10 Easy steps for Canadians to reduce their taxes

It’s that time of year again when we ask ourselves "how can I reduce my income taxes?" especially with the upcoming April 30th deadline to file your tax returns. Here are some quick and easy tips for Canadians to reduce the amount they owe on their taxes and hopefully at the end of the day get some money back.

1. Home Renovation Tax Credit

The home renovation tax credit applies to renovations made to your home after January 2009. The HRTC is equal to 15% of the renovation cost to a maximum of $10,000.


2. Child Care Expenses

Child care expenses include, fees paid to a babysitter or nanny, daycare fees, costs for an after school program, PLASP fees, etc. They are deductible by the lower income spouse, even if the higher income spouse paid for the child care costs. The maximum amount of child care expenses that can be claimed is $7,000 for each child born in 2003 or later and $4,000 for each child born in 1993 to 2002.


3. Accounting Fees

You can reduce your taxes, by deducting fees paid to your accountant for preparing your individual income tax return. The accounting fees paid may be deducted from investment income, rental income, or business income reported on your tax return. In all other cases, accounting fees are non-deductible.

4. Sales Person Expenses

As a salesperson, you can deduct any reasonable expense that you incurred for the purpose of earning commission income. To support your expense deductions, you must complete form T2200, Declaration of Conditions of Employment, and be required to pay for expenses related to your sales activities, as a condition of your employment.

5. Car Expenses

If you are required to use your personal car to carry out your employment duties, you can deduct expenses related to your car or vehicle. However, you must have a completed form T2200, Declaration of Conditions of Employment, and be required by your employment contract to use your personal automobile.

Only the business use portion of your car expenses can be deducted on your personal income tax return, which includes:

· Insurance

· Repairs and maintenance

· Lease costs (to a maximum of $800 + taxes)

· Capital cost allowance (i.e. tax depreciation, at a rate of 30% per year)

· 407 charges

· Parking fees

6. RRSP Contribution

Contributions made to an RRSP are deductible from your income. The maximum amount that you can contribute to an RRSP for 2011 is $22,450. However, if you did not use your entire RRSP deduction limit for the years 1991-2011, you can carry forward unused contributions to 2012. Therefore, your RRSP deduction limit for 2011 may be more than $22,450. For 2012 the maximum RRSP contribution will increase to $22,970.

7. TFSA

Consider contributing to a tax free savings account (TFSA). A TFSA is an account in which any investment income earned is not subject to income tax. Unlike an RRSP, withdrawals from a TFSA are not taxable. Stocks, bonds, mutual funds, and high interest savings accounts can all be held inside a TFSA. In addition, the maximum annual contribution limit to a TFSA is $5,000 plus any unused contributions since 2009.

8. Spousal Plan

Another way to reduce your tax bill is by making a loan to your spouse at the Canada Revenue Agency’s prescribed rate of interest, which is currently 1%. Your spouse could invest the loan proceeds in a business, high interest bearing investments, stocks, real estate, etc., and any income generated from those investments would be included in your spouse’s taxable income. The optimal amount of a spousal loan is equal to the amount that would equalize you and your spouse’s taxable incomes, after taking into account the investment income expected to be generated on the investments made from the loan proceeds. Making a spousal loan to a spouse who is in a lower income tax bracket is an excellent income splitting strategy, and is a perfect answer to your question of “How can I reduce my income taxes?”

9. Children fitness Amount

The children’s fitness tax credit, a.k.a. children’s fitness amount, is a tax credit available to Canadian taxpayers who enrol their children in a physical activity program. The tax credit is calculated as 15% of the amount paid for a physical activity program. The maximum credit that can be claimed is $500. The receipt for your child’s physical activity program should say whether the program qualifies for the children’s fitness tax credit.

10. Public Transit Amount

As a Canadian taxpayer, you can claim a tax credit, known as the public transit tax credit, for amounts spent on monthly or yearly public transit passes. Eligible passes must be for one of the following:

· Busses

· Streetcars

· Subways

· Trains

· Ferries

Is Your Retirement Affordable?

Vacation once a year $3000, Golf membership $2500 a year, Insurance (Home, Auto, Life, Health) $4000 a year, Bills Payable $3000 a year, New car $4000 a year (Lease/Financing), Knowing that you will be able to afford YOUR retirement, PRICELESS!!!  For all your Retirement needs contact a qualified Financial Advisor.

Many Canadians realise that saving for retirement is very important, if we don’t save for retirement then how can we as Canadians afford to maintain our standard of living that we have been accustom to during our working years?

In 2011 nearly six million Canadians contributed to their RRSPs (Registered Retirement Savings Plan), this number may seem like a lot but this means that 66% of Canadians did not contribute a single penny to their retirement plan. This is what I call the first mistake to 2011. It's easy to find excuses to not contribute to your retirement: no cash, paying for school, buying a home, family, or just simple procrastination.
But do we Canadians even have a clue about how we start to save for retirement? All we know is that we need a substantial amount of money to fund our everyday needs after our working years. But what is that amount?
Every year Canadians can contribute up to 18% of their previous years earning up to a maximum of $22,000. Of course if we all had $22,000 just lying around we would all max out our RRSP contribution and we would all be filthy rich by the time we're ready to retire. But the harsh reality is that we all have bills and other expenses to pay for which makes it harder for Canadians to supplement a retirement plan.

Is it REALLY that hard to contribute to your retirement plan?

Example:
John is 25 years old, a graduate from the University of Western Ontario who currently still lives at home, owns his own car, and has recently began his REAL WORLD career. After a few months of working John has been able to save $2000. Being a financially independent individual John realizes that it’s easier to save for retirement earlier in life then it is when family and other financial obligations take priority. So John decided to consult a financial advisor. The financial advisor suggests that John opens an RRSP with his $2000 as an initial investment, as well as make a $25 a week Pre Authorized Contribution with an expected Rate of Return of 5%. The Financial advisor also asks John if he would be able to make another $2000 contribution at the end of the year during RRSP season (Jan 1-Mar 1) and John agrees.

At the end of the year John will contribute $3300 to his RRSPs. If John consistently makes contributions of $3300 to his RRSP for 40 years, based on compounding and interest rates John will expect to have over $460,000 when he is set to retire.

Once John is in a better financial situation where he is able to contribute more too his retirement, not only will he better his financial situation for the future but he will increase the amount that he will have when he is able to retire.

I must ask one more time. Is Your Retirement Affordable?

I don't want to say it's funny, because it's not funny at all

There are too many homeowners who upon approval of their Mortgage from the bank agree to purchase Mortgage Insurance in the event of their death. Now I’m not saying that purchasing Mortgage Insurance is wrong, homeownership is the BIGGEST investment of your life and protecting yourself and your loved ones in the event that something were to happen to you is the smartest thing you can do for your loved ones.

The problem is that most homeowners only know one thing about Mortgage Insurance and that it’s included in their monthly mortgage payment, and that’s it. Most homeowners also believe that upon their death that their beneficiary will receive the balance of their Mortgage from the Mortgage Insurance that they signed up for upon re/approval of their mortgage. In some cases this is true, but in most cases this isn’t true at all it’s more further from the truth then you know.

Here is the truth: You do not own your Mortgage Insurance Policy, the Bank does. Your loved ones will not receive the balance of your Mortgage in the event of your death, the Bank does.  The person you may have assigned as your beneficiary for the policy is not, the Bank is. You DON’T have control over your policy, the Bank does. The Bank CAN terminate your insurance at ANYTIME.

Probably the most astonishing truth that I found out about the banks Mortgage Insurance is something called POST-CLAIM UNDERWRITING. Now many people don’t understand what POST-CLAIM UNDERWRITING is or what it even means unless you are a Life Licence Advisor or knowledgeable in the insurance industry.

Now, when we hear the word “Post” in the context of “The POST GAME show” or “The POST SEASON” we immediately think of “After” the game, or show or whatever it is. The context of “Post” also applies to your Mortgage Insurance. Post-Claim Underwriting is the process of: In the event of the homeowners’ death, the beneficiary will contact the Bank to claim the Mortgage Insurance on the remaining balance of the Mortgage too pay it down. Now, the Mortgage Insurance application that you signed up for however long ago that you renewed or purchased your Mortgage will NOW be sent to the underwriting department once the claim has been filed or made (POST-CLAIM UNDERWRITING).

This is what you may not know. Underwriting is the process of analysing medical questions that you were asked by a Life Licenced advisor which then gets analysed along with your medical records to detect if you are in fact insurable or uninsurable. Like I previously stated, once the beneficiary of the estate goes to claim the Mortgage Insurance the application that you signed will NOW be sent to the underwriting department, this is called: Post-Claim Underwriting. Now the underwriting department will analyse your medical records and make sure they match up with the mortgage insurance application.

 For Example

The underwriter will open your Mortgage Insurance Application and will read the first question “Has the Proposed insured smoked cigarettes, cigars, marijuana or used any tobacco products in the last 12 months?” your answer “No” then they will check your medical records and notice that you are telling the truth and that question is passed.

Next Question: “Have you had an x-ray in the past 2 years?” and you answer “No”. Again the underwriter will check your medical records and check if that statement is true. But in fact your medical records show that you had an x-ray 8 months ago for taking a hockey puck off the ankle and you went to the hospital to see if it was broken or not. Then underwriter will notice that you DID in fact have an X-ray 8 months prior to your death and since the claim is made POST-death the underwriter will mark the application VOID in the event of misrepresentation of the insured, and the beneficiary of the estate will no longer be eligible to receive the insurance benefit to pay down the remaining balance of the mortgage.

So all in all, this whole time you have been paying for your Mortgage Insurance no matter if it’s 1 year, 20 years, or 30 years it will never be underwritten unless you die, and depending on your health at the time you signed up and the time you die, will be the determining factor on whether your Mortgage Insurance will be approved or not.

 Now, the easiest way to go about getting Mortgage Insurance is by finding a qualified independent Life Licenced broker such as myself. The benefit by applying with an independent advisor is that YOU own your policy, YOU can assign a beneficiary of your choice, and YOU have full control of the Policy. What is also great about an Independent Broker is that we sit with you and go over all the necessary health questions that are required for underwriting to process your policy. We send all completed health applications to our underwriting department following the completiong of the medical form, which they again go over the necessary health questions and medical records and within 2-3 weeks you will be notified if you are insured or not, which is much simpler, faster, and benefits all parties involved.

To conclude, we never know what is going to happen tomorrow, tonight, or 2 minutes from now. What we do know is that our families are the most important things in life and that we will do whatever it takes to protect them from anything.

Do the right thing, and protect your family from financial crisis.