Advisors Report

2009 Tax Return Tips

Hello Bloggers!! It’s everyone’s favourite time of year again: Tax Time!  Although I don’t hear much cheering, I do know almost everyone has to file, and absolutely everyone loves to save money on their returns.  So, here are some great tax saving tips and tax credits that may apply to you to either increase your return or lower your payment to Canada Revenue Agency (CRA).

First off, if you are filling a return and are over 18 years of age, make sure you apply for the GST/HST Credit.  Only one person can claim per married or common law couple, so make sure it’s the person with the most tax owing.  If you have children under 18, you may be eligible for the Child Tax Benefit.  Both you and your spouse must file returns to get the credit, and the credit is paid out in monthly, non-taxable installments.

Then come the deductions from income.  You need to review your own personal situation to see if you qualify for each deduction.  If you have children, you may be able to claim Child Care Expenses, private school tuition fees, and moving expenses if your child moved away for continuing education.  If you made any investments in 2009, you may be able to write off interest expenses for money borrowed to produce income from business, investment or property.  And don’t forget to write off your safety deposit box; it qualifies as an investment expense!   If you moved in 2009 and it brings you at least 40 kilometres closer to work, you may be eligible for the Moving Expense Deduction.  These can include travel costs such as meals, temporary lodging, legal fees and more.  Make sure to review your situation to find exactly which deductions you qualify for.

Next come the non-refundable tax credits.  Remember these are not deductions from income, but are used to reduce federal or provincial taxes payable.   Everyone who earns income in Canada can claim the Employment Amount.  So make sure you do! Some others tax credits apply to children such as the Child Tax Credit for children under 18 and the Children’s Fitness Credit for sports and activities that keep kids active. If you received any dividend payments in 2009, you may be eligible for the Dividend Tax Credit.  Check with your financial advisor to see if you qualify.  Also, if you have a parent or grandparent living with you, you may be able to claim the Caregiver Amount.  There are also several credits for disabled persons, so make sure to talk to your accountant/advisor to maximize those claims.

And let’s not forget charitable donations.  If you gave money to a registered charity in 2009, you may qualify for the Charitable Donations Tax Credit.  Remember some donations receive larger credit amounts, such as any contributions to a Federal Political Party, and you may combine your donations with your spouse or common-law partner to maximize your credits.  Be sure to talk to your advisor or accountant before transferring amounts.  Also, the Home Renovation Tax Credit gives people who renovated a qualifying home a credit of up to $1,350.  This can only be claimed for 2009 so make sure you get those credits this year! 

You may also qualify for the Medical Expense Credit, which can help people cover some of their yearly medical expenses.  There is a threshold based on 3% of your income for the year, so make sure you’re above it! This credit must be claimed by the spouse with the lower net income, with some exceptions, so talk to your advisor to figure out the best strategy for claiming. 

It would be impossible for me to cover in any great detail all of the credits and deductions available to all Canadians. The key is to identify the ones available to you personally, and try to maximize them to your advantage.  I would strongly recommend talking to your accountant or financial advisor before claiming, as some credits and deductions can be complicated to apply in certain situations.  If you would like more detailed information on any of the above topics, feel free to contact me via email and I would be happy to answer any questions you may have.  Some of these topics are also covered in great detail on my blog, so be sure to check it regularly for money saving tips!  

Until next time,

Adam Myers

Financial Advisor

Professionals for Independent Planning, Ottawa Ontario

Email: adam@pfip.ca

Phone: 613-224-5511   X108

www.pfip.ca

Writen by Adam Myers

Financial Advisor, Ottawa Ontario

                                                                                                       Adam Myers, Financial Advisor

Hello Every body!!!  Although its very cold here in Ottawa, I just wanted to take this opportunity to wish everyone a happy and successful 2010!  And with the New Year still ringing in our ears, maybe it’s a good time to make a new resolution.  A “Financial Resolution”.  Please don’t confuse this with dieting or starting back up at the gym. Think of this as a simplified financial plan for 2010 that can help you reach your goals for the coming years.

Did you achieve your financial goals this past year?  How about this past decade?  Whether you did or did not, this may be an excellent time to make up a new plan, updated to include any changes from the past years.  Did you buy a new house? Get married? Have children? All these things can have a large impact on your financial situations, so make sure to adjust your plan accordingly.

The main goal of a financial plan is financial freedom.  I think most people would agree with me on that.  So what does financial freedom look like to you?   Take a minute and picture where you want to be in 10 years, then 20 years and so on till you have a clear picture of where you would like to be.  Then sit down and try to imagine how to get to that first step.  Proper money management is crucial to the maintence of your plan, so don’t be scared to ask for help.  Your financial advisor is a prefect place to start.  Here are a few ideas to get you started…

Cash flow

It’s a good idea to keep track of the money coming in and out of your accounts.  Look at where the majority of your out flow is heading and see where you can save money in your spending.  Budgeting is a huge aspect of financial freedom.  Also review your portfolio to see if your investments are inline with your goals.  Some plans were set up years ago and should be reviewed regularly to ensure they are still on course. 

Insurance and Emergency Funds

Protecting yourself and your family’s lifestyle are another important aspect of your plan.  Have an “Insurance Needs Review” done to make sure you’re properly covered; especially if there have been any major changes in your life.  You can find these on many insurance web sites if you don’t have an insurance broker you can talk to.   Also, start an emergency fund if you don’t have one, as unexpected events can be managed when you’re prepared.  A good place for this may be the “tax free savings account”, and with the New Year comes more contribution room, so be sure to look into this option.

Tax planning is not just a year end topic.  Tax planning and preparing can be done through out the year and are important factors to a financial plan.  The type of investments you hold and the tax bracket your in will influence your return, so examine these components carefully and make sure that taxes are working effectively for you, and not against you.   It’s also a good idea to keep careful documents of all your transactions and purchases so when tax time does come around, you have all your necessary information handy.

Financial Education

How about some plans for increasing your financial knowledge? Even the most experienced investor needs to keep up on changes to tax laws and new government incentives like the “tax free savings account”.  You can find a wealth of information at your local library, on line threw blogs and financial websites, and in many magazines and newspapers. 

And many others…..

There are many factors to consider when drawing up a financial plan that I haven’t mentioned, such as risk tolerance, mortgage payments, estate planning, etc…  So it may be in your best interest to ask for some help from a qualified financial advisor.  I am simply hoping to get you thinking about your finances and to get you started on your way to a healthy financial future.  Remember financial freedom is the goal, so stay on track and update your plan regularly.

Adam Myers

Financial Advisor

Professionals for Independent Planning

Email: adam@pfip.ca

By: Adam Myers

Charities and non-profit groups work on behalf of Canadians to provide the services and support that contribute to quality of life in our communities. We need to increase Canada’s donor base to ensure organizations working across the country and around the world can meet the growing demands of the individuals, families and communities they serve.

A recent Ottawa newspaper article has raised a troubling issue: Canadians, among some of the most privileged in the world, give a relatively small mount of income; on average 1.2%, to charities when compared to our American neighbours who donate a full 2% of income.   However, we have to factor in the difference in tax rates to see a clear picture. Americans pay considerably less taxes then we do, and after paying federal, provincial, municipal, sales and property taxes, people just do not have the money left over to donate to charity.   Or do they……?

With federal and provincial tax credits, charitable giving can actually be a tax reducing financial strategy.  The current federal charitable tax credit works like this: 15% on the first $200 donated and 29% on the remainder. The Ontario provincial credit for 2009 is 9.44% on the first $200 and 17.41% on amounts above.  So if you’re in a lower tax bracket, this can actually reduce your taxes owed at year end.  And with the ability to combine total donations with your spouse or common law partner, it’s even easier to get over that $200 mark. Just remember you can only claim up to 75% of your income from the year.

Ways to Give

There are several ways to donate, let’s take a quick look at a few of the more common choices:

Cash gifts – Probably the easiest way to support a charity. Most charities issue receipts for amounts $10 and over. The Income Tax Act allows you to carry forward donations in excess of the annual limit to any of the five following years.

Donations of securities – Gifts of qualifying securities (stocks, mutual funds, etc…) are not subject to capital gains tax.  You can donate securities that have built up capital gains, pay no tax, yet receive a tax receipt for the full value of the donation.  (This is a great tax strategy, but fairly complicated. If your interested send me an email and I would be glad to explain this in full.)

Through a will – Charitable donations made through a will are made in the year of death and the estate claims the tax credit on the final return.  A life insurance policy is a great way to carry this out. (Just be careful, a downside to estate made donations is the probate fees)

Tax Strategies

Here are some tax strategies to maximize your tax credit return.  For those of you that may be donating less than $200/year, try combing your totals with your spouse or common law partner.  Another option is to carry forward your donations for up to five years (remember the key is to get those donations over the $200 mark for the year of claim to maximize those credits)

For those of you who are donating higher amounts, you may want to donate stocks or mutual funds instead of cash.  Donating stocks to charity will result in 0% capital gains and a tax credit for the market value. If you have a large capital gain in your portfolio and you want to sell, you can donate a portion of your gain to charity to reduce your capital gains tax to zero.   (There is a formula to calculate the exact amounts required, which is a little over the scope of this material, but again, if anyone is interested, send me an email and I would be more then happy to explain it in full detail)

In conclusion, the need for donations is always present, but especially in the winter months.  So why not make a difference in your community, feel great about helping out and save your self some tax money in the process.  Find a charity that you feel deserves your donation, and help them help others this holiday season.

Adam Myers

Financial Advisor, Ottawa ON

Professionals for Independent Planning