We find money-saving and money-growing ideas from around the web for your everyday finances.
- Many people think it’s worthwhile to have a Costco membership. But is the Costco Executive membership worth it? According to the article, you have to spend $2,750 a year, or about $229 month, to make up the extra cost of the executive membership with the 2% cash-back feature.
- Do you know how much it costs to own and operate your car? Michael James shows how to get a handle on the cost of cars, and then provides a car costs spreadsheet so you can figure out the fixed and variable costs of your car.
- Whether you live near the U.S. border and shop there frequently, or you make the occasional trip south (north for those of us living in Windsor), this guide to cross border shopping has some helpful information.
- Consumer Reports offers tips on mattress shopping made easy – or less stressful – although for many people (being self-conscious and all), lying for ten minutes on a mattress in the middle of a store probably won’t be less stressful.
- Planning a trip this summer? Here are three ways to save money on your family vacation.
The following is an excerpt from “2013 Federal Budget Commentary” by Jerry S. Rubin, Vice-President, Wealth Planning Group, United Financial, a division of CI Private Counsel LP:
Finance Minister James Flaherty tabled the 2013 federal budget on March 21, 2013. This is the seventh budget for Minister Flaherty and the second for this majority Conservative government. The budget projects a deficit of $25.9 billion for the soon-to-end 2012-2013 fiscal year, and forecasts deficits of $18.7 billion for the 2013-2014 fiscal year and $6.6 billion for the 2014-2015 fiscal year. The minister reiterated the government’s previously stated position that the budget would return to a surplus position in 2015. The budget forecasts a surplus of $0.8 billion for the 2015-2016 fiscal year, followed by surpluses of $3.9 and $5.1 billion, respectively, in the two subsequent years.
The budget, or Economic Action Plan 2013 as it is referred to by the government, focuses on the five following areas:
• Connecting Canadians with available jobs.
• Helping manufacturers and businesses succeed in the global economy.
• Creating a new “Building Canada” plan to fund public infrastructure.
• Investing in world-class research and innovation.
• Supporting families and communities.
There were no increases to personal or corporate tax rates in the budget; however, there was considerable focus on measures that will increase tax “fairness” and close perceived tax “loopholes”.
The following is a summary of the changes [as it relates to personal tax matters] announced in the budget. Please note that these changes are still proposals until passed into law by the federal government.
Personal income tax rates
There were no changes announced with respect to personal income tax rates in this budget, although tax brackets have been indexed by 2% to reflect the impact of inflation. The effective rates for 2013 and corresponding tax bracket thresholds are shown in the following table.
|Taxable income range||2013 tax rates|
|$11,039 – $43,561||15%|
|$43,562 – $87,123||22%|
|$87,124 – $135,054||26%|
|$135,055 or more||29%|
Adoption expense tax credit
Acknowledging that there are costs incurred by adoptive parents prior to being matched with a child, the budget proposes to extend the adoption period by redefining the time at which the adoption period begins. Currently, the adoption period begins on the date that the child is matched with the adoptive family. Effective for adoptions finalized after 2012, the budget proposes to begin the adoption period at the earlier of:
• the time that the adoptive parent makes an application to register with a provincial ministry responsible for adoption or with a provincially licensed adoption agency; or
• the time that an adoption-related application is made to a Canadian court.
First-time donor’s super credit
In order to encourage charitable giving by new donors, the budget proposes a temporary one-time credit for first-time donors on up to $1,000 of monetary donations. An individual is a first-time donor if neither the individual nor the individual’s spouse or common-law partner claimed a charitable donation tax credit, or this new credit, in any taxation year after 2007.
The new 25% super credit will be added to the existing charitable donation tax credit, resulting in a tax credit rate of 40% on the first $200 of donations and 54% on the next $800. The new credit applies to donations made after budget day and before 2018. The maximum limit of $1,000 applies to both individuals and couples, so that there is no doubling of the credit for couples. As this is a one-time credit, donors may want to carry forward and not claim smaller donations until the $1,000 threshold is reached.
Lifetime capital gains exemption
The budget proposes to increase the $750,000 lifetime capital gains exemption by $50,000 to $800,000. The new limit will be available for dispositions of qualified small business corporation shares, qualified farm property and qualified fishing property after 2013. The new higher lifetime limit will be available to all individuals, including those who had previously claimed the maximum exemption at the time. The $800,000 amount will be indexed for 2015 and subsequent years.
Deduction for safety deposit boxes
The budget proposes to eliminate the deductibility of fees paid to a financial institution for the rental of a safety deposit box. This measure will apply to taxation years that begin on or after March 21, 2013.
Dividend tax credit
The budget proposes to make changes to the non-eligible dividend regime to more accurately reflect the corporate income taxes that are paid on active business income and to improve tax integration. The current 25% gross-up on non-eligible dividends will be reduced to 18% and the current dividend tax credit rate of 13.33% of the grossed-up dividend will be reduced to 11%. This effectively increases the highest marginal federal tax rate on non-eligible dividends from 19.58% to 21.22%. These changes are applicable to non-eligible dividends paid after 2013.
Registered pension plans
The budget proposes to enable registered pension plan (RPP) administrators to make refunds of contributions in order to correct errors, without first seeking Canada Revenue Agency (CRA) approval. In order to qualify, the refund must be made before December 31 of the year following the year in which the erroneous contribution was made. The refund to an individual plan member will be income in the year received, while refunds to employers will reduce the RPP expense for the year to which the refund relates. This measure will be effective in respect of RPP contributions made on or after the later of January 1, 2014 and the date of royal assent.
Labour-sponsored venture capital corporations tax credit
The budget proposes the phase-out of the federal labour-sponsored venture capital corporations (LSVCC) tax credit. The credit is currently equal to 15% of an investment in up to $5,000 of LSVCC shares. The phase-out will begin in 2015 when the credit will be reduced to 10%. It will be further reduced to 5% in 2016 and eliminated for 2017 and subsequent years. No new applications for registration of federal LSVCCs will be accepted after March 21, 2013.
Mineral exploration tax credit for flow-through share investors
The budget extends this credit for flow-through share arrangements that was scheduled to expire on March 31, 2013. The credit will continue to be available for flow-through share arrangements entered into on or before March 31, 2014.
Restricted farm losses
As a result of a recent decision by the Supreme Court of Canada, the budget proposes to amend the restricted farm loss rules to clarify that these rules will apply to restrict current deductibility of farming losses if farming is not the chief source of the taxpayer’s income. In addition, the budget proposes to increase the annual limit of deductible restricted farm losses from $8,750 to $17,500. These measures apply to taxation years that end on or after March 21, 2013.
Foreign reporting requirements
Canadian residents must file form T1135 – foreign income verification statement with CRA if the person owns specified foreign property costing more than $100,000. Effective for 2013 and subsequent taxation years, the budget proposes to extend the normal assessment period by three years if:
• the taxpayer fails to report income from the specified foreign property on their annual income tax return; and
• form T1135 was not filed on time by the taxpayer, or a specified foreign property was not identified, or was improperly identified on form T1135.
In addition, for 2013 and subsequent years, the form and its related instructions will be modified to require more detailed information regarding each specified foreign property, including:
• the name of the foreign institution or other entity holding funds outside of Canada;
• the specific country to which the property relates; and
• the foreign income generated from the property.
CRA will begin reminding taxpayers of their obligation to file form T1135 on assessment notices if they have checked the “yes” box on their income tax returns indicating that they own specified foreign property with a cost of more than $100,000. CRA is also in the process of developing a system that would allow for the electronic filing of form T1135.
Extended reassessment period
The budget proposes to extend the normal three-year reassessment period for tax shelter participants where the tax shelter promoter has not filed the required information return on time. The reassessment period will be extended to three years after the date that the relevant information return is filed. This will be effective for taxation years that end on or after March 21, 2013.
Taxes in dispute and charitable donation tax shelters
CRA is generally prohibited from initiating collection action in respect of assessed income taxes, penalties and interest in cases where taxpayers have formally objected to the assessment. In order to discourage participation in charitable donation tax shelters deemed offensive by CRA that lead to prolonged litigation and delayed tax collection, the budget proposes to allow CRA to collect up to 50% of the disputed amount pending ultimate determination of the tax liability. This measure will apply to 2013 and subsequent taxation years.
A synthetic disposition occurs where a taxpayer enters into a transaction that eliminates all or substantially all of the risk for loss or opportunity for gain. In effect, the taxpayer economically disposes of the property but continues to own it for income tax purposes through the use of certain financial arrangements.
Where a synthetic disposition takes place, the taxpayer will be deemed to have disposed of the property at fair market value and to have immediately reacquired it at that cost. The taxpayer will also be deemed to not own the property for the purposes of various “holding period” tests in the Income Tax Act. These measures will apply to arrangements entered into on or after March 21, 2013.
Character conversion transactions
This refers to financial arrangements that attempt to convert ordinary income into capital gains, through the use of financial derivatives. These arrangements typically involve the use of forward contracts to buy or sell a capital property at a price linked to some other property or measure, such as the performance of an investment portfolio or index.
The budget proposes to treat the return from the derivative investment distinct from the disposition of the underlying asset. This will generally result in ordinary income treatment for the derivative-based return. This measure will apply to derivative forward agreements that have a duration of more than 180 days. In order to prevent double taxation, any income or loss will result in an adjustment to the adjusted cost base of the capital property.
Trust loss trading
The budget will introduce rules restricting the use of losses in trusts that are similar to the acquisition of control rules for corporations. The new rules will apply when a trust has been subject to a “loss restriction event”. This will occur when a person or partnership becomes a majority interest beneficiary of the trust or when a group becomes a majority interest group of beneficiaries of the trust. This provision will apply to transactions that occur on or after March 21, 2013.
The budget proposes to extend the deemed Canadian residence rules to non-resident trusts (other than immigration trusts) in situations where a Canadian resident taxpayer transfers or loans property to the trust and the property held by the trust may revert to the taxpayer or the taxpayer has influence over the trust’s dealings with the property. This provision will apply to taxation years that end on or after March 21, 2013.
Graduated rate taxation of trusts and estates
A common estate planning strategy involves the use of testamentary trusts created in a deceased person’s will to hold a beneficiary’s inheritance. These trusts can be more tax efficient than receiving an outright inheritance because the trusts are subject to taxation at graduated rates, similar to individuals, and essentially allow for the splitting of income between the trust and the beneficiaries. The effects can be magnified in cases where deceased individuals with significant estates create multiple trusts. This tax benefit can be contrasted with inter-vivos trusts created during the person’s lifetime, which are subject to taxation at the highest marginal rates applicable to individuals, which serves to prevent tax-motivated use of these trusts.
The budget indicates the Department of Finance’s concern with the increasing tax-motivated use of testamentary trusts and the impact on the tax base. Accordingly, the budget announces that the government will consult on possible measures to eliminate the tax benefits arising from the use of these trusts. A consultation paper will be released to stakeholders for comment. No timing was announced.
We find money-saving and money-growing ideas from around the web for your everyday finances.
- Should you turn off the light whenever you leave a room? Not necessarily. “The cost effectiveness of when to turn off lights depends on the type of lights and the price of electricity.” The U.S. Energy Dept. provides some information on when to turn off your lights.
- Do you use a mortgage broker? This article highlights some potential conflicts, and then shares five questions to ask your broker, so that you’re getting the best rate.
- It’s headlined as how to get rid of debt in 25 steps. It’s not really a step-by-step path out of debt, but there are 25 common-sense ideas that will help you deal with your debt.
- It’s tax time, so this is a timely reminder of five tax breaks you may not know about. Also … a new credit in 2012 is the Family Caregiver tax credit, which is featured in this video.
- For most people bank fees are not a big budget expense, but they can be annoying and the small monthly amounts can add up over a year. Here are some ideas on how to save on banking fees.
We find money-saving and money-growing ideas for your everyday finances from around the web.
- Got a ticket? Low-cost legal expense insurance can help. Would you buy this kind of insurance?
- Libraries are not just for borrowing books. They also offer “internet access, DVDs, CDs and magazines. Some even offer video game rentals.” So check out the benefits of getting a library card.
- Rewards Canada provides a summary of travel reward credit card medical insurance coverage. The takeaway: “So please, before you choose a card based solely on the medical insurance please read the policies of those that you are considering before making your decision.”
- It’s tax time! Here are five reasons students should file tax returns. Not only does the GST/HST credit require you to file a return, but here in Ontario the Trillium benefit also requires it.
- Without being a home-stager, here are four no-cost ways to prepare your home for a quick sale. “Clean the water heater” is one we would never have thought of.
- Whether you currently own or plan to purchase a property, you should understand title insurance, and how it protects you as a property owner.