Black Friday Shopping Tips

With today being the official start of the Christmas shopping season, I wanted to arm you with some strategies so you don’t end up with an unexpected surprise in January – a huge credit card bill.

Have a Budget.  Without a plan or budget, most people will over spend.  So before you go, prepare a budget; this will force you to think twice before buying. 

Use Cash.  Using only cash for your purchases will keep you on track of how much you are spending.

Make a List.  Sticking to a list will help you avoid impulse purchases.

Compare Pricing On-Line.  Knowing which store has the best price will not only save you time at the mall but it will help you avoid paying too much.

Set Boundaries.  Whether you have a lot of people on your list to buy for; or you’re on a limited budget, talk to your family and friends about setting limits to control expenses.

Keep Track of what you spend.  Do you know what you have spent so far?  If not, view your up-to-date statements on-line and make a list of your purchases, if you have paid cash for some things make sure you add those expenditures to your list as well.  Be detailed, and don’t forget to include the cost of hosting a holiday dinner, cocktails with co-workers, wrapping paper, gift bags and treats.

Remember, some of the best gifts are not costly.  Spending time together and enjoying affordable activities like skating, sledding, holiday festivals or simply going for a walk to view the neighbourhood light displays create wonderful memories.

Furthermore, avoiding a huge credit card bill in January could be the best Christmas gift you ever give yourself!

Happy Shopping!

Tracey

Source:  Original article posted on Advisor.ca  by staff, 12-11-13

Income Splitting with Adult Children

Diverting income to family members who have little or no income can help reduce your family’s overall tax bill.  However, The Income Tax Act has attribution rules that limit us in the ways we can do this; here are five legitimate income splitting strategies;

Hire them.  But pay them a reasonable salary, CRA only recognizes wages paid to family members that are equal to an amount you would pay a non-family member for the same job.  Be sure to remit payroll taxes and CPP, you will also want to keep track of your children’s employment activities and the date they started working for you.

Lend them money to invest.  You can lend your children money to invest as long as you charge the prescribed rate of interest (currently 1%) any income earned on the investment will be taxed in the hands of the child.  However, they must pay the interest owed to you no later than 30 days after the end of the year or the income will be attributed back to you.

Give or lend money for TFSAs.  Income earned inside a TFSA is not subject to tax and therefore attribution rules do not apply.  You can lend or gift money to your children with the intent of them investing it into a TFSA.

Lend or give money to buy property.  If you are already helping out your child by paying part of their rent, it might make more sense to lend them money to buy a house instead.  As long as you/they don’t rent out rooms; the house doesn’t generate income and there’s no attribution.  If the property goes up in value, the gains are usually sheltered under the principle residence tax exemption.

Lend money to a trust.  You can lend money to a trust set up for your children as long as you charge the prescribed rate of interest on the loan.  Whatever the investments inside the trust earn; above the interest paid on the loan; is allocated to the beneficiary of the trust.  The beneficiary must pay tax on the income earned regardless of their age.

None of us like to pay tax, just make sure the strategies you are using to reduce your overall tax bill are legitimate and accepted by CRA.  If you have any questions do not hesitate to give me a call.

Have a great weekend,

Tracey

Source:  Original article posted on Advisor.ca 04-14 by Stella Gasparro, CPA, CA, Partner at MNP

5 Golden Rules of Retirement Planning

The most common question I get as a Financial Planner is “How much can I afford to live on or take out of my investments every year during retirement?”  Naturally, this question has many assumptions and everyone is different, but here are five golden rules when it comes to retirement planning;

Don’t expect to reduce your spending in the first few years of retirement, this is the time when you are healthy and finally able to do the things you have always dreamed of, such as travelling and golfing – so plan for it.

Plan for increased longevity.  The average person will retire today at 61 years of age and live almost three decades in retirement.  In fact, it is likely that if a couple retires at age 62, one of them will still be living at age 92.

Keep your withdrawal rate as low as possible for as long as possible, despite the increasing desire to spend in your early retirement years.  If possible, keep your withdrawal rate under 5% and increase if needed as you age.  Keep in mind this is the withdrawal rate from your investment portfolio, which does not include your pension, OAS or CCP.

Plan for discretionary health care expenses.  This could be in the form or retirement housing, cross-border health care or even potential amendments to the Canadian system.

Don’t go too conservative too quickly, thus “going broke safely”.  Capital protection is important and while the return and safety of bonds can be attractive; it is important the average person still has some equities well into their retirement.  This will be even more necessary if we experience a continued rising interest rate environment (causing bond values to drop).

The golden years are meant to be just that – not a time to cut back on your lifestyle.  Unfortunately, outliving money will be a more likely scenario for many Canadians who have not properly prepared. 

Like never before, aging Canadians need strong leadership and financial advice, don’t wind up somewhere unexpected; for a review of your plan give me a call.

Have a great weekend,

Tracey

Tax Relief for Canadian Families

Prime Minister Stephen Harper is moving forward with his promise of income splitting for families with children under the age of 18, a multi-billion dollar election promise from 2011.

The “Family Tax Cut” allows an eligible taxpayer to transfer up to $50,000 of income to his or her spouse in order to receive a non-refundable tax credit of up to $2000 per year, starting in 2014.

The Conservative government will also be boosting the universal child care benefit $60 per month for kids under the age of six, to total $160 a month.  Furthermore; a new $60 monthly benefit will be added for families with children between the ages of six and seventeen, starting in 2015.

“Our goal has always been to make sure that Canada is the best country in the world in which to raise a family”, Harper told a group of supporters last week.  “Our government is utterly convinced of one thing:  when it comes to the cost of raising a family, Canada’s moms and dads deserve all of the help that we can give them.” He added.

More Tax Savings

The government will also be increasing the limits on the child care expense deduction by $1000, this credit allows parents to claim child care expenses incurred so they could go to work or attend school.  In addition, the Conservative government recently fulfilled another campaign promise and doubled the children’s fitness tax credit.

“We know Canadians work hard for their money; we know they work hard raising their families too,” Harper commented.  “Under the plan we have announced today, every single Canadian family with children will benefit.  Everyone will have more money in their pockets.”

Critics feel these new tax credits and deductions will not reach enough Canadian tax payers.  The income splitting credit and universal child care benefit will cost 3.1 billion in 2014-15 and 4.5 billion in 2015-16.  The Conservatives made these promises during their 2011 election campaign, but it was contingent on the federal books being balanced.  Harper has said that the federal deficit over the past fiscal year would be 5.2 billion, which is only a fraction of the 16.6 billion that was forecast.  However, he still insists there won’t be a surplus on the books until next year.

The last of the three major surplus-contingent 2011 promises has yet to be implemented; this would see the annual contribution limit on the Tax Free Savings Account (TFSA) double to $10,000 per year.

If you have any questions or would like to get more information, please don’t hesitate to contact me.

Have a great weekend,

Tracey

Source:  Advisor.ca, original article posted 30-10-14 by Canadian Press