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. 

 

 

contribute to SPP

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Yes you can, contribute to a SPP with your RRSP room!

Did you know that you can contribute to a Saskatchewan Pension Plan (SPP) even if you don’t live in Saskatchewan?   Yes (Canadian) folks, this is absolutely true.

Why SPP?

I like this plan because:
1)  it is easy to join;
2)  it is easy to contribute –
– annual maximum contribution is $2,500, which you can opt for monthly contributions using your credit card, and
– an annual additional transfer-in from an existing RRSP of up to $10,000;
3)  their management expense at .96% for their balanced fund is decent and lower than most managed mutual funds;
4)  their balanced fund return is decent.   Average return over the 30-year period since inception is 8.1%, with a respectable 5-year average of 7.6%.  Check out the full history here.   (Of course, you need to keep in mind that these rates are not guaranteed going forward.   They just show the plan’s past performance in investment returns.)

So give the SPP some serious consideration, especially if you are considering long term retirement investing.

And happy 2017 planning!

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.

CRA says – be wary of scammers!

CPABC says:

“Highly skilled scammers are impersonating the Canada Revenue Agency (CRA) through telephone calls, mail, text messages, and emails.  If you want to confirm the authenticity of any CRA communication, call your local CRA office.  For information on scams or to report deceptive telemarketing, contact the Canadian Anti-Fraud Centre (CAFC) online or call 1-888-495-8501.”

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.

Canadian Tax Myths and Tips

Canadian tax filings can be daunting.   Here are a few articles to help you through the process this season that I think is worth your read.  The first two from CBC News and the 3rd from a recent blog post from the Women’s Financial Learning Centre. –

  1. www.cbc.ca/news/business/taxes/10-tax-filing-myths-that-could-cost-you-money-1.1266240
  2. www.cbc.ca/news/business/taxes/tax-season-2015-10-ways-to-attract-a-cra-auditor-s-attention-1.2969196
  3. www.womensfinanciallearning.ca/2016/03/09/5-tax-filing-tips-to-save-you-time-and-money/#more-1802

 

 

It’s RRSP Time Again!

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Needless to say, it’s that time of the year again when some of us are scrounging for money and time to invest to our Registered Retirement Savings Plan (RRSP).

If you’re a procrastinator and haven’t got around to contributing yet, here are a few things to keep in mind.

• Deadline for this year is 11:59pm Monday, February 29, 2016.

• If you have high income in 2015 and projected low income for 2016, you may want to use RRSP contributions (2015)/withdrawals (2016) to equalize your income of both years to save on the overall income taxes for the combined two years.

• Contribute to a spousal RRSP if you’re the high income earner in the household. This will enable you the tax deductions and equalize both your retirement income down the road on retirement.

• If you have no or low income in 2015, you probably want to skip the contribution altogether for this year. This is especially applicable if you anticipate higher income years in the near future which can benefit more from your contributions then.

• Do not exceed your RRSP contribution limit. Check your Notice of Assessment for the maximum amount you’re allowed. There’s a maximum over-contribution limit of $2,000 and going over will end up attracting a steep penalty.

Other considerations

• Don’t rush into the wrong investments when you make your RRSP contributions. Temporarily park your contributions into a cash account within your plan. Take your time and make your investment decision later when you’ve done your due diligence.

• Consider appointing a beneficiary.

• Keep in mind any RRSP withdrawals are taxable in the year of withdrawal.

• Keep in mind any spousal RRSP withdrawals may be taxable by the higher income earner if the rules are not followed. Consult with your advisor before making this move.

• You can still make contributions to a spousal RRSP after you turned 71 if you have the room, providing your spouse is not yet 71.

• And remember your RRSP is, first and foremost, savings for your retirement. Do not use it as a short term savings vehicle.

2015 year-end tax saving tips

cutting taxes

 

 

 

Tax rules are getting more complex and cumbersome. That’s why it is important to spend time and make an effort to legally maximize your personal tax deductions and minimize your taxes.

Prior to year-end is a good time to do just that. It’s your opportunity to take advantage of available deductions before they expire or become unavailable for the current year.
For 2015, here are some common tax saving reminders …
1) Paying tax deductible expenses
these deductions are only available when they are paid. Tax deductible alimony payments, child care expenses, investment counsel fees and interest on borrowings for investing or business purpose are common deductible expenses.

2) Paying for items that qualify for tax credits
these payments may give rise to refundable/non-refundable tax credits but only if they are paid within the calendar year. Items include dental and medical expenses, charitable donations, political contributions, children’s fitness and arts program fees, tuition fees, student loan interest and monthly transit passes.

3) Review non registered investment portfolios to crystallize your losses
here’s an opportunity to rid your unwanted losing investments and lock in their losses to offset your other capital gains. These losses can be applied against 2015 as well as available for carry back to any or all of the previous 3 years. All trades must be settled by Dec 24, 2015 for Canadian exchanges and Dec 28, 2015 for the US exchanges. Check for potentially different trade dates for mutual fund dispositions. (Caution – watch out for superficial loss rule which will nullify your losses for tax purpose.)

4) RRSP contributions
you have until February 29, 2016 to contribute to your RRSP or spousal RRSP to qualify for 2015 deductions. If you are turning (or have turned) 71 this year, December 31, 2015 is your deadline for one final contribution to your RRSP.

 

Some 2015 changes in tax rules:
– Indexing of adoption tax credit of $15,000.
– Child care deduction increases to $8,000 for children under 7, $5,000 for children 7 to 16, and $11,000 for children eligible for the disability tax credit
– Child fitness tax credit will be a refundable tax credit starting in 2015.
– A non-refundable Home Accessibility Tax Credit of up to $10,000 will be available in 2016 for expenditures made in 2015. This is available to seniors and persons eligible for the disability tax credit.
– Enhancement of the Universal Childcare Benefit program. The amount has been increased by $60 a month and is taxable to the lower income spouse. At the same time, the children’s credit of $2,255 a year, has been eliminated.