Jamie Golombek CIBC - Client Seminar Year End Tax Planning

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Jamie Golombek CIBC - Client Seminar Year End Tax Planning

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Jamie Golombek CIBC - Client Seminar Year End Tax Planning

  1. 1. Year End Tax TipsJamie GolombekManaging DirectorNovember 2009
  2. 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 2009 2006 2007 2008 2010 + future yearsForm T1A 2
  3. 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” 3
  4. 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” 4
  5. 5. #2 - Home ownership and prospective home ownership  Home Renovation Tax Credit  First-Time Home Buyers’ Tax Credit  Home Buyers’ Plan 5
  6. 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 6
  7. 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 7
  8. 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 8
  9. 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) 9
  10. 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. 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. 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. 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. 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. 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. 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. 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. 18. #8 – Spousal Loan at 1% (Example) Jack loans Diane $200,000 Investment earns 5% annually Interest Expense – 1% Jack Diane $200,000 Income $2,000 Income $10,000 Interest expense (2,000) Net income $ 8,000 Income splitting opportunity: $8,000 Tax Savings (ONT): $8,000 X (46.41% - 21%) = $2,033 annually
  19. 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. 20. #9 – Pay investment expenses by Dec. 31 Investment counseling fees (non-registered only) Professional accounting services Safety deposit box rental Interest expense
  21. 21. #9 – Make Debt Tax-Deductible “Singleton Shuffle” $300,000 $300,000 $300,000 $300,000
  22. 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.asp Credit: Philippe Landreville, Photographer Supreme Court of Canada Collection
  23. 23. #10 – Plan NOT to Get a Refund!in·tax·i·fi·ca·tion (in-täk-sə -fə -kā-shə n) noun the euphoria of getting a tax refund that lasts only until you realize it was your own money to begin with…
  24. 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. 25. #10 – Avoiding Clawback of 2010 OAS Apply for 2010 reduction of clawback at source – OAS Form T1213 OAS
  26. 26. Questions & Answers

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