Jamie Golombek CIBC - Client Seminar Year End Tax Planning
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Transcript of Jamie Golombek CIBC - Client Seminar Year End Tax Planning
Year End Tax Tips
Jamie GolombekManaging Director
November 2009
2
#1 - Tax loss selling
Applied against capital gains– Including CG distributions from mutual funds
Must be used against 2009 gains first Excess can be carried back / carried forward
2006 2007 2008 2010 + future years2009
Form T1A
3
#1 - Tax loss selling - transfers
Transfer to RRSP?
- Loss denied
- Crystallize first, wait 30 days to buy back
Transfer to TFSA?
- Loss denied
Transfer to RESP?
- OK, but if held for 30 days, “superficial loss”
4
#1 - Tax loss selling – “superficial loss”
Superficial loss- Buy “identical property” within 30 calendar days
- Who?
You
Spouse/partner
Corporation controlled by you/spouse/partner
Trust, if you or spouse is majority-interest beneficiary
Transfer to parent / child – OK
Switch funds (3rd party funds)- Corporate to trust version (vice versa)
- Not identical properties
Two index funds? – CRA says “identical”
5
#2 - Home ownership and prospective home ownership
Home Renovation Tax Credit
First-Time Home Buyers’ Tax Credit
Home Buyers’ Plan
6
#2 – Home Renovation Tax Credit (HRTC)
Expenditures over $1,000
Maximum of $10,000
– Credit worth 15% of $9,000 = $1,350
Per family (spouse/partner, minor kids)
From Jan 28, 2009 until Jan 31, 2010
Eligible expenses?
– Labour, professional services
– Building materials
– Equipment rentals
– Permits
Ineligible?
– Routine maintenance
– Furniture, drapery, appliances
– Interest expense
7
#2 – Home Renovation Tax Credit (HRTC)
Air conditioners
Condo renos – specific/general
Docks
Driveways
Landscaping
Sauna
Solar panels
Swimming pools / hot tubs
Materials purchased before Feb 2010 qualify even if they are installed after January 2010
Labour only qualifies if work is done before February 2010, even if prepaid
8
#2 - First-Time Home Buyers’ Tax Credit
New $5,000 amount eligible for 15% credit– Value = $750
“First-time home buyer”– Neither individual nor spouse/partner owned home in
current or previous four calendar years
One claim per family– Unused credit can be transferred to spouse/partner
9
#2 - Home Buyers’ Plan
$25,000 can now be withdrawn from an RRSP, tax-free
Must be paid back over 15 years to avoid annual income inclusion
“First-time home buyer”– Neither individual nor spouse/partner owned home in
current or previous four calendar years
DEFER participation to January 2010 to delay repayment until 2012 (vs. 2011)
10
#3 – RRSP annuitants who turn 71 in 2009
Convert to RRIF (or annuity) by December 31
Final RRSP contribution must be made by December 31
– No sixty day rule
– Unless spousal RRSP with younger spouse/partner
11
#3 – RRSP annuitants who turn 71 in 2009
Consider one-time “over-contribution”
– Client (71) has $100,000 of earned income in 2009
– Will create $18,000 of RRSP contribution room for 2010
– Contribute $18,000 to RRSP in December 2009
– Pay penalty of 1% or $180 for month of December
– Deduct contribution in 2010 (or future year) against ANY source of income
12
#4 – Contribute to an RESP
$50,000 per child
No annual maximum
Maximize Canada Education Savings Grants (CESGs)
– 20% on first $2,500/annually = $500
– Catch-up CESGs back to 1998
• Max of $1,000 of CESGs per year
– $7,200 per child maximum
Child turned 15 in 2009 with no RESP?
– Contribute at least $2,000 to RESP in 2009 to get CESG for 2009 and make child eligible for 2010 and 2011 CESGs
13
#5 – Charitable donations
Must be made by December 31st
No capital gains tax on “in-kind” donations of publicly traded
securities to charity
Consider “donor advised funds” through public foundation
14
#6 – Contribute to a Registered Disability Savings Plan
$200,000 lifetime limit
Age 59 and under to open
Age 49 and under to get government funds:
– Canada Disability Savings Grants
• Family income < $77,664 (2009)
» 300% of first $500
» 200% of next $1,000
• Family income > $77,664
» 100% of first $1,000
• Lifetime max: $70,000
15
#6 - RDSPs (cont’d)
Canada Disability Savings Bonds
– Family income < $21,816 (2009)
• $1,000 annually (no contributions required)
– Family income > $21,816
• Reduced pro-rate until eliminated at income > $38,832 (2009)
– Lifetime max: $20,000
16
#7 – Purchase business assets
Claim a half-year’s depreciation even if asset bought on
December 31st
Accelerated tax depreciation for computer purchases
– Can write off 100% of cost of computers in year acquired
– No “half-year” rule
– For purchases from January 28, 2009 through January 31, 2011
17
#8 – Spousal/Partner Loan at 1%
Spouse or partner gifts/transfers funds
- FULL attribution of income / gains to transferor
Exceptions:
– Pay FMV or prescribed rate loan
Rate for Q4 2009 – 1%
– Lowest ever!
18
Jack loans Diane $200,000 Investment earns 5% annually
Income splitting opportunity: $8,000
Tax Savings (ONT): $8,000 X (46.41% - 21%) = $2,033 annually
Income $2,000
#8 – Spousal Loan at 1% (Example)
Jack$200,000
Interest Expense – 1%
Income $10,000
Interest expense (2,000)
Net income $ 8,000
Diane
19
#8 – Spousal Loan – Rate Reset?
What if you have an existing loan at 3% or 4%?
– Can you adjust rate on loan?
– Can you refinance with new loan?
20
#9 – Pay investment expenses by Dec. 31
Investment counseling fees (non-registered only)
Professional accounting services
Safety deposit box rental
Interest expense
21
#9 – Make Debt Tax-Deductible
“Singleton Shuffle”
$300,000$300,000
$300,000 $300,000
22
#9 – Make Debt Tax-Deductible (cont’d)
Lipson decision – Supreme Court (January 2009) General Anti-Avoidance Rule (GAAR) Use of attribution rules
Source: http://www.scc-csc.gc.ca/Details/d4-eng.aspCredit: Philippe Landreville, PhotographerSupreme Court of Canada Collection
23
#10 – Plan NOT to Get a Refund!
the euphoria of getting a tax refund that lasts only until you realize it was your own money to begin with…
in·tax·i·fi·ca·tion (in-täk-sə-fə-kā-shən) noun
24
2009 Tip #10 – Plan NOT to Get a Refund! (cont’d)
“Undue hardship” provision
Too much tax withheld at source
Due to:
– RRSP contributions
– Support payments
– Childcare expenses
– Charitable donations
Form T1213
25
#10 – Avoiding Clawback of 2010 OAS
Apply for 2010 reduction of clawback at source – OAS
Form T1213 OAS
26
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