Act Now, and Save on Your 2010 Taxes

As the final weeks of 2010 draw to a close, most of us are focused on holiday activities.  To ensure a fresh start to your 2011, now is the time to implement year-end tax strategies.  A quick review can uncover opportunities for you to keep more tax dollars in your own pocket. 

Here is a quick checklist to get you started:
 

1.       Pay items that qualify for tax breaks such as tuition fees, medical expenses, childcare fees, or child support.  Paying them before December 31 will allow you to deduct them on your 2010 income tax return.

2.       Consider triggering a capital loss for planning purposes.  Some investments in your non-registered portfolio may have been affected by the recent market fluctuations and currently sitting in a negative position.  If you sell or dispose of the investment, you can use the capital loss to offset capital gains earned in 2010, or carry them back against gains you were taxed on in any of 2009, 2008 or 2007.  You can also carry the loss forward as a cushion against future capital gains – you can carry a loss forward indefinitely.

3.       Make political or charitable donations before the end of December and get the tax credit for this year.

4.       Top up RESP and RDSP contributions before December 31^st as carry forward amounts are limited and you may miss out on Government Grants and/or Bonds.

A little preparation now can help reduce your tax bill and improve the performance of your investment portfolio.  It’s a good idea to speak with me; or your tax specialist before the end of the year about your tax and financial strategies.  If you don’t, you may end up paying more in taxes than you have to.

Have a great weekend,

Tracey

Source; Mackenzie Financial Corporation

How Does it Affect My Money?

Through all the noise about Sovereign Debt, political uncertainty and the possibility of a global recession; most people just want to know “How does it affect my money?”

Please click the link below to watch a short investor friendly video put out by the Portfolio Managers at Dynamic Funds.  It will give you a little in-site on how your money is being managed to take advantage of these volatile markets.

View the Video 

Enjoy, and have a great weekend.

Tracey

Rate Hikes May Mean Half Million Foreclosures.

With interest rates at historic lows and expected to rise in 2013, I though the following was an interesting article to share.

Over 600,000 Canadians will struggle to make their mortgage payments if their rates rise by just 1%, according to the seventh Annual State of the Residential Mortgage Market report by the Canadian Association of Accredited Mortgage Professionals (CAAMP). Recognizing that interest rates cannot stay at historic lows forever, many are bracing for higher rates. But 3% said they could afford no increase in their monthly payment, while another 5% said they could afford an increase of up to $99.

Of the 5.80 million mortgage holders in Canada, roughly 650,000 (12%) would be challenged by rate rises of less than 1%.

Overall, the average amount of room for increase is $750 per month on top of current costs, with 68% saying they could manage an increase of more than $300 a month. Eighty-four percent said they could handle an increase of $200 per month in their mortgage payments.

While nearly half (46%) of respondents agreed that Canadians have too much debt, the majority didn’t think their own debt load was a problem. There is also a strong sentiment that low interest rates have allowed people to buy homes that probably should not have bought them.

In spite of that sentiment, there was similar agreement that real estate is a good investment and that mortgage debt is “good debt”. Only seven percent agreed strongly with the statement that they personally regretted the size of the mortgage they took on.

In this extended period of rock bottom interest rates, it comes as no surprise that Canadians have largely sought out new lower rates on their mortgages. Twenty three percent renewed or refinanced in the past year and 78% of those secured a lower rate—on average, 1.46% lower.

“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president and CEO of CAAMP. “They are planning ahead, aggressively paying down their mortgage in advance of any further economic jolt

There’s some good news on the home equity front: only 10% of mortgage holders took out equity in the last year, a 40% drop from 2010. Of those that did tap their home equity, the average amount is estimated at $49,000.

Seventy-eight percent said they have at least 25% equity in their homes. The study estimates that the total value of owner-occupied housing in Canada is $3.017 trillion, with mortgages and lines of credit on these homes totaling $982 billion. That leaves $2.035 trillion (68%) in home owners’ equity.

“Despite less than positive feelings towards the economy, or maybe because of that, Canadians are showing a level of prudence in their decisions that is inspiring,” said Murphy. “That suggests to us that there is no need for policy makers to introduce new measures that would reduce housing activity.”

When asked if they were concerned about a downturn in Canada’s housing market in the next year, the responses were far from optimistic. On a scale of 1 to 10, with 10 being complete agreement with the statement, responses averaged 5.84.

“Opinions are close to neutral on this question. But, for this statement, we would hope to see a high level of disagreement,” the report says. “These responses suggest weak confidence about housing market prospects.”

Across the country the weakest confidence levels were found in Quebec, Saskatchewan, Ontario and Manitoba. The strongest confidence levels were in Atlantic Canada, followed by Alberta and British Columbia.

How would an interest rate hike affect your monthly budget? Not sure; would you like to find out? Give me a call; I can even quote you on a new low mortgage rate if you need one.

Thanks for reading, have a great weekend.

Tracey

Originally published on Advisor.ca

Filed by Steven Lamb

What's Going on in Greece

European financial and political discussions have escalated from a simmer to a full boil this week and I’d like to use the post this week to go over some of the issues at hand, how we got to this point and what it means for Canadian and Global Investors. 

Early 1990’s – 2000’s

In an effort to align the economic interest of the member nations of the European Union, government debt and deficit limits were set.  Over time, some members including Greece (Greece joined in 2000) strayed from the limits and their debt levels increased far higher than Eurozone averages.  It is not entirely clear whether Greece was hiding the debt levels in complicated derivatives or other European countries were not interested in enforcing their agreement.  The end result is still the same; Greece had some of the highest debt to GDP ratios in the world at the end of the decade.

April 2010

Greece, seeing potential defaults on its sovereign debt and mixed results from the budget cutting they had already begun appealed to Europe and the IMF for an emergency loan.  Europe demanded austerity measures which were implemented and an EU/IMF loan package was agreed upon.

June 2011

Audits from the EU/IMF as well as decisions from the credit rating agencies concluded that the austerity measures undertaken were not enough.  Greece needed another round of emergency funds to stave off default and lenders were not convinced that enough budget cutting had been done to warrant more funds.  Stock markets feared the results of this standoff and price volatility increased.

October 2011

Leaders of the Eurozone fearing wide scale default in Greece agreed on a plan that would have Greek bondholders write off a large portion of loans.  They would enhance the bailout fund and add stability back to the Greek financial system. 

This Monday

Greek Prime Minister George Papandreou surprised everyone by announcing that he would take the decision to accept the new bail-out package (and associated austerity measures) to a referendum.  The global markets were shocked, European leaders were shocked and the MSCI global stock indices saw some of the largest drops in since 2008.

Thursday

After seeing the response to the referendum idea, Mr. Papandreou’s opposition party agreed to back the bailout conditional on a coalition government taking control of the country and Mr. Papandreou stepping down as leader.  Global markets rose as the fear of a drawn out referendum seemed to be gone however the political battle today has left Greece in political limbo.

Today

Mr. Papandreou’s party has a slim lead in Greek parliament and his popularity within his own party is fading.  He is facing defections and a non-confidence vote that could trigger an election within three weeks and change in leader within days.

So what is the impact for Canadians?  Canadian banks have invested less than 0.3% of their total assets in Greece, Ireland, Portugal and Spain.  It has been estimated that sovereign debt defaults in all four of those countries would only result in losses at .14% of revenues.  The challenge for Canadians is that our markets for many months have seen short term volatility as a result of symbolic events and not business fundamentals.  The unorganized default of Greece would be unprecedented and it is impossible to predict the reaction we will see should it happen.  Although we have seen sovereign defaults before in Argentina and Russia, we have not seen one in a developed country and we have not seen one involving a currency as important as the Euro. 

I will update the blog post as we receive news next week.  Call me if you would like to discuss any of these issues.

Have a good weekend,

Tracey

What is a Registered Disability Savings Plan?

A Registered disability Savings Plan (RDSP) is a registered savings plan, like an RRSP; but it is intended to help parents and others to save for the long-term financial security of persons with severe or prolonged disabilities.  In order to qualify for government grants the person who is disabled must be eligible for the Disability Tax Credit, and be 49yrs or younger.

 When the beneficiary is a minor, the parents or legal guardian can set up an RDSP and remain holders of the plan until the beneficiary turns 18 years of age.  If the beneficiary is over 18yrs and legally competent to manage property, then he/she must be the holder of the plan.  Although there can be more than one holder of the plan (both parents) there can only be one beneficiary per plan, and there can be only one RDSP per beneficiary.

 Anyone can contribute to a RDSP and you can contribute up to $200,000 per beneficiary during the lifetime of the plan.  There is no annual contribution limit, so a parent or grandparent can bequest a lump sum into a RDSP for a disabled child.

Although the contributions are not tax deductable; the plan holder will receive government grants for opening and investing into a RDSP, these can be quite substantial.

An RDSP can receive a maximum of $3500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime.  A grant can be paid into an RDSP on contributions made to the beneficiary’s RDSP until December 31 of the year the beneficiary turns 49 years old. 

The amount of the grant is based on the beneficiary’s family income as follows:

Beneficiary’s Family Income	Contribution	Grant	Maximum
$81,941* Or less	On the first $500	$3 for every $1 Contributed	$1500
	On the next $1000	$2 for every $1 Contributed	$2000
More than $81,941*	On the first $1000	$1 for every $1 contributed	$1000

*The beneficiary family income thresholds are indexed each year to inflation.  The income thresholds shown are for 2010.

The Canada Disability Savings Bond

A Canada disability savings bond is an amount paid by the government of Canada directly into an RDSP.  The government will pay bonds of up to $1000 a year to low-income Canadian with disabilities.  No contributions are required to receive the bond.  The lifetime bond limit is $20,000.  A bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old.  The amount of the bond is based on the beneficiary’s family income as follows:

Beneficiary’s family Income	Bond
$23,855* or less (or if the holder is public institution)	$1000
Between $23,855* and $40,970*	Part of the $1000 - based on the formula in the Canada Disability Savings Act
More than $40.970*	No Bond is paid

*The beneficiary family income thresholds are indexed each year to inflation.  The income threshold shown is for 2010.

Starting this year in 2011; you are able to carry forward unused grant and bond entitlements to future years.  The carry forward period only started after 2007 and is for a period of 10 years.

If within 10 years any of the following events occur, the government bonds and grants must be repaid to the government of Canada:

-        The RDSP is terminated (voluntary closure)
-        The plan is deregistered
-          A disability assistance payment is made from the plan money
-        The beneficiary ceases to be eligible for the disability tax credit
-         The beneficiary dies

 For more information about RDSPs visit CCRA’s website:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rdsp-reei/menu-eng.html

Or as with any of your financial questions, give me a call.

Have a great weekend,

Tracey