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Avoid pitfalls when transferring assets to kids
Posted Jul. 04 2013, 10:00 EDT, from www.theGlobeandMail.com
When I sat down with James, he shared with me his story. As part of his estate planning, he’s been wanting to transfer ownership of his cottage and a rental property to his son and daughter respectively. So, a few months ago he did just that. In addition, he’s been concerned about creditors and wanted to remove those assets from his hands to protect those assets. So, he sold the cottage to his son for $1, and the rental property to his daughter for the same price. James and I had a long conversation about what this meant for him, and what he might have done differently.
The problems
James has a few issues to be concerned about here. First, if you give or sell an asset to anyone but your spouse (or common-law partner), you’ll be deemed to have sold the asset for fair market value, even if you set the selling price at much less, as James had done. So, James will pay tax as though he sold both the cottage and rental property at their fair market values.
Tips, tricks and tools to help you maximize your tax returns.
6 Tax Tips for Parents
Posted April 3rd, 2013, from www.CBC.ca
Kids bring their own rewards - in the form of tax breaks and credits
To ensure you get your share of those and other benefits and tax deductions, here is a rundown of some of the things to think about when it comes to your kids and your taxes — from birth to when they leave the nest.
1. Claim birth-related medical costs
Claim on your return such expenses as the cost of a hospital room or a nurse's pre-natal care.
2. Apply for Canada child benefits
In British Columbia, Alberta, Manitoba, Ontario, Quebec, Nova Scotia and Prince Edward Island, you can apply for child benefits at the same time as you register a birth — if you are the birth mother and a resident of one of those provinces. The information will be sent electronically to the Canada Revenue Agency.
3. Apply for a social insurance number for your child
New parents need a SIN for their offspring to take advantage of benefits and programs to encourage education savings, including:
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The registered education savings plan (RESP): Parents, other family members and friends can contribute to an RESP as a way of saving funds for a child's post-secondary education. You don't get a tax deduction on the contribution, but the income earned once the money is inside the RESP is not taxed until it is paid out to the beneficiary, who is the one to pay the tax. The federal government can also contribute to an RESP in the form of grants. Quebec and Alberta provide added incentives, and Saskatchewan will do so beginning in the 2013 tax year. Having an RESP may also qualify you for:
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The Canada Learning Bond: For children born after 2003 whose family is receiving the national child benefit supplement, the federal government will contribute $500 to an RESP to help cover the costs of a post-secondary education (it will also pay $25 toward the cost of starting an RESP account). It will continue to contribute $100 for each year that the family qualifies for the supplement up to age 15 and to a maximum of $2,000.
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The Canada Education Savings Grant: The federal government adds 20 cents for every $1 of the first $2,500 saved in an RESP each year. Depending on the family income, the government might also provide an extra 10 or 20 cents on every $1 of the first $500 saved annually in an RESP. The grant has a maximum lifetime limit of $7,200 and is paid out up until the end of the calendar year the child turns 17.
HELPFUL TIPS
Three common RRSP mistakes you’ll want to avoid
Published Wednesday, Jan. 08 2014, 7:41 PM ESTLast updated Friday, Jan. 10 2014, 4:53 PM EST, from www.theGlobeandMail.com
We all make mistakes. I think about Joseph O’Callaghan, who robbed the guard of an armoured car in 2011. He stole the guard’s cash box, was caught, and was sentenced to nine years in prison by a court in Belfast. As it turns out, the box contained no money because Mr. O’Callaghan stole it while the guard was on his way into the bank, not on his way out.
I’m not sure what the greater mistake was: Stealing an empty box, or getting caught. Rookie mistakes, for sure.
Canadians often make “rookie mistakes” when it comes to their registered retirement savings plans (RRSPs). Now that 2014 has arrived, many are turning their attention to RRSPs since the 2013 contribution deadline is March 1, 2014 – not far off. Because March 1 falls on a Saturday, Canadians have until March 3 to make a contribution this year.
Making mistakes can cost you thousands if you’re not careful. Today, I want to share some common mistakes to avoid when it comes to your RRSP.
Mistake No. 1
Consider Jack. Jack sold some stocks at a profit in 2013 and decided that he’d like to offset these capital gains. ...
Mistake No. 2
Janice’s husband contributed $30,000 to a spousal RRSP for Janice in 2011 and 2012.The investments in that RRSP declined in value to just $5,000 by mid-2013. ...
Mistake No. 3
Michael and his wife, Marnie, are saving for retirement. Marnie has significant unused RRSP contribution room, but has no cash to make contributions. Michael, on the other hand, does have some cash, so he plans to give Marnie $50,000 so that she can contribute to her RRSP before the March 3 deadline. ...
Tax time 2015: What's new this year
from CBC News; posted Mar 02, 2015 5:00 AM ET; Updated Apr 28, 2015 10:22 AM ET
Every year, the federal government tinkers with the rules that determine how much income tax we pay.
This year, as Canadians prepare to file their 2014 returns, we highlight 10 changes that could affect how much you owe — or how much you save.
Family tax cut credit — Last October (the day before Halloween, actually), the Harper government announced a package of tax changes for families with children...
Children's fitness tax credit — Last fall, the government announced that the children's fitness tax credit would be doubled, beginning with the 2014 tax year...
Adoption expense tax credit — The maximum eligible adoption expenses that qualify for this tax credit were boosted to $15,000 in 2014, up from $11,669 in 2013. In 2015 and subsequent years, this credit will be indexed to inflation.
Medical expense tax credit — There are two changes to note here. The long list of eligible medical expenses now includes the cost of designing a therapy plan for someone who qualifies for the disability tax credit. It also includes the cost of service animals that help people with severe diabetes.
Search and rescue volunteers credit — People who spent at least 200 hours as a search and rescue volunteer in 2014 now qualify for $450 in tax relief, thanks to a new credit that was introduced in the 2014 federal budget.
Sharing information on snowbirds with U.S. — As of June 30, 2014, new rules came into effect that will allow Canadian and U.S. authorities to keep closer track of the cross-border movements of their residents...
Safety deposit box deduction eliminated — As of the 2014 tax year, you can no longer deduct the cost of renting a safety deposit box to store all those precious investment records. For corporations, that change already took effect in March 2013.
Gifts of cultural property — The 2014 federal budget closed a loophole that amounted to little more than an abusive tax shelter for gifts of certified cultural property...
Tax-free savings accounts — People could put another $5,500 into a tax-free savings account in 2014. Another $10,000 can be socked away in 2015...
GST/HST credit — You no longer need to apply for the GST/HST credit. The tax department's computers will now analyze your return and figure out if you're eligible.
Mineral exploration tax credit — The government announced in March that it will extend the 15 per cent tax credit for investors in flow-through shares of mineral exploration companies for another year — until the end of March 2016...
Six tax mistakes cottage owners should avoid
Published Thursday, May. 28 2015, 5:22 PM EDT Last updated Friday, May. 29 2015, 3:47 PM EDT, from www.theGlobeandMail.com
As a cottage owner, I’ve been careful not to make many mistakes. According to Carolyn, the biggest mistake I’ve made was trying to grow a Grizzly Adams beard last summer while relaxing at the lake for a week. If you own a cottage, or are thinking of buying one, be mindful of the following cottage-owner mistakes that can cost you big tax dollars if you’re not careful.
1. Failing to track capital improvements...
2. Owning the cottage in a corporation...
3. Claiming capital losses related to the cottage...
4. Changing use of the property to income-producing...
5. Selling to the kids for less than fair market value...
6. Renting the cottage for losses...
CRA Audit- Will I Be Selected?
from The Blunt Bean Counter Blog; posted July 21, 2014 (Originally from Feb 15, 2011)
I am often asked how the Canada Revenue Agency (“CRA”) selects its audit victims; oops, I meant to say taxpayers subject to audit. Through experience I know certain taxpayers, certain claims and certain industries seem to trigger audits. With that in mind, I will list below what I have seen and how I believe the CRA selects certain individuals and businesses for audit.
Reasons for Individuals and Corporations
I would suggest there is nothing worse than a scorned lover, a business partner you have had a falling out with or a dismissed employee to trigger a CRA audit. These individuals know your little secrets; a cash deal here, an offshore account there and a conference you expensed that was really a vacation. These people are also vindictive and in some cases, they make statements and claims that are not factual in nature; however, the claims are enough to bring the CRA to your door.