Author: admin

by

CPPIB good news update

The Canada Pension Plan Investment Board (CPPIB) manages $392 billion as of 2019/Mar/31 for Canadians. Its mandate is to optimize return on investment for the Canada Pension Plan (CPP), for many generations and with a low risk profile.
It released its latest annual report. The results are impressive.

  • the plan produced a solid 8.9% return this past financial year;
  • the plan’s net assets increased by almost $36 billion;
  • the plan produced an average of 9.2% return for the last 10 years.

Facts on CPP. Did you know that –

  • it was designed to provide just 25% of an average income (not 100%)?
  • CPP contributions are kept entirely separate from government general accounts, and at arms length from possible federal government’s meddling and political interference?
  • the plan’s chief actuary is responsible to review and make projections to ensure there will be no shortfall, for at least over the next 75 years?

If you’ve ever contributed to the Canada Pension Plan, you can view your estimated monthly CPP benefits on retirement. You need to obtain an account with MyService Canada and request a record of your personal CPP contributions over your working live.
MyService Canada – here’s the link

The bottom line on our collective CPP government pension – we need not worry our CPP will run of money any time soon!

CPPIB – here’s its link

by

Beware of CRA scams!

Canada Revenue Agency (CRA) has posted some warnings on scams whereby thousands of unsuspecting Canadians have fallen prey to and lost millions of dollars to scammers.

Check out the government’s website for more information and how to protect yourself – click here. Here are some important points mentioned by CRA on its website –

1) By phone, CRA will never

  • ask for information about your passport, health card, or driver’s license
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • use aggressive language or threaten you with arrest or sending the police
  • leave voicemails that are threatening or give personal or financial information

2) By email, CRA will never

  • give or ask for personal or financial information by email and ask you to click on a link
  • email you a link asking you to fill in an online form with personal or financial details
  • send you an email with a link to your refund
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

3) By mail, CRA will never

  • set up a meeting with you in a public place to take a payment
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

4) CRA never uses text messages or instant messaging such as Facebook Messenger or WhatsApp to communicate with taxpayers under any circumstance. If a taxpayer receives text or instant messages claiming to be from the CRA, they are scams!

5) Other useful information on scammers posing as CRA employees. Check out this CRA’s website link – click here.

by

TFSA accumulated savings, RRSP and tax tips – 2019 update

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

I’ve dropped the assumed annual return from 4%  to a conservative 3% due to recent decline and uncertainty in the markets.  Even with this reduced drop over the plan’s life-to-date, and assuming the maximum is contributed each year at the beginning of each year, one can still expect to have over $75,000 by the end of 2019! The magic of compounding and accumulation.

Here’s the link – 2019Jan-TFSA savings accumulation

Chartered Professional Accountants of BC (CPABC) is committed to providing resources to assist individuals and businesses prepare their income tax returns, invest in RRSPs, and plan their finances.   As a service to the public, here’s the link to its latest RRSP and other useful tax tips.

by

Short and sweet for the year-end

It’s really amazing that another year-end is upon us.    Living just keeps happening and time flies.

Before you know it, we might be at a stage where we’ll need a little financial cushion to help us along.   Hopefully over the years, you’ve been socking away a little savings regularly and that it has grown nicely and steadily for you.

Here again is a reminder to help you along in maximizing your savings and minimizing your taxes along the way.

  • Tax free savings account (TFSA) – building a tax free nest egg  without worrying about future tax liability on the income.
  • Registered Retirement Savings Plan (RRSP) – building a tax deferred retirement nest egg, saving you taxes today and hopefully to pay tax in the future when you income is taxed at a lower rate.
  • Regular withdrawal to invest – getting into the habit of forced savings by withdrawing a set amount each payday.   Investing those savings into tax efficient investments will help maximize your savings.  The compounding effect of regular savings can also have a pleasant surprise over time.
  • Spend less.   Think twice before buying will often result in a bigger nest egg.  Remember, this is often from after tax money so your saving has even more bang for the buck.

It’s often said that having family and friends is the most important things to have during the holidays.   This is so true, and you don’t need to spend a huge sum to have a memorable and wonderful time.

Merry Christmas and Happy New Year!

 

by

SPP contributions is now $6,000 annually!

 

Good news for RRSP contributors.

SPP (Saskatchewan Pension Plan), a defined contribution plan and is available to all Canadians, has increased its annual maximum limit to $6,000 from $2,500, subject to one’s available RRSP room.

Members can take advantage of the increased limit starting with the 2017 tax year.

Its performance for the past year on its Balanced Fund is a respectable 9.7%.

Another unique option over other RRSP plans is its method of contributions.   Aside from normal fund transfers and deposits, it also allows for regular credit card (Visa or Mastercard) contributions.

Click on this link for more information – https://www.saskpension.com/

Note::  RRSP contribution deadline is March 1, 2018 for the 2017 tax year.

by

Once again, it’s year-end tax planning time …

Before we start to celebrate another festive season, let’s review some essential planning items and act now to make sure we save on 2017 tax dollars.

  • Make sure you’ve paid these bills before the year-end for this year’s tax benefits/credits –
    medical and dental expenses;
    child care expenses;
    spousal support payment;
    political donations;
    charitable donations;
    tuition fees (there are new rules in 2017 extending eligibility for occupational skills courses);
    interest and vestment counsel fees;
    monthly transit pass costs for January to June, 2017 (this credit is no longer available after June 30, 2017).
  • Harvesting tax losses.   Consider selling unwanted 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.  The last stock trading date for settlement of securities this year is December 27, 2017, for both Canadian and US exchange securities.
  • 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.
  • For self employed taxpayers, consider
    – making your intended capital item purchases (such as an automobile) before the business’ year-end to maximize your capital cost allowance.  You are entitled to claim half of the maximum business deductions for the year even though you actually only owned the item(s) for as few as one day!
    – consider paying adult family members a reasonable amount on work they’ve performed for the business for income splitting purpose. It is especially important if you have an incorporated business as the government is looking to changing the tax rules in 2018;
    – if you have discretion over the timing and amount of receipt of non-eligible dividend income, consider receiving them this year rather than later.  Tax rates are increasing.   Although other consideration like tax deferral benefits must also be taken into account.
  • This is the time to see if it makes sense to contribute to your RRSP or spousal RRSP for the current year.   You probably know how much income you’ve earned for the year, and whether a contribution will benefit you in tax savings.
  • Adjust your 4th quarter tax instalment to compensate for possible 2017 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.

Upcoming deadlines –
2017 personal tax filing – April 30, 2018
2017 personal tax filing with selfemployment reporting – June 15, 2018
RRSP contribution deadline for 2017 – March 01, 2018

 

 

by

Short term rentals – mortgage helper traps and tips

Air bnb and other online short-term rentals are popping up everywhere.   Renting out your home or part of your home from time to time is a great way to bring in extra income.

But before you do, consider the following potential traps:

  1. Does your home’s municipal zoning allows you to sell short term rentals?  Does it require you to apply for a licence?
  2. Have you taken out extra property and liability coverage for this type of rental with your home insurance?   If not, you will likely null and void your policy with these rentals and ultimately defeat the purpose of having home insurance.
  3. If you live in a condo complex, have you checked with your strata?
  4. Consider the tax liability of rental income generated.  Short term rentals are considered business ventures, as such must be reported on your annual income tax return.  Have you planned for this tax expense?
  5. Consider potential tax implication with Canada Revenue Agency’s ‘change in use’ rule on your principal residence exemptions.   The rules have changed and you may incur additional capital gains tax now, or when you sell your home in the future.

Tips to counter these potential traps:

A. To avoid running afoul of government licensing requirements, fully understand zoning laws and abide by their requirements.

B. Speak with your insurance broker/agent about the potential change BEFORE you start your rentals.   It is not difficult for insurance companies to check if you’re violating the policy rules.  Your online ads are date stamped identifying when you’ve actually started making your home available for rentals.

C. To avoid penalties and levies from your strata, abide by its rules.

D. Speak with a tax accountant or lawyer BEFORE you start your rentals.   Understand fully the tax implications of your rental business and decide if this is still a venture worth your while to embark on.

Rental rules are complex and not as simple as just sharing your home in exchange for money.   A mortgage helper is nice but make sure you go in fully prepared and with your eyes wide open.

 

 

by

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!

by

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.

 

by

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