news brief Archives - Page 8 of 17

Personal Investor: TFSAs not just for the wealthy – BNNBloomberg.ca

Recently, wealthier Canadians have been the majority investors in TFSAs, trying to avoid tax pay outs at retirement. This is not why these investment plans were created. Canadians who are not wealthy often view TFSAs as short-term accounts but should really be utilized for retirement savings. A new report by the Institute for Research on Public Policy recommends that more low income investors be educated on the benefits of these accounts as well as an initiative for employers to enroll employees in these accounts, as opposed to RRSPs, based on their incomes.

“The Institute for Research on Public Policy report argues that the TFSA needs to return to its roots: a savings tool for average Canadians”

Imagine Canada as a tax haven for Americans

With the current American political environment, wealthy Americans may be fearful of a democratic party takeover that would likely result in higher taxes. The only way to dodge a higher tax rate is to leave the country. With few nearby options available, one of the only viable options may be moving to Canada. While the American perception is that Canada is a quasi-socialist economy with high taxes, Canada’s top federal income tax rate is 33 percent — lower than the equivalent rate in the U.S. It may seem unlikely for Canada to be a tax haven, and it remains to be seen how those affected would respond to a tax increase.

“Taxes on rich Americans are probably going up if Democrats win both the presidency and Congress anytime soon. If and when taxes are raised, an interesting question is how those affected will respond. “

Canada’s actuaries urge governments to raise retirement age

As the average age of retiring workers is increasing, there is a call for the payout from retirement income programs to come at a later age than 65. If Canadians work longer, they can save up for a larger retirement income. Actuaries are suggesting that the retirement age be raised to 67 for pension plan payouts and Old age Security payout pushed to age 67 to 75 before benefits are paid.

“Canadians are living longer than ever, and many are choosing to work beyond age 65. It makes sense to update our country’s retirement income programs to reflect this fact.”

What retirees need to know if they plan to defer Old Age Security benefits until 70

When retiring, deciding when to start the Old Age Pension Plan and Canada Pension Plan are two considerations. The decision mainly rests on a person’s individual preference and should be dependent on their circumstances. There are factors that may influence when is the right time to begin if deciding to put it off until 70 years old. One must consider their health, and if they have any ailments that would cause them to rethink how soon they need to apply for the retirement programs. Lastly, the lump-sum payment 12 months prior to death payable to their estate as noted in the OAS act may also be something to think about and plan for.

“At 65, the current maximum monthly OAS pension is $600.85 or $7,210.20 per year. Wait until 70 and OAS pays $817.16 per month or $9,805.87 a year, plus any inflation increases.”

These are the eight sources of retirement income you need to know about

When preparing to retire, you need to be aware of your available options to cover your expenses, as well as how much money you will owe in taxes based on these options. There are up to eight different sources of funds. Some people may not have considered all of them, and others may not apply to all retirees. They include: government pensions, investment portfolios, defined pension benefit plan, corporate investment account, annuities, your home, insurance policies, and your kids (or other family). Each of these income sources requires planning to maximize your cash flow without paying out too much in taxes.

“Remember that your retirement income is about much more than simply an RRSP or RRIF. There are hopefully many sources of income for you, but the more sources of income, the more complex some of the tax and planning issues become.”

Tax on cottage rental income never takes a holiday

Renting out a cottage for extra income should be an easy process when claiming the income made on your taxes unless, however, you live in the property part-time. Deductions and expenses can only be applied for the time that you are actually renting out the property and should be carefully recorded. Larger expenses are considered capital costs in many cases. If you decide to make it your full time residence, you don’t have to pay a capital gains tax nut the CRA has to know it’s no longer a rental income. It’s best to seek professional help if you are unsure what to do.

“Things can get complicated when cottage owners use the property for part of the year.”

The real reason people fail to save enough for retirement — and what you can do to limit the damage

Most economists report that you need savings of 10-15 percent to retire comfortably, but most Canadians are saving just over 7 percent. The main reason, according to retirees, is negative shocks while they are working. These unexpected expenditures include unemployment, health problems and divorce. In order to deal with these negative shocks and still save money, you can protect yourself with disability insurance, save money as if you’re planning for earlier retirement, and even insuring your marital union through Marriage Assurance policies. This allows you to “plan for the worst, hope for the best, and insure against the risks that you can.”

“Perhaps as important as how much you need to save to retire is an understanding of the things that prevent people from saving enough in the first place — despite their best intentions.”

Feds highlight indexation of Canada Child Benefit

Canadian taxpayers who have children under seventeen years of age are able to take advantage of an increase in the Canada Child Benefit (CCB). As of July, the calculation is being increased to reflect inflation. This means for the 2019-20 benefit year, parents or guardians of a child under age 6 can receive a maximum benefit of $6,639 per child, and a child between 6 and 17 years of age, will receive a maximum benefit of $5,602 per child. The increase from the previous year are $143 and $121, respectively.

“In July, the maximum benefit will increase up to $143 per child for 2019-2020.”

Budget change could offer sizable tax savings on a new car – The Globe and Mail

If you’re interested in purchasing a new car, specifically a zero-emission vehicle, then you may be able to take advantage of proposed tax provisions announced in the 2019 federal budget. To be eligible, the vehicle will need to be used for business purposes, and you can either own the business, be a partner or an employee who uses their own vehicle for work. If you qualify, you can deduct the full cost of the vehicle (up to $55,000 plus sales taxes) in the year of purchase until 2023. The vehicle must be new, and fully electric, a plug-in hybrid (with a batter capacity of at least 15 kWh), or fully powered by hydrogen. Be aware that there is additional criteria and rules, so be sure that you follow all of them in order to get your deduction at tax time.

“The 2019 federal budget proposes to allow an enhanced deduction for capital cost allowance (CCA, which is depreciation for tax purposes) if a zero-emission vehicle is purchased for work purposes.”

A lot of Canadians seem to have stopped investing to pay down their debts – The Globe and Mail

Based on the flow of money, Strategic Insight Canada believes Canadians are making the decision to switch from investing to paying down debt. The theory is based on the drastic drop in money going into investment products of all types in late 2018 and early 2019. Strategic Insight ruled out a worsening economy because of the lack of money going into deposits such as savings accounts and guaranteed investment certificates. Currently, this trend has resulted in total debt levels being lower than they were during the recession of 2008.

“The conclusion drawn by Mr. Cardone from these money trends is that people are paying down debt with money they would otherwise have invested.”