on how to save over $42,500 in just 7 years, even with only a 4% rate of return!

1)   Do not impulse buy, only shop for what’s on your prepared list;
(Studies have shown that as much as $3,700 a year is wasted on unnecessary purchases.)

 

2)   Lunch in (not out) more often;
(A average savings of at least $5 per meal when not lunching out.  Do this twice a week and you will save $520 a year.)

lunch in, save money

lunch in, save money

 

3)   Stop food waste, be creative with leftovers;
(Studies have shown that as much as 35% of our food ends up being wasted, or $2,200 year.)

 

4)   Pay your credit card bills on time;
(It’s obvious, many dollars can be saved when you stop those 18% to 20% interest charges levied by your credit card companies.)

no more credit card late payments!

no more credit card late payments!

 

5)   Look for cheaper phone plans;
(Even a savings of $20 a month in your phone plan will save you $240 a year.)

 

Add up all your savings and you are well on your way to top up your TFSA for a more secured future!

see your money grow!

see your money grow!