A Tax-Free Savings Account (TFSA) is an investment vehicle available to Canadian residents. It offers numerous benefits, including tax-free growth of your investments and tax-free withdrawals. Before you decide to open a TFSA, it’s essential to understand the eligibility requirements, contribution limits, eligible investments, and withdrawal rules.
Eligibility Requirements
To open a TFSA, you must be a resident of Canada with a valid Social Insurance Number (SIN) and be at least 18 years old. However, in some provinces and territories, the legal age to enter a contract (which includes opening a TFSA) is 19. The TFSA contribution room for the year an individual turns 18 is carried over to the following year if the individual resides in a jurisdiction where the legal age is 19.
Benefits
One of the primary benefits of a TFSA is that it allows your investments to grow tax-free. Any income you earn from your investments within the TFSA is not taxed, even upon withdrawal. This includes interest, dividends, and capital gains.
Additionally, you can withdraw any amount from your TFSA at any time, and the withdrawals are tax-free. It’s important to note that withdrawing funds from your TFSA does not reduce the total amount of contributions you have made for the year. The amount withdrawn in a year will be added back to your TFSA contribution room at the beginning of the following year.
Contribution Limit
The annual TFSA dollar limit has varied over the years. From 2009 to 2012, it was $5,000; in 2013 and 2014, it was $5,500; in 2015, it increased to $10,000; from 2016 to 2018, it was $5,500; from 2019 to 2022, it was $6,000, and in 2023, it is $6,500. This annual limit will be indexed to inflation and rounded to the nearest $500.
The maximum amount you can contribute to a TFSA is determined by your TFSA contribution room. This room is the sum of the TFSA dollar limit of the current year, any unused TFSA contribution room from previous years, and any withdrawals made from the TFSA in the previous year.
Let’s look at two examples to better understand this:
Example #1: Carry Forward Unused Room to Your Current Contribution
In 2020, the annual TFSA contribution limit is $6,000. If you only contribute $5,000, you would have $1,000 of unused room. This unused room gets carried over to the next year. So, in 2021, the annual contribution room is $6,000, but because of the unused room from 2020, you actually have a total contribution room of $7,000 ($6,000 for 2021 + $1,000 carried over from 2020).
Example #2: Reclaim Your Contribution Room in the Following Year When You Make a Withdrawal
In 2021, you have $7,000 in contribution room and decide to contribute the full amount. However, you also decide to make a withdrawal of $1,000 in 2021. In 2022, the annual contribution limit is $6,000, but because of the withdrawal made in 2021, you actually have a total contribution room of $7,000 ($6,000 for 2022 + $1,000 withdrawn in 2021).
Please note that if you exceed your available TFSA contribution room at any time in the year, you will have to pay a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account.
Eligible Investments
The types of investments that are permitted in a TFSA are generally the same as those allowed in a Registered Retirement Savings Plan (RRSP). These include cash, segregated funds, mutual funds, securities listed on a designated stock exchange, guaranteed investment certificates, and bonds.
Withdrawals
As mentioned earlier, you can generally withdraw any amount from the TFSA at any time, depending on the type of investment held in your TFSA. However, if you decide to replace or re-contribute all or a part of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room.
For example, if in 2023 you withdraw $1,000 from your TFSA and later in the same year decide to re-contribute that amount, you can only do so if your contribution room for 2023 allows for it. If it doesn’t and you re-contribute the $1,000 anyway, you will be considered to have over-contributed to your TFSA in that year. This will result in a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account
Beneficiary
When establishing a Tax-Free Savings Account (TFSA), you are given the choice to designate a beneficiary. This person will be the recipient of the investments within your TFSA in the event of your death. The assets inherited by the beneficiary are not considered income, and as such, are received tax-free. It’s important to note, though, that while the inherited amount is tax-free, the beneficiary will be responsible for any tax on earnings that the TFSA generates after the original account holder’s death.
Start Planning for Your Future Today!
Understanding Registered Education Savings Plans (RESPs) in Canada
/in 2023, blog, Family, financial advice, financial planning, Registered Education Savings Plan /by Bryan WilsonWhat is an RESP?
A Registered Education Savings Plan (RESP) is a unique savings account available in Canada, designed to assist individuals, such as parents or guardians, in saving for a child’s post-secondary education. Notably, anyone can open an RESP for a child. There are two main types of RESPs: single and family plans. Single plans cater to one beneficiary who doesn’t necessarily have to be related to the contributor. In contrast, family plans can cater to multiple beneficiaries, who must be related to the contributor by blood or adoption. This special account type offers significant tax benefits and is structured explicitly to fund a child’s future educational needs.
What are the eligibility requirements to open an RESP?
Opening an RESP requires both the contributor and the beneficiary (the child for whom you’re saving) to be Canadian residents with a valid Social Insurance Number (SIN). The plan can be opened for up to 35 years, and the RESP has a lifetime contribution limit of $50,000. To qualify for the Canada Education Savings Grant (CESG), the beneficiary must be aged 17 or under.
How can my child access their RESP funds for school?
The beneficiary can start withdrawing funds from the RESP as Educational Assistance Payments (EAPs) once they enrol in an eligible post-secondary educational program. EAPs comprise the income earned in the RESP and any government grants. The original contributions made to the RESP can be withdrawn tax-free by the contributor or given to the beneficiary. Given the student’s income level and personal tax credits, they typically remain tax-free.
What are the benefits of an RESP?
RESPs offer numerous benefits. Key among them is tax-deferred growth, which means the investment income generated within the account isn’t taxed as long as it remains in the plan. Also, through programs like the CESG and the Canada Learning Bond (CLB), the Canadian government contributes to your RESP, thereby enhancing your savings. Lastly, RESPs provide a structured path to save for a child’s future education, encouraging consistent savings and financial planning.
How does the Canada Education Savings Grant work?
The CESG is a government grant that matches a portion of your annual RESP contributions. The standard matching rate is 20% on the first $2,500 contributed each year, leading to a maximum annual grant of $500. However, low-income families may qualify for a higher matching rate. Unused CESG contribution room can be carried forward, allowing for a potential maximum grant payment of $1,000 in a single year. The CESG is available until the beneficiary turns 17, with a lifetime limit of $7,200 per beneficiary.
What is the Canada Learning Bond?
The Canada Learning Bond (CLB) is another program to promote long-term savings for a child’s post-secondary education. It targets children born after 2003 from low-income families. Eligible families receive an initial $500 from the government, directly deposited into the child’s RESP. An additional $100 is added annually until the child turns 15, for a potential total of $2,000. The CLB does not require any contributions to the RESP, making it accessible even for those in a tight financial position.
What are the BCTESG and QESI?
Provincial programs such as the British Columbia Training and Education Savings Grant (BCTESG) and the Quebec Education Savings Incentive (QESI) provide additional incentives for education savings. The BCTESG offers a one-time grant of $1,200 for eligible children, and the QESI provides a refundable tax credit paid directly into an RESP for qualifying Quebec residents.
How do I open an RESP?
Opening an RESP can be done through a financial advisor. You need to provide your SIN and the SIN of the beneficiary. Understanding the terms, conditions, and potential fees linked with the RESP offered by your chosen institution is crucial. You can make regular contributions or contribute lump sums as you see fit. Inquiring about the types of investments available within the RESP is vital, as they can significantly impact the growth of your savings.
In conclusion, while RESPs offer a structured and tax-efficient way of saving for a child’s post-secondary education, they also require careful planning and consistent contributions. Be sure to understand all aspects of an RESP and consider contacting us before starting one.
Understanding Tax-Free Savings Accounts (TFSAs)
/in blog, Investment /by Bryan WilsonA Tax-Free Savings Account (TFSA) is an investment vehicle available to Canadian residents. It offers numerous benefits, including tax-free growth of your investments and tax-free withdrawals. Before you decide to open a TFSA, it’s essential to understand the eligibility requirements, contribution limits, eligible investments, and withdrawal rules.
Eligibility Requirements
To open a TFSA, you must be a resident of Canada with a valid Social Insurance Number (SIN) and be at least 18 years old. However, in some provinces and territories, the legal age to enter a contract (which includes opening a TFSA) is 19. The TFSA contribution room for the year an individual turns 18 is carried over to the following year if the individual resides in a jurisdiction where the legal age is 19.
Benefits
One of the primary benefits of a TFSA is that it allows your investments to grow tax-free. Any income you earn from your investments within the TFSA is not taxed, even upon withdrawal. This includes interest, dividends, and capital gains.
Additionally, you can withdraw any amount from your TFSA at any time, and the withdrawals are tax-free. It’s important to note that withdrawing funds from your TFSA does not reduce the total amount of contributions you have made for the year. The amount withdrawn in a year will be added back to your TFSA contribution room at the beginning of the following year.
Contribution Limit
The annual TFSA dollar limit has varied over the years. From 2009 to 2012, it was $5,000; in 2013 and 2014, it was $5,500; in 2015, it increased to $10,000; from 2016 to 2018, it was $5,500; from 2019 to 2022, it was $6,000, and in 2023, it is $6,500. This annual limit will be indexed to inflation and rounded to the nearest $500.
The maximum amount you can contribute to a TFSA is determined by your TFSA contribution room. This room is the sum of the TFSA dollar limit of the current year, any unused TFSA contribution room from previous years, and any withdrawals made from the TFSA in the previous year.
Let’s look at two examples to better understand this:
Example #1: Carry Forward Unused Room to Your Current Contribution
In 2020, the annual TFSA contribution limit is $6,000. If you only contribute $5,000, you would have $1,000 of unused room. This unused room gets carried over to the next year. So, in 2021, the annual contribution room is $6,000, but because of the unused room from 2020, you actually have a total contribution room of $7,000 ($6,000 for 2021 + $1,000 carried over from 2020).
Example #2: Reclaim Your Contribution Room in the Following Year When You Make a Withdrawal
In 2021, you have $7,000 in contribution room and decide to contribute the full amount. However, you also decide to make a withdrawal of $1,000 in 2021. In 2022, the annual contribution limit is $6,000, but because of the withdrawal made in 2021, you actually have a total contribution room of $7,000 ($6,000 for 2022 + $1,000 withdrawn in 2021).
Please note that if you exceed your available TFSA contribution room at any time in the year, you will have to pay a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account.
Eligible Investments
The types of investments that are permitted in a TFSA are generally the same as those allowed in a Registered Retirement Savings Plan (RRSP). These include cash, segregated funds, mutual funds, securities listed on a designated stock exchange, guaranteed investment certificates, and bonds.
Withdrawals
As mentioned earlier, you can generally withdraw any amount from the TFSA at any time, depending on the type of investment held in your TFSA. However, if you decide to replace or re-contribute all or a part of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room.
For example, if in 2023 you withdraw $1,000 from your TFSA and later in the same year decide to re-contribute that amount, you can only do so if your contribution room for 2023 allows for it. If it doesn’t and you re-contribute the $1,000 anyway, you will be considered to have over-contributed to your TFSA in that year. This will result in a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account
Beneficiary
When establishing a Tax-Free Savings Account (TFSA), you are given the choice to designate a beneficiary. This person will be the recipient of the investments within your TFSA in the event of your death. The assets inherited by the beneficiary are not considered income, and as such, are received tax-free. It’s important to note, though, that while the inherited amount is tax-free, the beneficiary will be responsible for any tax on earnings that the TFSA generates after the original account holder’s death.
Start Planning for Your Future Today!
Canada Emergency Business Account: Government extends repayment and partial loan forgiveness deadlines
/in 2023, blog, corporate, Debt, incorporated professionals /by Bryan WilsonPrime Minister Justin Trudeau has declared that the government is granting an additional year for businesses to repay loans obtained through the small business pandemic loan program. However, it’s crucial to note that businesses must still repay the forgivable portion of the loan within the next few months to avoid losing that benefit.
This program, known as the Canada Emergency Business Account (CEBA), was initiated during the peak of the pandemic to provide support to small businesses that had to close or limit their operations due to public health restrictions. Under this program, businesses could request interest-free loans backed by the federal government, with a maximum limit of $60,000 per applicant. To encourage prompt repayment, up to $20,000 of the loan would be forgiven if the remaining amount was repaid by a specified deadline. Initially set for the end of 2022, this repayment deadline was later extended to the end of 2023.
For businesses unable to meet the extended deadline, they would start incurring interest on the outstanding loan amount and would be required to fully repay it by the end of 2025. However, this repayment deadline has now been pushed further to the end of 2026.
Prime Minister Trudeau explained, “While many businesses have already repaid their loans, we recognize that some need a bit more time to meet their obligations.”
To facilitate this extension, businesses will have until January 18, 2024, to qualify for debt forgiveness. Those businesses that have refinanced their loans will be granted until March 28 to meet the requirements. After January 19, 2024, all outstanding loans will begin accruing five percent interest.
It’s worth noting that nearly 900,000 businesses were approved for this program, receiving a total of just over $49 billion in loans. However, as of May 31, only 21 percent of these businesses had fully repaid their loans.
The announcement regarding CEBA is part of a series of new measures introduced by Prime Minister Trudeau to address concerns about the rising cost of living.
Protecting Key Talent using Group Benefits
/in 2023, blog, Business Owners, corporate, dental benefits, disability, Group Benefits, health benefits, Insurance, life insurance, pension plan, Professional Corporations, Professionals, Retirement /by Bryan WilsonBuilding a Sustainable Future Together
As a group benefits specialist, our main objective is to foster a sustainable future by working in partnership with our clients. We believe that a knowledgeable and engaged workforce is essential for any organization’s success. One of the crucial aspects of achieving this goal is protecting key talent within your company. In this article, we will explore how group benefits can play a significant role in safeguarding your organization’s most valuable asset: its people.
The Value of Key Talent
Key talent refers to those employees who possess critical skills, expertise, and knowledge that drive your company’s growth and success. They are the backbone of your organization, ensuring it thrives in today’s competitive landscape. Retaining these valuable individuals is vital as their loss can have a significant impact on your business operations, productivity, and overall morale.
Challenges in Retaining Key Talent
In today’s dynamic job market, retaining key talent can be challenging. Many factors come into play, such as attractive offers from competitors, personal growth opportunities, work-life balance, and employee well-being. As an employer, understanding and addressing these challenges are essential to protect your top performers and maintain a competitive edge.
The Role of Group Benefits
Group benefits can be a powerful tool in attracting and retaining key talent. By offering comprehensive and customized benefits packages, you demonstrate your commitment to your employees’ well-being, security, and future. Here are some key aspects of group benefits that contribute to protecting your key talent:
1. Health and Wellness Coverage
Providing robust health and wellness benefits, including medical, dental, and vision coverage, not only promotes a healthy workforce but also demonstrates your dedication to their overall well-being. When employees feel supported in their health, they are more likely to remain loyal to your organization.
2. Income Protection
Group benefits often include disability insurance, which provides financial protection for employees who might experience an injury or illness that prevents them from working. This security helps ease financial worries during challenging times and creates a sense of stability, encouraging key talent to stay with your company for the long term.
3. Retirement Planning
A well-designed retirement plan is an attractive feature for key talent. It shows that you care about their future and are committed to helping them achieve financial security during their retirement years. Contributing to a retirement plan also reinforces a collaborative and client-focused relationship with your employees.
4. Work-Life Balance Support
Offering benefits that support work-life balance, such as flexible work arrangements, paid time off, and family leave, shows your understanding of the importance of a balanced life. Employees who feel they have the flexibility to manage their personal and professional responsibilities are more likely to stay committed to your organization.
5. Career Development
Group benefits can extend beyond traditional offerings. Consider including professional development and training opportunities within your benefits package. Investing in your employees’ growth not only enhances their skills but also reinforces your commitment to their long-term success.
Educational Approach and Collaboration
Our mission as group benefits specialists is to provide educational and collaborative support to our clients. By engaging in open discussions about your organization’s needs and goals, we can tailor group benefits packages that align with your unique requirements. Together, we can build a sustainable future by nurturing and protecting your key talent.
Protecting key talent using group benefits is not just a sound business strategy; it reflects a client-focused, educational, and collaborative approach to employee welfare. As a group benefits specialist, we are committed to working hand-in-hand with our clients to create comprehensive and customized solutions that safeguard their organization’s most valuable asset – their people. By investing in the well-being, security, and future of your employees, you are not only enhancing loyalty and retention but also building a stronger and more sustainable future for your company. Let’s continue to partner together to ensure a prosperous and thriving workforce.
Estate Planning for Blended Families
/in blog, Estate Planning, Family /by Bryan WilsonBlended families – where two people get married but have children from previous relationships – are becoming more common. It can be challenging enough to take care of the everyday logistics; from where to live to making sure everyone gets along. So trying to make sure you properly take of estate planning often doesn’t get taken care of.
In most families – blended or not – spouses leave everything to each other. Then, when the surviving spouse dies, the remainder is divided amongst all of the children. The problem with this setup is that there is no guarantee that the surviving spouse will not remarry and inadvertently disinherit the deceased’s children.
To make sure that everyone is treated fairly, it’s essential to consider how to handle each of the following estate planning issues for blended families:
Sharing the Family Home
Make the Most of a Registered Retirement Savings Plan
How to Share Non-Registered Investments and Other Assets
Why It’s Important to Select a Good Trustee
The Advantages of Life Insurance for Blended Family Estate Planning
It’s essential to have a full discussion with your spouse and children to avoid misunderstandings and reduce uncertainty. But you don’t have to do it alone! We can provide you with tailored solutions to ensure your wishes are carried out.
Sharing The Family Home
This can be challenging, depending on whether the blended family moves into a new home or into a house one spouse already owns. An option to consider is that the spouse who is moving into the home already owned by the other spouse can then purchase an interest in the family home. If this occurs, each spouse can own the home as tenants-in-common, enabling them to manage their interest in the house separately.
When it comes time for each spouse to draw up a will, provisions can be made for the surviving spouse to remain in the home until the time of their choosing (or death) before passing on the interest to their respective children.
Make the Most of a Registered Retirement Savings Plans
The best way to take advantage of the tax-free rollover from an RRSP is for each spouse to name each other the beneficiary. While it may be tempting to leave your RRSP to your estate or one or more of your children, this can have ramifications. If you leave it to your estate, it will have to go through probate and also be taxed. If you leave it an adult child, the RRSP won’t have to go through probate, but the entire RRSP will be considered taxable to the deceased in the year of death.
How to Share Non-Registered Investments and Other Assets
You can set up your estate planning so that your spouse can benefit from income-producing assets during their lifetime, without necessarily impacting the capital in those assets. Your children can then benefit from them after your spouse dies.
Each spouse can set up a spousal testamentary trust to contain their income-producing investments and assets. The surviving spouse will then receive all the income from the trust and the option to access the capital for specific needs (if specified in the trust). After the surviving spouse dies, the assets will pass to whoever was identified as the trust’s inheritors. You can make the inheritors your children. This ensures that both your spouse and your children are taken care of.
Why It’s Important to Select a Good Trustee
Trusts are a vital part of effective estate planning for blended families. This means that it’s critical to pick the right trustee – as they will control and manage the assets of the deceased’s estate as outlined in the deceased’s will. You may even want to consider multiple trustees or the services of a trust company. A strong but neutral trustee will help ensure that your wishes are followed without causing fighting amongst family members.
Advantages of Life Insurance for Blended Family Estate Planning
There are several advantages to using life insurance policies as part of your estate planning for blended families:
The death benefit is tax-free. You can have it paid out in cash directly or create trusts, so the capital goes to your spouse while they live and your children after your spouse dies.
Since you can name the beneficiary, you can control who inherits the proceeds. It’s not considered part of the will, so it cannot be included in any wills variation action (more commonly known as challenging the will).
If one spouse enters the marriage with significantly more wealth than the other, life insurance can help create a fair division of assets.
The Takeaway
No matter what choices you make about estate planning for your blended family, you must communicate openly and honestly with everyone in the family. This will help ensure that everyone is aware of the state of affairs and reduces misunderstandings and uncertainty about what the future may hold for everyone in the family.
Using professional advice while you are estate planning for blended families can help you create a solution that satisfies both spouses and their respective children’s objectives. Reach out to me if you have any questions or concerns about your estate planning – I’m here to help!
Why A Buy-Sell Agreement Is Vital For Your Business
/in blog, Business Owners, Buy Sell /by Bryan WilsonWhy A Buy-Sell Agreement Is Vital For Your Business
The purpose of a buy-sell agreement is to establish a set of rules or actions (that are legally binding) for what must happen to a business if one or more of the business owners is no longer involved.
Why does my business need a buy‐sell agreement?
A buy-sell agreement is vital for your business as it protects the shareholders and the business itself if one of the partners exits the business for any reason.
A buy-sell agreement offers so many benefits for your business. It:
What are the different types of buy-sell agreements?
These are the most common types of buy-sell agreements:
What do I need to cover in my buy‐sell agreement?
Your buy-sell agreement must address the following:
What is the best way to fund my buy-sell agreement?
This needs to be addressed when putting the buy-sell agreement together and can be challenging in the case of some “triggers,” such as a business owner getting a divorce or a disagreement between business owners.
In the case of the death of a business owner or a business owner becoming disabled, the buy-sell agreement can be funded by insurance. Insurance provides both immediate capital and significant tax benefits.
We Can Help!
Buy-sell agreements can be complex and challenging, but they are vital to protect your business and your personal interests. We can explain the best way to set one up – reach out to us today to get started!
Do you have enough for retirement?
/in blog, pension plan, Retirees, Retirement, RRSP, Tax Free Savings Account /by Bryan WilsonMany of us dream of the day that we can retire and have the time to ourselves that we have dreamed of for so many years. But, to have a genuinely contented and relaxing retirement, you need to ensure that you have the means to afford it. So, now’s the best time to consider the three critical stages of retirement planning.
Accumulation
This is the stage you save for your retirement – essentially, the majority of your working life. So, naturally, if you start saving for your retirement early, you will have the ability to save a larger pension for the future, though this is not always achievable for young people or those on a low income.
Pre-retirement
At this point, you are making the final plans for your retirement. Although you are potentially making less money at this late stage of your career, it’s still a necessary time to continue saving and making sure that your investments are fit for purpose.
Retirement
Once you are no longer working, your retirement income will usually come from three key sources:
Government benefits: Canada Pension Plan or Old Age Security
Employer pension or retirement plan
Personal savings: Registered Retirement Savings Plan, Tax-Free Savings Account, Non-Registered Savings
Your concern will be to ensure that your money lasts the length of your lifetime.
Drawing up a retirement plan
A retirement plan is a crucial process to undertake during your working life, as it will help you outline and achieve your financial goals for the future. However, making such a plan doesn’t have to be daunting – here are our key steps to success:
Work out how much income you’ll need in your retirement. This is a key starting point to ensure that you save enough to meet this need.
Start early. If you can, invest any spare money into your retirement fund and keep going. Small amounts grow over time and can help you create a savings fund to meet your needs in retirement.
Diversify as much as you can. The best way to reduce your risk and exposure to poor market performance is to spread your investments. We can help you create a strategy that focuses on your attitude to risk.
Contributing to a TFSA or RRSP is a great place to start. Contribute the maximum amounts you can, and don’t forget to contribute on a consistent basis.
Talk to us today about your retirement goals.
The Six Steps to Financial Planning
/in blog, financial planning /by Bryan WilsonThe 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!
Tax Tips You Need To Know Before Filing Your 2022 Taxes
/in 2023, blog, disability, Tax /by Bryan WilsonTax Tips You Need To Know Before Filing Your 2022 Taxes
This year’s tax deadline is May 1, 2023, as April 30 falls on a Sunday this year. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. In this article, we’ll provide you with tips to help you maximize your tax refund and ensure you’re taking advantage of all the available tax benefits.
Canada Workers Benefit
The Canada Workers Benefit (CWB) is a refundable tax credit designed to help low-income working families and individuals. The credit is made up of two parts:
The basic amount
A disability supplement (if you qualify).
To determine whether you qualify for the tax credit, you’ll need to consider your net income and where you live. The CRA website provides full details about the net income qualification amounts.
The maximum amounts you can qualify for are as follows:
The maximum basic amount is $1,428 for single individuals and $2,461 for families.
The maximum amount for the disability supplement is $737 for single individuals and $737 for families.
Claiming Home Office Expenses Due To COVID-19
You can still claim home office expenses if you’re not self-employed but worked from home due to the pandemic. You can:
Claim the temporary flat amount if you worked more than 50% of the time from home for at least four consecutive weeks in 2022. You can claim $2 for each day worked from home, up to a maximum of $500. No paperwork or forms are required!
Use the detailed method and claim the actual amounts. In this case, you’ll need supporting documentation, plus a completed and signed T2200S form from your employer. You can claim various applicable expenses, including home Internet access fees.
The Tax Deduction for Zero-Emissions Vehicles
A capital cost allowance (CCA) is a tax deduction that helps cover the cost of an asset’s depreciation over time. The CRA created two new capital cost allowances, which apply to zero-emission vehicles bought after March 18, 2019.
They are as follows:
Class 54. This class is for motor and passenger vehicles, excluding taxis or vehicles used for lease or rent. It has a CCA rate of 30%. For 2022, capital costs will be deductible up to $55,000, plus sales tax. This amount will be reassessed every year.
Class 55 is for leased and rented vehicles or taxis. The CCA rate is 40%.
Return Of Fuel Charge Proceeds To Farmers Tax Credit
You may be eligible for this tax credit if you are either self-employed or part of a farming partnership in Alberta, Manitoba, Ontario and Saskatchewan.
This tax credit aims to help farmers offset the high cost of the carbon tax.
Eligible Educator School Supply Tax Credit
You can claim up to $1,000 of eligible supplies and expenses if you qualify for the educator school supply tax credit.
The tax credit rate for the 2022 tax year is 25%, with a maximum credit of $250.
Need help?
Do you qualify for a credit or deduction? Call us – we’re here to save you money on your taxes!
Salary vs Dividend
/in blog, Business Owners /by Bryan WilsonAs a business owner, you have the ability to pay yourself a salary or dividend or a combination of both. In this article and infographic, we will examine the difference between salary and dividends and review the advantages and disadvantages of each.
When deciding to pay yourself as a business owner, please review these factors:
How much do you need?
How much tax?
Other considerations including retirement and employment insurance.
How much do you need?
Determine your cash flow on a personal and corporate level.
What’s your personal after-tax cash flow need?
What’s your corporate cash flow need?
How much tax?
Figure out how much you will pay in tax. Business owners understand that tax is a sizeable expense.
What’s your personal income tax rate?
Depending on the province you reside in and your income, make sure you also include income from other sources to determine your tax rate. (Example: old age security, pension, rental, investment income etc.)
If you decide to pay out in dividends, check if you will be paying out eligible or ineligible dividends. The taxation of eligible dividends is more favorable than ineligible dividends from an individual income tax standpoint.
What’s your corporation’s income tax rate?
For taxation year 2020, the small business federal tax rate is 9% . Please also remember, if you pay out salary, salary is considered a tax-deductible expense, therefore this will lower the corporation’s taxable income versus paying out dividends will not lower the corporation’s taxable income.
Other considerations
If you pay yourself a salary, these options are available.
Do you need RRSP contribution room?
As part of this, it’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make.
Are you interested in contributing to the Canada Pension Plan?
This is unique to your circumstances and a cost-benefit analysis to determine the amount of contributions makes sense.
Do you need employment insurance (EI)?
For shareholders owning more than 40% of voting shares, EI is optional. There are situations worth careful thought such as maternity benefit, parental benefit, sickness benefit, compassionate care benefit, family caregiver benefit for children or family caregiver benefit for adults.
The infographic below summarizes the difference between Salary vs. Dividend.
We would also advise that you get in touch with your accountant to help you determine the best mix for your unique situation.
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Source:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html
Source:
https://www.canada.ca/en/employment-social-development/programs/ei/ei-list/reports/self-employed-special-benefits.html#h2.01-h3.02