Don’t lose all your hard-earned money to taxes

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Don’t lose all your hard-earned money to taxes

Tax planning is an essential part of managing your money – both while living and after your death. You want to maximize the amount of money to your beneficiaries, not the government. We have three tips to help you reduce taxes on your hard-earned money:

  1. Make the most of the lifetime capital gains exemption

  2. Decrease your end-of-life tax bill

  3. Look into Immediate Financing Arrangements

Lifetime capital gains exemption

The good news is that you can save a lot of money on taxes using the lifetime capital gains exemption. The bad news is that you could lose out on some of those savings unless you follow all the appropriate steps. Having a financial team to guide you through these steps is essential. When it comes to selling all or part of your business, your lawyer, accountant, and financial advisor must be all on the same page.

End-of-life tax bill

As with the lifetime capital gains exemption, working with your financial team to ensure your affairs are in order is crucial. Without the proper paperwork, your hard-earned money may not go to the family members, friends, or charities you want to support. Take the time to ensure that your wishes are properly documented and that you have filled out all essential paperwork.

Consider an Immediate Financing Arrangement

An Immediate Financing Arrangement (IFA) lets your business:

  • Get a life insurance premium on behalf of a shareholder

  • Create a tax deduction

  • Transfer assets tax-free from the business to a shareholder’s estate

Also, you can use an IFA to help increase your business’ cash flow by pledging the life insurance policy as collateral for a loan. The loan can be invested into the business or other investments if the company does not need the additional cash flow.

The Takeaway

While this can all seem overwhelming, it is essential to make sure you take the proper steps to protect your business and minimize your tax bill. But you don’t have to do this alone – contact us today for expert advice and guidance.

The Six Steps to Financial Planning

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The Six Steps to Financial Planning

Many people put off planning for their financial future because they’re overwhelmed with all the decisions they have to make. The good news is that there’s help at hand – in the form of a certified financial planner. A certified financial planner is trained to focus on all aspects of your finances – everything from your taxes to retirement savings.

A certified financial planner will develop a plan that works for you both today and in the future.

Meeting your financial planner

When you first meet with your financial planner, they will tell you about their obligations and responsibilities. They should:

  • Give you a general overview of the financial planning process

  • Tell you what services they provide and how they are compensated for them

  • Let you know what they will expect from you as a client

You should let your financial planner know how involved you want to be in creating and executing your financial plan. You should also ask any questions about the process or how compensation works.

Determining your goals and expectations

Now you’re ready to make your plan. But first, you and your financial planner should discuss your personal and financial goals and your current and future needs and priorities.

Your financial planner will make sure they have all the details they need. They may ask you to fill in questionnaires or provide documentation on your current financial state.

Reviewing your current financial state

Before your financial planner can get started on your financial plan, they need to know about your current situation – including cash flow, net worth and any taxes you may owe in the future.

To customize your financial plan, so it works for you, your financial planner must know about anything that could impact it – for example, a dependent adult child.

Developing the financial plan

Once they have all the information they need, your financial planner will create a customized plan that aligns with your goals, objectives, and risk tolerance. They will also provide you with information on projected returns and recommended actions.

Implementing the plan

Once you approve it, your financial planner should implement your plan. They should also help you contact other professionals they’ve recommended to assist with your financial plan – such as a lawyer or an insurance agent.

Monitoring the plan

Your certified financial planner should periodically contact you to adjust your financial plan. In addition, a life change – such as the birth of a child or retirement – may require adjustments to your financial plan.

It can be hard to plan for the future – but you don’t have to do it alone. Contact a certified financial planner or us today!

Self Owned vs. Bank Owned Mortgage Insurance

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Before buying insurance from your bank to cover your mortgage, understand the difference between self owned mortgage life insurance and bank owned life insurance. The key differences are ownership, premium, coverage, beneficiaries and portability.

Ownership:

  • Self: You own and control the policy.

  • Bank: The bank owns and controls the policy.

Premium:

  • Self: Your premiums are guaranteed at policy issue and discounts are available based on your health.

  • Bank: Premiums are not guaranteed and there are no discounts available based on your health.

Coverage:

  • Self: The coverage that you apply for remains the same.

  • Bank: The coverage is tied to your mortgage balance therefore it decreases as you pay down your mortgage but the premium stays the same.

Beneficiary:

  • Self: You choose who your beneficiary is and they can choose how they want to use the insurance benefit.

  • Bank: The bank is beneficiary and only pays off your mortgage.

Portability:

  • Self: Your policy stays with you regardless of your lender.

  • Bank: Your policy is tied to your lender and if you change, you may need to reapply for insurance.

We’ve created an infographic about the difference between personally owned life insurance vs. bank owned life insurance.

Talk to us, we can help.

2022 Federal Budget Highlights

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Federal Budget 2022 – Highlights

On April 7, 2022, the Federal Government released their 2022 budget. We have broken down the highlights of the financial measures in this budget into the following different sections:

  • Housing

  • Alternative minimum tax

  • Dental care

  • Small businesses

  • Tradespeople

  • Canada Growth Fund

  • Climate

  • Bank and insurer taxes

Housing

There were several tax measures related to housing introduced in the budget.

Budget 2022 introduced a new kind of savings account – a Tax-Free First Home Savings Account (FHSA).

These are the key things you need to know about the new FHSAs:

  • You must be at least 18 years of age and a resident of Canada to open an account. You must also not currently own a home or have owned one in the previous four calendar years.

  • You can only open and use an FHSA once, and you must close it within a year after your first withdrawal.

  • Contributions are tax-deductible, and income earned in an FHSA will not be either while it is in the account or when you withdraw it.

  • There is a lifetime contribution limit of $40,00, with an annual contribution limit of $8,000. You can’t carry contribution room forward.

  • If you don’t use the funds in your FHSA within 15 years of opening it, you can transfer them to an RRSP or RRIF tax-free. Transfers to an RRSP do not impact your RRSP contribution room.

Two existing tax credits were increased, and a new one was introduced:

  • The First-Time Home Buyers’ Tax Credit amount was increased from $5000 to $10,000, giving up to $1,500 in direct support to home buyers. This tax credit applies to all homes purchased on or after January 1, 2022.

  • The annual expense limit for the Home Accessibility Tax Credit has been increased to $20,000 for 2022 and subsequent tax years.

  • A new tax credit, the Multigenerational Home Renovation Tax Credit, was introduced, which will start in 2023. This tax credit is a 15% refundable credit for eligible expenses up to $50,000 (maximum tax credit is $7,500) for constructing a secondary suite for a senior or an adult with a disability to live with a qualifying relative.

Budget 2022 proposes new rules, effective January 1, 2023, that anyone who sells a residential property they have held for less than 12 months would be subject to full taxation on their profits as business income. However, there will be some exemptions to these rules due to life events such as a death, disability, the birth of a child, a new job, or a divorce.

Budget 2022 also announces restrictions that would help ensure that Canadians, instead of foreign investors, own housing. A two-year ban will be introduced on non-residents buying residential property, with some exceptions, such as individuals who have work permits and are living in Canada.

Alternative Minimum Tax

In Canada, the top federal tax rate is 33% and starts at an income of $221,708. However, many high-income filers end up paying less tax than this due to tax deductions and tax credits.

The goal of the Alternative Minimum Tax (AMT), which has been around since 1986, is to ensure high-income Canadians are paying their fair share of taxes. However, it has not been substantially updated since it was introduced. In Budget 2022, the government indicated they would be investigating changes to the AMT, which will likely be disclosed in the fall 2022 economic update.

Dental Care

For many Canadians without private coverage, going to the dentist is too expensive. Budget 2022 commits $5.3 billion to provide dental care for Canadians with family incomes of less than $90,000 annually. Coverage will start for children under 12 this year and expand to children under 18, seniors and those living with a disability in 2023, with the program will be fully implemented by 2025.

Small Businesses

Small businesses currently have a 9% tax rate on the first $500,000 of taxable income (compared to the corporate tax rate of 15%). However, after a small business’ capital employed in Canada reaches $15 million, it is no longer eligible for the 9% tax rate.

Budget 2022 proposes gradually phasing out the small business tax rate so that businesses are not discouraged from expanding. The new cut-off for the lower tax rate will be $50 million.

Budget 2022 also includes a proposal to create an Employee Ownership Trust. This would be a new, dedicated trust under the Income Tax Act to support employee ownership.

Tradespeople

Budget 2022 introduces the Labour Mobility Deduction. This would allow eligible tradespersons and apprentices to deduct up to $4,000 a year in eligible travel and temporary relocation expenses.

Budget 2022 also commits to providing $84.2 million over four years to double funding for the Union Training and Innovation Program, which would help 3,500 apprentices from underrepresented groups each year.

Canada Growth Fund

Budget 2022 introduces a new Canada Growth Fund, with the goals of both diversifying our economy and helping achieve our climate goals.

The Canada Growth Fund aims to attract considerable private sector investment, support the restructuring of vital supply chains, and bolster our exports. The Canada Growth Fund will also provide backing to reduce our emissions and invest in the growth of low-carbon industries.

Climate

Budget 2022 continues to confirm the government’s commitment to fighting climate change. It commits $1.7 billion over five years to extend the Incentives for Zero-Emission Vehicles Program until March 2025 and also provides funding to create a national network of electric vehicle charging stations.

Budget 2022 also commits $250 million over four years to support the development of clean electricity, including inter-provincial electricity transmission projects and Small Modular Reactors.

Bank And Insurer Taxes

Budget 2022 introduced a new financial measure called the Canada Recovery Dividend. Banks and insurers will have to pay a one-time, 15% tax on 2021 taxable income above $1 billion. This tax will be payable over five years.

Budget 2022 also proposes increasing the tax rate on income above $100 million for banks and insurers to 16.5% (currently 15% for other corporations).

Wondering How This May Impact You?

If you have any questions or concerns about how the new federal budget may impact you, call us – we’d be happy to help you!

2021 Income Tax Year Tips

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Tax Tips You Need To Know Before Filing Your 2021 Taxes

This year’s tax deadline is April 30, 2022. We’ve got a list of tips to help you save on your taxes!

Claiming home office expenses

You can claim up to $500 under the “flat rate” method if you worked at home due to COVID-19. To claim more, you must use the detailed method to claim home office expenses.

Employer-provided benefits

If your employer reimburses you for certain costs (such as commuting costs, parking, and home office equipment) due to COVID-19, the CRA will generally not consider this a taxable benefit.

Repaying Covid-19 support payments

If you repaid COVID-19 benefits, you can deduct the amount on your tax return either for the year you received the benefit or the year you repaid it, or you can split the deduction between both years.

Climate Action incentive can no longer be claimed

As of 2021, this amount can’t be claimed as a refundable credit; instead, you’ll receive quarterly payments via the benefits system.

Disability tax credit (DTC)

If you or a family member are DTC claimants, then you should review the updated criteria for the tax credit in regards to mental functions, life-sustaining therapy and calculating therapy time.

Eligible educator school supply tax credit

This tax credit has been increased to 25 percent for eligible supplies (such as books and games) to a maximum of $1,000.

Tax deduction on interest payments

You can claim a tax deduction for the interest you’ve paid on any money you’ve borrowed to invest. However, you can only do this if you use the money to earn investment income (for example, a rental property).

The digital subscriptions tax credit

You can claim up to $500 as a tax credit if you have a digital subscription to a qualifying Canadian news outlet.

Self-employed? Be sure to set aside enough for personal income tax!

If you’re self-employed, be sure you put aside enough money (we recommend 25% of your income) to pay your tax bill when the time comes. You’re taxed only on your net income (total income minus expenses).

You need to plan ahead for tax changes if you want to retire abroad

Planning to retire abroad? If so, you need to be aware of the tax implications and plan accordingly. If you sell your house and move, you may be considered a “non-resident” and be subject to capital gains taxes on non-registered investments (even if you have not sold them) or have your pension subjected to a withholding tax.

You can stop making CPP contributions if you’re over 65 but plan to keep working

If you’re 65 and already collecting Canada Pension Plan (CPP) benefits but also still working, you may be able to stop making CPP contributions. To do so, you need to fill in the form CPT30.

Need help?

Not sure if you qualify for a credit or deduction? Give us a call – we’re here to save you money on your taxes!

Saskatchewan 2022 Budget Highlights

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Saskatchewan 2022 Budget Highlights

On March 23, 2022, the Saskatchewan Minister of Finance announced Saskatchewan’s 2022 budget. This article highlights the most important things you need to know.

No Changes To Corporate or Personal Tax Rates

There are no changes to Saskatchewan’s corporate tax rates or personal tax rates in Budget 2022.

Increased Value-Add Agriculture Incentive Tax Credit

Budget 2022 increases the tax credit rate for the Saskatchewan Value-added Agriculture Incentive up to 40%, depending on the amount being invested. This credit is only available for capital expenditures valued at $10 million or more for newly constructed or expanded value-added agriculture facilities in Saskatchewan, such as canola crush facilities and pea protein processors.

Increased Technology Start-Up Incentive Tax Credit

This initiative offers a non-refundable 45% tax credit to anyone investing in eligible start-up businesses that are either developing new technologies or applying existing technology in a new way. Budget 2022 increases the annual cap of the Saskatchewan Technology Start-up Incentive tax credit to $3.5 million per year.

Changes in Education Property Taxes

Budget 2022 increases the mill rates (amount of tax payable per dollar of a property’s assessed value). The new education property tax rates are as follows:

  • Agricultural — 1.42 (from 1.36)

  • Residential — 4.54 (from 4.46)

  • Commercial/Industrial — 6.86 (from 6.75)

  • Resource — 9.88 (from 9.79)

Changes In PST Charges

Budget 2022 includes two PST changes. Audiobooks will be exempt from PST sales as of April 1, 2022. As of October 1, 2022, PST will be charged by various places that charge admission, including sporting events, concerts, museums, and fairs. It will also be applied to gym memberships and golf memberships.

Improvements In Child Care Options

Budget 2022 commits over 300 million dollars to improve child care options. The money is committed as follows:

  • $309.6 million for early learning and child care. This includes funding provided via the Federal-Provincial Early Years Agreements.

  • $4.3 million to create 6,100 new child care spaces.

Helping The Healthcare System Thrive

Budget 2022 also commits a record 6.8 billion to help the healthcare system thrive. The money is committed in a variety of areas, including:

  • $21.6 million to reduce the surgical waitlist. 

  • $12.5 million for 11 additional ICU beds. The government’s goal is to bring the total of ICU beds in the province to 90 by 2022-23, increasing to 110 by 2024-25.

  • $470 million for mental health and addictions services programs.

We can help!

We can help you determine the effect of tax changes in this year’s budget on your personal or business finances. Get started today and give us a call!

Permanent versus Term Life Insurance – What are the Differences?

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Permanent versus Term Life Insurance – What are the Differences?

You know you need life insurance – but you’re not sure which kind is best for you. We can help you with that decision.

There are two main kinds of life insurance:

  • Permanent, which lasts for your entire life.
  • Term, which is only good for a set amount of time.

No matter which type of life insurance you buy – permanent or term – you can rest easy knowing you’ve provided financial protection for your family.

Permanent life insurance

Permanent life insurance is good for your entire life unless you choose to cancel it. It’s an excellent choice to give you peace of mind that you’ll always be covered, even if you develop major health issues later in life.

There are also benefits to having permanent life insurance beyond guaranteed lifelong coverage:

  • You can use the policy to build up a cash value – making it a good choice for low-risk investing.
  • You may be able to use your permanent life insurance policy as collateral for a loan, making it a good choice for business owners.

The main drawback to permanent life insurance policies is that the premiums are often more expensive than term life insurance premiums. If, however, you’re thinking long-term and can afford the premiums, permanent life insurance is a great way to ensure you’re always protected and can have some guaranteed money for your estate.

Term life insurance

Term life insurance is either valid for a set amount of time (such as five or ten years) or until you reach a set age – for example, 60. You should generally be able to renew your life insurance at the end of each term, but your premiums may go up.

Term life insurance premiums are cheaper than permanent life insurance premiums – at least, you are younger and healthier (as the risk of you dying is lower). Your premiums will increase as you age or develop health issues.

You can’t use term life insurance as collateral for a loan or use the policy to build up a cash value. There are lots of benefits to term life insurance, though – it’s a good choice for you if you want low premiums, easy-to-understand insurance, and only need it for a set amount of time – such as while you have a mortgage or young children.

We can help you decide between permanent and term life insurance

If you’re not sure what kind of life insurance is best for you, we can help. We’re happy to talk to you to get more information about your insurance needs. We can then discuss what each type of insurance will cost you and which type of insurance we feel is best for you.

Give us a call today!

2022 Financial Calendar

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2022 Financial Calendar

Welcome to our 2022 financial calendar! This “at a glance” document lists important dates, including when government benefits are distributed and tax filing deadlines.

Be sure to bookmark this or add the dates listed to your personal calendar so you’re always in the loop!

Use our calendar to make sure you keep on track with your financial goals and avoid missing any critical tax or investment deadlines.

If you’re looking for help with your taxes, tax packages will be available in February 2022, so reach out to your accountant or us to book an appointment and get started on your taxes!

Important Dates

Dates to know:

  • January 1 is when the contribution room for your TFSA opens again. The maximum contribution for 2022 is $6,000.

  • The government will issue GST/HST credit payments on January 5, April 5, July 5, and October 5.

  • Canada Child Benefit payments (CCB) will be issued on the following dates: January 20, February 18, March 18, April 20, May 20, June 20, July 20, August 19, September 20, October 20, November 18, and December 13.

  • The government will issue CPP and OAS payments on the following dates: January 27, February 24, March 29, April 27, May 27, June 28, July 27, August 29, September 27, October 27, November 28, and December 21.

  • The final date for your RRSP contributions to be eligible for the 2021 tax year is March 1, 2022.

  • Bank of Canada’s interest rate announcements will be on January 26, March 2, April 13, June 1, July 13, September 7, October 26, and December 7.

  • May 2, 2022, is the last day to file personal income taxes, and tax payments are also due by this date. This is also the filing deadline for final returns if death occurred between January 1 and October 31, 2021.

  • May 3 to June 30 – The filing deadline for final tax returns if death occurred between November 1 and December 31. The due date for the final return is six months after the date of death.

  • The tax deadline for all self-employment returns is June 15, 2022. Any balance owing, however, is due May 2, 2022.

  • The deadline for final RESP, RDSP, and TFSA contributions is December 31.

  • December 31 is also the deadline for 2022 charitable contributions.

  • December 31 is also the deadline for individuals who turned 71 in 2022 to finish contributing to their RRSPs and convert them into RRIFs.