Back to School Tax Tips

As the kids head back to college or university in a few days, why not share some tips with them so they can be sure they are taking full advantage of the tax system to maximize the amount of cash in their jeans.

Here are five top tax tips for students:

1   Maximize your non-refundable tax credits.
If they earned income during the year, perhaps from a part-time or summer job, then the various non-refundable credits available to them as a student should come in handy to reduce their federal, or in some cases, provincial taxes payable.

The most common credits for students include: tuition, education, and textbook credits, a credit for the cost of monthly public transit passes, a credit for interest paid on certain student loans and the relatively new Canada employment amount.

2   Their scholarship is tax-free!
The tax rules changed back in 2006 to exempt the full amount of any scholarships, fellowships, bursaries, study grants and artists' project grants received by students from tax; provided the program they are enrolled in entitles them to the education credit.

3   Report only the EAP portion of RESP withdrawals.
Only the educational assistance payments (EAPs) from their Registered Education Savings Plans are taxable. EAPs consist of the income, growth, or Canada Education Savings Grants (CESGs) paid out to them from their RESP. Any contributions refunded to them are tax-free.

4   Claim moving expenses.
If your son or daughter moved back home from school during the summer months to earn employment income, they can deduct their moving costs against their summer employment earnings provided their move was more than 40 kilometres.

5   Consider a TFSA for extra cash.
Have they saved some extra cash from working during those summer months? Why not tell them to sock up to $20,000 into a new Tax Free Savings Account (TFSA). The money grows tax- free and they can access their funds whenever they want, for any reason. Plus, any amounts they do withdraw can be re-contributed, beginning the following year.

We live in Canada, we pay tax.  Helping our kids keep more of their hard earned income will hopefully educate them on the importance of tax planning, a great skill to have.

Enjoy the last long weekend of the summer,

Tracey

Source:  Original article written my Jamie Golombek, welcometojamiegolombek.com

 

Common Estate Planning Mistakes

 

Although most people (78%) have no experience in managing an Estate, more than 80% of us choose a family member or close friend as our executor, according to a CIBC poll.  While family and friends may be dependable, more often than not these people have no practical knowledge of the responsibilities associated with having the title.

“If you appoint (someone) without the appropriate experience, it could cost your estate thousands of dollars, as well as months or even years of angst for your loved ones,” says Jamie Golombek, managing director, tax & estate planning at CIBC.

 

Three Common Mistakes

Underestimating the time involved in administering an estate

The CIBC poll found that 38% of people thought it would only take about six months to administer an estate, while two-thirds thought it would take less than one year.  In reality, tax errors, litigation and other complications can delay an estate’s administration for months if not years.
 

Choosing the wrong executor

The responsibilities of an executor include funeral arrangements, valuating estate assets and liabilities, filing tax returns, collecting insurance proceeds, and accounting for the estate’s financial activities.  Your executor will need the time and skill set to deal with many parties, including lawyers, accountants, financial institutions, insurance companies, government agencies and beneficiaries.

Preparing your will and then forgetting about it

Your will should be reviewed at least every five years.  Other changes that should trigger a review include a marriage, divorce, birth, diagnosis of a critical illness, or moving to another province and/or country.  Be sure to keep good records and make sure your executor knows where to find your will.  Too many times an estate is delayed because the will or other crucial documents can’t be found.

The obligations of an executor can be quite daunting, it is important to discuss them with the person you have chosen to make sure they are up for the task.  Alternatively, if you have agreed to be someone’s executor; make sure you understand their wishes; even ask to see a copy of the will so you can be fully prepared.

 

Have a great weekend,

 

Tracey

 

 

Source:  advisor.ca

10 Reasons Why CANADA is a Great Place to Retire

There is plenty of bad news out there; but when it comes to retirement Canadians have many factors working in their favor;

1.      Canada consistently ranks as one of the best countries in the world  to live.

2.      Canadian life expectancy is among the highest in the world.

3.      The Canada Pension Plan is sustainable for at least the next 75 years.

4.      Canadian governments cover approximately 70% of health costs.

5.      Canada’s retirement income system provides flexible options for saving, investing and generation income.

6.      The Bank of Canada is committed to keeping inflation low and predictable.

7.      Workplace pension coverage is likely to improve as governments consider various proposals.

8.      Compared to other countries, Canada is in good shape financially.

9.      Rising Canadian housing prices have added wealth for boomers.

10.   Canada’s labor market provides opportunities for older Canadians.

Even though Canada is a great place to retire, you still have to plan your retirement.  Here are six key points to remember;

What do you want your retirement to look like?

If you know what you want, you are more likely to get it.

Make a written Retirement Plan.

If you want to have control over how you live your later years, creating a written plan in advance will likely mean you have better options when you have to make choices about what you do and where you live.

Planning to Work in Retirement is not a Retirement Plan.

Plan to work because it gives you satisfaction, fulfillment and enjoyment – not because you need to.

Get Good Advice.

Professional financial advice can improve your chances of having the retirement you want.

Don’t assume your living expenses will be a lot lower in retirement.

There may be things you spend more on, such as travel, entertainment, hobbies and health insurance.

A house is not a retirement savings account.

Downsizing can be complicated and may not get you the financial results you want.

Creating a Retirement Income Plan is one aspect of Financial Planning that I love to do, if we haven’t worked on yours yet, give me a call.

Have a great weekend,

Tracey

Source:  Fidelity Investments, Fidelity Retirement Survey, by The Strategic Counsel

Understanding Living Benefits

Depending on your needs, desires and health condition, there are many types of Living Benefit Insurance products available.  These include Disability, Critical Illness and Long-term care.

Disability Insurance

During a disability, household bills still need to be paid.  Disability insurance provides a benefit, usually 60-70% of salary, in the event the insured becomes disabled and is unable to work.  There are various types of disability coverage, ranging from policies that will only pay benefits if you are unable to work at any job; to policies that will pay benefits provided you are unable to perform the duties required for you regular job.

Many employers offer their employees group disability insurance coverage.  However, self-employed individual or individuals who are not covered through their employers should ensure that they have adequate insurance coverage to continue to pay their cost of living while they are unable to earn a pay cheque.

Critical Illness Insurance

Critical illness insurance is a relatively new product, which was introduced in the 1980s.  It pays a benefit to the insured in the event the individual is diagnosed with any of a specified list of critical illnesses, such as cancer or a heart attack, and survives a waiting period that is usually 30 days.  Some critical illness insurance plans may cover as few as three or four illnesses while others cover two dozen or more.  Whereas disability insurance usually pays a monthly benefit equal to a percentage of your salary in the event you are unable to work, critical illness insurance pays a lump-sum benefit shortly after diagnosis, regardless of the ability to work.  This can help pay for items related to the illness, such as medical expenses that are not covered by a health plan, or a much needed vacation.

Long-term Care Insurance

As the population ages, more and more people require expensive long-term care.  Canadians want the peace of mind of knowing that they will be able to afford the care they need without burdening their families with the costs.  Long-term care insurance provides a benefit that helps cover the cost of nursing home fees or attendant care fees.  Most plans generally pay a stated daily or weekly benefit once it is determined that the insured is no longer able to adequately care for themselves.

Insurance is an important part of everyone’s financial plan.  Protection of one’s income and quality of life can be established from the payment of the first premium.  As with all things in life, you get what you pay for; there are relatively inexpensive basic plans and more expensive comprehensive plans.  It’s always important to consult a licensed insurance agent like myself to determine the most appropriate solution for your needs.  If you have questions please don’t hesitate to give me a call.

Have a great weekend,

Tracey

Source: Invesco