Author Topic: Can"EH"dian Tax - You have questions, I have answers  (Read 106804 times)

RetiredAt63

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #250 on: April 26, 2015, 06:22:19 AM »
Are you planning to take money out of an RRSP (one set of rules) or transfer it to a RRIF and take from that (another set of rules)?
Also, people tend to assume that they will turn their RRSP into a RRIF the year they turn 71, because that is when they have to do it.  But you can put some or all of your RRSP into a RRIF earlier if that is more advantageous overall for you.  For example, when I retired for real I put most of my RRSP into a RRIF and am taking out the minimum.  I still had RRSP contribution room and used it, so I also have an RRSP that is going to sit there and grow until I need to shift it.

My husband's work retirement plan is an RRSP with a company match, which projections show will be worth $700,000 at that time. We would withdraw 4% per year.

Thanks!
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c-kat

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #251 on: April 26, 2015, 10:35:42 AM »
Are you planning to take money out of an RRSP (one set of rules) or transfer it to a RRIF and take from that (another set of rules)?
Also, people tend to assume that they will turn their RRSP into a RRIF the year they turn 71, because that is when they have to do it.  But you can put some or all of your RRSP into a RRIF earlier if that is more advantageous overall for you.  For example, when I retired for real I put most of my RRSP into a RRIF and am taking out the minimum.  I still had RRSP contribution room and used it, so I also have an RRSP that is going to sit there and grow until I need to shift it.

My husband's work retirement plan is an RRSP with a company match, which projections show will be worth $700,000 at that time. We would withdraw 4% per year.

Thanks!

Good point. I hadn't thought about that distinction.  We would do whatever worked best from a tax standpoint. What would you suggest?

RetiredAt63

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #252 on: April 26, 2015, 08:41:55 PM »
Good point. I hadn't thought about that distinction.  We would do whatever worked best from a tax standpoint. What would you suggest?

Money out of an RRSP versus a RRIF, hmm.  I don't have enough information and I am not an expert on this - I only know more than the average bear because I am in the middle of the RRSP thing.  Most people here are too young  ;-)

Any decent financial planner can work out various scenarios for you - the one I use at my bank did it for me.  I can tell you how we did it, which might help.

First, you (I am using the generic "you" here) have to convert an RRSP to a RRIF (or use it to buy an annuity) by the time you hit 71, or your spouse does.  If you do not need the income, this is a common choice - but what happens is that at 71 the required minimum withdrawal is high enough that people notice a big tax hit.  Whereas if you start withdrawing earlier, the minimum withdrawal is much smaller, and for several years your RRIF should continue to grow.  At some point your withdrawals (% withdrawn having to increase each year) will be greater than the growth and the total value will start to shrink.  Each year the % coming out is higher, as the thinking behind the RRIF is that you should end up with zero in it if you live long enough, just as you would with a regular pension (when you hit your 90s the withdrawal rate is huge).  Anyway, if you don't need the money you can invest it in something that is more under your control, a TFSA is the obvious choice if you have room.  Income from a RRIF counts as taxable income, and affects OAS, which is another reason starting it at 71 has a big impact, the sudden large increase in income can trigger OAS clawback if it wasn't already happening.

When you take money out of an RRSP, there is with-holding tax.  You lose that contribution room.  And there are probably all sorts of other implications that I do not know about, because this is an area I haven't researched.  I know there are ways to get it out for a house or education, but other than that, RRSPs are set up to really discourage people from taking money out of them.

TFSAs are wonderful, in that they are just what the name says, tax free when you take the money out.  Of course they are done with after-tax dollars.  But they don't count as taxable income, so if you are at the point of seeing OAS being affected by income, money from a TFSA is better.  If OAS is irrelevant (you have so much money it is all clawed back, or so little you can't get to clawback position) then it isn't part of the calculations.

I don't think it matters where the RRSPs and TFSAs are, the tax rules are the same.

Re pension and CPP, I am in the same boat, my pension will drop when I hit 65 and am eligible for full CPP.  I started CPP a bit early (divorce debt to pay) so my pension will drop more than my reduced CPP payment - the drop in pension will be roughly made up for by OAS.

Gordon Pape's book on TFSAs is really good, well worth a read.

So really, my advice to you is run a bunch of different scenarios and see which works out best in the long term.  But check out the tax rules for each.

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CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #253 on: April 27, 2015, 09:44:42 AM »
First of all thanks for all your great information!
I have a simple question for you,
my wife has a defined benefit pension but has 8500 in rrsp room. I have all of my savings in an rrsp at the moment. She has a higher income than I do and I would like to have her contribute to a spousal rrsp to claim the deduction and to try and even out our retirement incomes. What I'm finding confusing is 'how to actually do this'.
We share a bank account and every two weeks I invest in my e-series rrsp from our shared account. Would we continue to invest in the same way to add the extra 8500 and then when we submit our taxes next year, she claims 8500 of the deposit as a spousal rrsp? Or does a new rrsp need to be setup...
Many thanks!
She should be able to put money directly into your RRSP - speak with your bank on logistics, but this doesn't need to be separate.

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #254 on: April 28, 2015, 07:38:21 AM »
Are you planning to take money out of an RRSP (one set of rules) or transfer it to a RRIF and take from that (another set of rules)?
Also, people tend to assume that they will turn their RRSP into a RRIF the year they turn 71, because that is when they have to do it.  But you can put some or all of your RRSP into a RRIF earlier if that is more advantageous overall for you.  For example, when I retired for real I put most of my RRSP into a RRIF and am taking out the minimum.  I still had RRSP contribution room and used it, so I also have an RRSP that is going to sit there and grow until I need to shift it.

My husband's work retirement plan is an RRSP with a company match, which projections show will be worth $700,000 at that time. We would withdraw 4% per year.

Thanks!

Good point. I hadn't thought about that distinction.  We would do whatever worked best from a tax standpoint. What would you suggest?

Hi there,

In terms of minimizing impact on future investments, the TFSA is a great way to shield future earnings as withdrawals are not considered "income". Retired @ 63 has good points here in terms of differences between the plans. Personally my view is that TFSA's are a better investment vehicle, as the savings are back-loaded in the sense that the taxes have been paid, and from here on out it is tax-shielded earnings with no impact on future benefits (at this point in any case.)

The RRIF rules have been loosened in this year's budget - from about 7% minimum to around 5% minimum withdrawal rates per year.

Hope this helps!


CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #255 on: April 29, 2015, 07:20:07 AM »
Folks,

Going to take a brief moment to comment on an article which came across my desk yesterday.

http://news.nationalpost.com/news/canada/canadian-politics/ottawa-man-gives-1500-back-to-the-government-in-taxes-after-refusing-to-take-income-splitting-credit

The gist of this is simple - it's a publicity stunt... The article is misleading - he didn't "give back" the $1,500 - he just elected to not take the family tax credit, and receive as big of a refund. His line of reasoning is that, sure, he could have spent the money, but why not just let the government keep it?

I'd be curious to know what people are doing with their refunds - spending it is the assumed presumption of most, but I sincerely hope the MMM'ers are squirreling the funds away for the future, or at least a portion thereof.

I can't help but think how selfish this person is - clearly he has children and a family... But has opted to pay $1,500 (closer to $6-10k by the time his kids go to University, with interest), instead of investing in his family's future - children's education, TFSA account, RRSP, etc.

Or, should he feel so generous, why not donate directly to a cause his family believes in? Charity is a wonderful thing - as someone who serves on a few not-for-profit boards, I can safely say many great institutions out there are desperate for money, knowledge, and expertise.

This isn't a political commentary - but I find it troublesome that 1) the assumption that refunds are blown of frivolous items still exists, and 2) someone's need for attention extends beyond the well-being of their family - surely the CRA didn't leak this story, but it's clear he has systematically exploited the news system for recognition.

In that note - I ask, what are people doing with their refunds or tax savings this year? Are you spending, saving, or investing in the future (education, increasing property value, whatever the case may be.)


Retire-Canada

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #256 on: April 29, 2015, 08:21:53 AM »

In that note - I ask, what are people doing with their refunds or tax savings this year? Are you spending, saving, or investing in the future (education, increasing property value, whatever the case may be.)

I'm self-employed and pay my taxes in instalments. I have a pretty good handle on the taxes I owe so I tend to owe/get a refund of less than $500/yr. This year I owed ~$400.

I don't really see my tax savings as a separate item from my "general revenue" stream.

My typical monthly process is:

- total income for month from invoices
- set aside GST owing
- set aside my income tax estimate
- put aside mortgage payments for next month
- pay bills and VISA
- invest surplus in my RRSP/TFSA & Non-reg accounts
- repeat

If I did get an extra $500 in a particular year due to a tax credit or rate reduction it would get invested.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #257 on: April 29, 2015, 09:39:57 AM »

In that note - I ask, what are people doing with their refunds or tax savings this year? Are you spending, saving, or investing in the future (education, increasing property value, whatever the case may be.)

Yeah, I thought that guy was a total dick.  As you point out, he really only robbed his own family/humanity.  That article would have actually kicked ass if he said that he donated the $1,500 to say Nepal earthquake fund (which the Canadian gov't is matching).  Boom.  $3,000 to charity.

Anyway, I took my $6,000 refund and rebalanced the portfolio by purchasing XEC (emerging markets etf). 
Signing up for Tangerine Bank?  Let's both earn some cash!  Here is my Tangerine Key: 43684467S1  Cheers.

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #258 on: April 29, 2015, 11:27:30 AM »
Took my 6,650$ refund to get the max subsidies out of RESP for the year (5k$) and 1,150$ to pay for a mistake I did in april (landlording attempt that turned bad). Still thinking what I should do with the 500$ remaining...

What about 48 bottles of red wine?
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #259 on: April 29, 2015, 11:59:56 AM »
In that note - I ask, what are people doing with their refunds or tax savings this year? Are you spending, saving, or investing in the future (education, increasing property value, whatever the case may be.)

I'm the sole provider for me and my son, and both of us are recognized federally as people with disabilities. I take every penny I can get, keep my spending as low as possible while maintaining quality of life and, yep, squirrel away everything else. I've maxed both our RDSPs to date, contributed to his RESP, invest the rest outside of those, and am working on finding a bank that will allow me to set up a TFSA Trust (we're not allowed this unless it's a Trust). I also make sure to share some of our money (as well as knowledge, time, energy, etc), and always look to put the Sharing money into approaches that I believe will help marginalized people near and far improve their financial footing.

So, I agree it's weird that this guy couldn't think of anything more productive to do with the credit.

Mr. Rich Moose

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #260 on: April 29, 2015, 12:02:23 PM »
Took my $13,000 refund and added it to my TFSA!
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Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #261 on: April 29, 2015, 05:57:02 PM »
Took my $13,000 refund and added it to my TFSA!

You know about the T1213 form Tuxedo?

I know you can manage that money better than any government. That why I hate huge refund. I feel like I lend money @ 0%
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Cathy

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #262 on: April 29, 2015, 06:03:25 PM »
I received a large Canadian refund for tax year 2014 (~10,000 CAD).

I tried to avoid it during the year by filing Form T1213, but it was rejected for a meritless reason by the CRA. I actually filed two more times, each time responding to their meritless contentions, but they refused to approve it. The full story is too frustrating to describe in detail, so you'll just have to trust me that I was right and the CRA's position was devoid of merit.

I considered using the appeal process, but I decided I would just wait and eventually receive the refund. This turned out to be a serious mistake because between the money being withheld and me receiving the refund, it lost 10-20% of its value in USD.

Despite the loss of value, I still converted the refund to USD immediately, transferred it to the US banking system, and contributed it to one of my investment accounts.
« Last Edit: April 29, 2015, 06:08:01 PM by Cathy »
This post contains only general information on the issues raised by this topic. This post does not provide help tailored to your specific situation. There are many facts that could be relevant to your specific situation and I am not in possession of those facts. If you need help tailored to your specific situation, you should retain an appropriate professional and not rely on this post.

Maya

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #263 on: April 29, 2015, 06:46:00 PM »
Can you help us get an idea of how capital gains will work on the sale of our rental property?

difference between evaluated price when we left and sale price is $80k.

How much taxes are we likely to pay on this? We're in Quebec.

We have 70 k RRSP contribution space (50 for DH, 20 for me) which we'll be fully topping up this year. Also need to get our net income down as low as possible because increase in income means increase in daycare costs with new law.

Thanks for your help! Sale goes through in June, so want to have an idea how much we keep back from investments to make sure we can pay the tax bill.

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #264 on: April 29, 2015, 07:18:00 PM »
Can you help us get an idea of how capital gains will work on the sale of our rental property?

difference between evaluated price when we left and sale price is $80k.

How much taxes are we likely to pay on this? We're in Quebec.

We have 70 k RRSP contribution space (50 for DH, 20 for me) which we'll be fully topping up this year. Also need to get our net income down as low as possible because increase in income means increase in daycare costs with new law.

Thanks for your help! Sale goes through in June, so want to have an idea how much we keep back from investments to make sure we can pay the tax bill.

Tax on capital gain is about 20% (but really depend on you income). You sold for 80k$ more than you paid for but you can reduce capital gain by deducting some improvement expenses. Fortunatly, you got almost 1 year to make your homework. Run different plans before to fill RRSPs, it may worth to keep some room for next years.

How come you got 70k$ room?
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

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Mr. Rich Moose

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #265 on: April 29, 2015, 11:02:51 PM »
Took my $13,000 refund and added it to my TFSA!

You know about the T1213 form Tuxedo?

I know you can manage that money better than any government. That why I hate huge refund. I feel like I lend money @ 0%

You bet! I used the T1213 twice last year for a total of $10,000. I made huge contributions to my RRSP at the end of January and February and filed my taxes early so I didn't feel it would be worthwhile to fuss with T1213 forms knowing my refund was going to come a few weeks later anyways.
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CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #266 on: May 04, 2015, 10:27:38 PM »
Happy Cinco de Mayo - IE Tax Filing day this year!

Best to those who have filed, a subtle "uh oh" to those who haven't - and anywhere in between.

As seen in the poll, there are more than a few of us saving and investing our resources, and no Apple Watches purchased to date. Mazel Tov!

To those of you considering an Apple Watch (even with a refund). Please don't. $700 plus for a timepiece is expensive (especially when the iPhone 7 or 8 comes out, rendering your iPhone and Watch useless) in a few years. If you're so inclined, go to a reputable dealer, buy a Patek Phillipe, and watch (get it?) the value grow.

A very happy, prosperous, and joyful 2015 tax year to the (suckers) people who file in Canada!

CPA CB

Maya

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #267 on: May 12, 2015, 08:19:44 AM »
Can you help us get an idea of how capital gains will work on the sale of our rental property?

difference between evaluated price when we left and sale price is $80k.

How much taxes are we likely to pay on this? We're in Quebec.

We have 70 k RRSP contribution space (50 for DH, 20 for me) which we'll be fully topping up this year. Also need to get our net income down as low as possible because increase in income means increase in daycare costs with new law.

Thanks for your help! Sale goes through in June, so want to have an idea how much we keep back from investments to make sure we can pay the tax bill.

Tax on capital gain is about 20% (but really depend on you income). You sold for 80k$ more than you paid for but you can reduce capital gain by deducting some improvement expenses. Fortunatly, you got almost 1 year to make your homework. Run different plans before to fill RRSPs, it may worth to keep some room for next years.

How come you got 70k$ room?

We'd been focused on paying off the HELOC we took out on the condo to buy our house. Paid it off just in time to sell the condo LOL. In the end it'll likely save us some taxes as well. So not planned likely helped us a little.

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #268 on: May 13, 2015, 08:22:07 PM »
Can you help us get an idea of how capital gains will work on the sale of our rental property?

difference between evaluated price when we left and sale price is $80k.

How much taxes are we likely to pay on this? We're in Quebec.

We have 70 k RRSP contribution space (50 for DH, 20 for me) which we'll be fully topping up this year. Also need to get our net income down as low as possible because increase in income means increase in daycare costs with new law.

Thanks for your help! Sale goes through in June, so want to have an idea how much we keep back from investments to make sure we can pay the tax bill.

Tax on capital gain is about 20% (but really depend on you income). You sold for 80k$ more than you paid for but you can reduce capital gain by deducting some improvement expenses. Fortunatly, you got almost 1 year to make your homework. Run different plans before to fill RRSPs, it may worth to keep some room for next years.

How come you got 70k$ room?

We'd been focused on paying off the HELOC we took out on the condo to buy our house. Paid it off just in time to sell the condo LOL. In the end it'll likely save us some taxes as well. So not planned likely helped us a little.

Sorry but you lost me here. The sale of the condo should be enough to repay the HELOC when you sold it? Since it's a HELOC, you have no penalty doing so. Because it was a rental, interests from HELOC were deductibles. ???

I would never skip the opportunity to save 38% income taxes to repay a 3% HELOC

I hope I missunderstand your story or you really need some advices

*Actually, I do both
« Last Edit: May 13, 2015, 08:24:09 PM by Le Barbu »
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

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Maya

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #269 on: May 15, 2015, 06:26:41 PM »
We took out the HELOC to use it to get our down payment on our primary residence to avoid paying mortgage insurance. We'd saved up 5% but then realized we could save the insurance if we got the HELOC so we did. No interest deduction because it was used to buy our primary residence and not a rental.

The interest rate ended up being variable at 4.5% so I wanted to get it down as quick as possible. Perhaps investments could have done slightly better, but we liked the security of paying down the debt first. And now it will serve us well to have the extra space in our rrsp to reduce our capital gains (I hope) as well as the increase in daycare fees this year that are now tied to income.

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #270 on: May 15, 2015, 09:25:03 PM »
We took out the HELOC to use it to get our down payment on our primary residence to avoid paying mortgage insurance. We'd saved up 5% but then realized we could save the insurance if we got the HELOC so we did. No interest deduction because it was used to buy our primary residence and not a rental.

The interest rate ended up being variable at 4.5% so I wanted to get it down as quick as possible. Perhaps investments could have done slightly better, but we liked the security of paying down the debt first. And now it will serve us well to have the extra space in our rrsp to reduce our capital gains (I hope) as well as the increase in daycare fees this year that are now tied to income.

I understand now! Run some numbers to make sure to stay in the 38% refund bracket with RRSP contributions. You may be better to spread it over 2-3 years.
"The real reason this blog exists, is simply to save the entire human race from destroying itself through overconsumption of its own habitat"

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SweetLife

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #271 on: July 01, 2015, 07:20:27 AM »
I'd be curious to know what people are doing with their refunds - spending it is the assumed presumption of most, but I sincerely hope the MMM'ers are squirreling the funds away for the future, or at least a portion thereof.

My hair is still on fire so I put the entire $680 towards paying off debt... and it felt GREAT!!!!

CPA CB I want to REALLY thank you for putting up this thread! I did my own taxes this year for the first time and it was hairy ... I mean scary lol... I am Canadian as well (Happy Canada day!!!) and just returned from maternity leave (loved the year off lol) ... but had a few issues not sure if you could advise me for next year...

I have been doing minimum RRSP's (until I get all my bills paid off) under $1000

I make just under $75,000 per year and my husband is not working outside the home. (He will be staying home to take care of our baby - bless him!).

My Mom passed away and left my 4 siblings and I a 200-acre farm near Toronto that we rent out to a farmer - rent for this year will be $10,000 - split 5 ways. (The way my brother set it up it is a rental and no longer a farm per se)

So this year I decided to do my own taxes to save some $$$ (and be a little more Mushtachian lol) ... I used an online program and everything was fine ... I think lol....

My question is: this rental - has a small house on it - I went up with my husband and did some repairs - doors/mosquito netting/rat poison/grass cutting/trimming etc ... is it acceptable to put these in as expenses? (for the materials??) and can I claim gas to get there?

In truth I think this property will be sold as 5 people making decisions is no fun at all ... and though we all get along we all have different ideas of what should/needs to be done with the property (hunting/no hunting in bush etc) ... and in fact for my little family selling would be the best bet as the revenue (less capital gains, I am told) ... will be enough to wipe out all of our bills, pay off my mortgage and likely have enough left to have a chunk to invest and really start our snowballing ... but that won't be done this year.

Anyways :) Thank you for any advice!!! :) 





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CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #272 on: July 02, 2015, 02:00:36 PM »
I'd be curious to know what people are doing with their refunds - spending it is the assumed presumption of most, but I sincerely hope the MMM'ers are squirreling the funds away for the future, or at least a portion thereof.

My hair is still on fire so I put the entire $680 towards paying off debt... and it felt GREAT!!!!

CPA CB I want to REALLY thank you for putting up this thread! I did my own taxes this year for the first time and it was hairy ... I mean scary lol... I am Canadian as well (Happy Canada day!!!) and just returned from maternity leave (loved the year off lol) ... but had a few issues not sure if you could advise me for next year...

I have been doing minimum RRSP's (until I get all my bills paid off) under $1000

I make just under $75,000 per year and my husband is not working outside the home. (He will be staying home to take care of our baby - bless him!).

My Mom passed away and left my 4 siblings and I a 200-acre farm near Toronto that we rent out to a farmer - rent for this year will be $10,000 - split 5 ways. (The way my brother set it up it is a rental and no longer a farm per se)

So this year I decided to do my own taxes to save some $$$ (and be a little more Mushtachian lol) ... I used an online program and everything was fine ... I think lol....

My question is: this rental - has a small house on it - I went up with my husband and did some repairs - doors/mosquito netting/rat poison/grass cutting/trimming etc ... is it acceptable to put these in as expenses? (for the materials??) and can I claim gas to get there?

In truth I think this property will be sold as 5 people making decisions is no fun at all ... and though we all get along we all have different ideas of what should/needs to be done with the property (hunting/no hunting in bush etc) ... and in fact for my little family selling would be the best bet as the revenue (less capital gains, I am told) ... will be enough to wipe out all of our bills, pay off my mortgage and likely have enough left to have a chunk to invest and really start our snowballing ... but that won't be done this year.

Anyways :) Thank you for any advice!!! :)

Hi Sweet Life - it is my pleasure!

I'm sorry to hear about your mother.

My first question is - what was the disposal value of the property in your mother's final tax return? Farms have very specific and tax-advantageous rules. I hope this was taken care of appropriately on her 'deemed' disposition to you and your family.

As for the expenses - yes these are reasonable and in line with allowable expenses for rental properties. You should claim km rather than gas , which is $0.55 for the first 5000 km and $0.49 per km thereafter in 2015.

I suggest you either research the capital gains rules for farms (on CRA's website and CanLii if more advanced) or speak with a CPA who can guide you through the disposal process. Without knowing more, you could save many thousands of dollars on disposition by doing it 'correctly' versus just claiming it as a sale of property - farm property has weird rules, and you want to make sure you dot the I's and cross the T's.

Also - congrats on doing your own taxes! It can be a scary proposition, but a rewarding one.

Best of luck!

CPA CB

McBuck

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #273 on: July 03, 2015, 07:58:10 AM »
I just graduated and started a job so I'll only be working 6 months this year making ~34k gross (65k salary).

Can I file a T1213 to reduce my taxes taken off my paycheck since I won't be making my full salary in 2015? The CRA website doesn't seem to mention a partial working year as a valid reason.

I'm in Ontario btw.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #274 on: July 03, 2015, 08:23:39 AM »
@McBuck

You can fill the T1213 and see how they handle it. Is it your first "real big cash cow job"? I mean, do you have RRSP contributions historical datas?

I fill that kind of form every year since 1999 and some years they just send me the approval letter right away and some other years, they ask some questions to confirm everything is ok.

The good news is that you are "only" 6-8 months away now form filling taxes and get a refund...

Worst case scenario, you'll get a big refund and buy a chunk of Vanguard ETF in march 2016!

From my viewing, there is 2 different levels for someone who want to fill T1213. First level, liquidity shortage (to make weekly/monthly contributions). This level can be solved by contribuing a lump sum near the limit date (usually march 1st) and get a large refund few weeks after (if you fill your taxes fast and properly). Level 2 needs the T1213 to be solved because it's your money and the goverment is keeping it away from your bank account. Mentally, you feel like you lend money @ 0% and "lose" the return you should be making in the market.
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lostamonkey

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #275 on: July 03, 2015, 09:07:17 AM »
I just graduated and started a job so I'll only be working 6 months this year making ~34k gross (65k salary).

Can I file a T1213 to reduce my taxes taken off my paycheck since I won't be making my full salary in 2015? The CRA website doesn't seem to mention a partial working year as a valid reason.

I'm in Ontario btw.

Don't you have a ton of federal tuition/provincial tuition carryforwards that you can put on your TD1 so your employer will withhold almost no tax anyway?

McBuck

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #276 on: July 03, 2015, 12:16:52 PM »
@McBuck

You can fill the T1213 and see how they handle it. Is it your first "real big cash cow job"? I mean, do you have RRSP contributions historical datas?

I fill that kind of form every year since 1999 and some years they just send me the approval letter right away and some other years, they ask some questions to confirm everything is ok.

The good news is that you are "only" 6-8 months away now form filling taxes and get a refund...

Worst case scenario, you'll get a big refund and buy a chunk of Vanguard ETF in march 2016!

From my viewing, there is 2 different levels for someone who want to fill T1213. First level, liquidity shortage (to make weekly/monthly contributions). This level can be solved by contribuing a lump sum near the limit date (usually march 1st) and get a large refund few weeks after (if you fill your taxes fast and properly). Level 2 needs the T1213 to be solved because it's your money and the goverment is keeping it away from your bank account. Mentally, you feel like you lend money @ 0% and "lose" the return you should be making in the market.
I had an internship which spanned 8 months in 2013 and 8 months in 2014. I claimed most of my tuition credits for those years but I have roughly $6k left. My RRSP contribution limit for 2015 is $19k and just started contributing with this job. I suppose I'll fill it out under "other" and if they reject it I'll get a few grand refund.

Cathy

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #277 on: July 03, 2015, 02:30:50 PM »
Don't you have a ton of federal tuition/provincial tuition carryforwards that you can put on your TD1 so your employer will withhold almost no tax anyway?

The answer is "probably not".

In this post, "ITA" refers to the Income Tax Act, RSC 1985, c 1 (5th Supp). "Reg" refers to the Income Tax Regulations, CRC, c 945.

ITA § 153(1)(a) provides in relevant part that any person paying wages to any other person "shall deduct or withhold from the payment the amount determined in accordance with prescribed rules".

ITA § 221(1)(a) provides that the Governor in Council may may regulations "prescribing anything that, by this Act, is to be prescribed".

Reg § 107(2) provides that an employee may "elect[] to file a prescribed form for the year". Cryptically, the provision does not say what the form contains or what it is for.

Reg § 102(2) provides that when an employee files the prescribed form alluded to in Reg § 107(2), then the employer shall compute the employee's "estimated annual taxable income" for withholding purposes by subtracting the "the amount of that employee’s expenses in respect of the year as recorded by that employee on that form". The regulation does not say or limit what kind of expenses can be claimed on the form, but it the form does need to be the "prescribed form".

As far I can tell, no legal instrument actually tells us what this mysterious "prescribed form" is, but it's probably intended to be Form TD1. Form TD1 does not appear to contain anywhere to claim carry forward education amounts. Section 5 of Form TD1 instructs the reader to enter an amount computed based on the present year only. Modifying the form to include carry forward amounts would probably cause it not to be the "prescribed form" anymore, meaning it would not reduce the amount of tax withheld from your wages.

Including the carry forward amounts in Form TD1 might also be a criminal offense contrary to ITA § 239(1)(a), which provides that anybody who has "made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation" is guilty of a criminal offense. However, the document contemplated by Reg § 107(2) is referred to as a "prescribed form", not a "return", "certificate", "statement", or "answer", so it's arguable whether this criminal offense applies.

The main weakness in the limitations of Form TD1 is that Form TD1 may not be authorised by law. There does not appear to be any instrument that says that Form TD1 is the "prescribed form" contemplated by Reg § 107(2). A related issue is that the general rule in administrative law is that a person authorised to make regulations must be the person who makes the regulations; he cannot further delegate that power. ITA § 221(1)(a) authorises the Governor in Council to make regulations; it does not authorise the CRA to do so. Parliament was aware of this principle of law, so it enacted ITA § 221(4) which provides that a regulation made by the Governor in Council may "incorporate by reference material as amended from time to time". This is arguably exactly what Reg § 107(2) does.
« Last Edit: July 03, 2015, 02:32:41 PM by Cathy »
This post contains only general information on the issues raised by this topic. This post does not provide help tailored to your specific situation. There are many facts that could be relevant to your specific situation and I am not in possession of those facts. If you need help tailored to your specific situation, you should retain an appropriate professional and not rely on this post.

McBuck

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #278 on: July 03, 2015, 03:45:26 PM »
Cathy - my tuition amounts are actually for Jan-Apr of this year, but my University doesn't release the t2202a until fall.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #279 on: July 03, 2015, 04:00:05 PM »
Cathy - my tuition amounts are actually for Jan-Apr of this year, but my University doesn't release the t2202a until fall.

I was (and am) expressing no view on your situation.
This post contains only general information on the issues raised by this topic. This post does not provide help tailored to your specific situation. There are many facts that could be relevant to your specific situation and I am not in possession of those facts. If you need help tailored to your specific situation, you should retain an appropriate professional and not rely on this post.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #280 on: July 03, 2015, 05:55:59 PM »
Not sure if someone can answer me here, should I get a will if I have no kids or wife. I mean if I die, all my assets (RRSP and TFSA) would go to my parents, but I figure if I am dead, it would automatically go to them, so mayb a will would be a waste of money, right??? Btw, I have no brothers or sisters.

AllTheMarshmallows

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #281 on: July 03, 2015, 08:32:32 PM »
When you die and leave registered investments like RRSP's and name your parents as beneficiaries your estate will owe a chunk of change in taxes to the CRA. It is considered a deemed disposition on the date of your death.

The executor is the person appointed in a will to administer an estate. If you have no Will, someone, perhaps your family would have to apply to court for Letters of Administration to act essentially as an executor. Lawyers will be happy to guide your estate through this process, most likely at a cost way beyond what a simple Will would have cost in the first place. Why would you want to put your family through this court process in the first place?

 The Executor/Administrator of your Will is responsible to identify the debts owed by the deceased at the time of his or her death, and to pay them, if there are sufficient assets to do so. This includes your taxes owing. The Executor will file your Terminal T1 return as well as T3 returns etc. Just because you died your debt does not. No funds can be distributed to beneficiaries until all debts have been dealt with.

I would suggest you seek legal council at once and get something drawn up that you will most likely change a few times over the years when life changes i.e get married, have kids, get divorced, and the likes but not having an estate plan at all is not a great idea...

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #282 on: July 03, 2015, 08:36:22 PM »
@fb132, even in your situation, a will is a good idea. It makes things a lot simpler and faster for your beloved. Your Mustachian? You'll find few hundred bucks for estate planning. Hope this help!
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #283 on: July 04, 2015, 05:48:33 AM »
@fb132, even in your situation, a will is a good idea. It makes things a lot simpler and faster for your beloved. Your Mustachian? You'll find few hundred bucks for estate planning. Hope this help!
I see you are from Quebec like I am. How much should I put aside to pay a notary for my will considering my only assets are my investments? I get alot of different numbers from different people. i figure 400$ should be enough, I mean, my stuff is not complicated, it's not like I own a home or a buisness. It will be simply rolling over my investments and whatever cash I have left to someone else.

Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #284 on: July 04, 2015, 09:09:55 PM »
400$ is good, for 100$ more, you can get a mandatory as well. I got both 15 years ago.
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lostamonkey

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #285 on: July 05, 2015, 11:13:49 AM »
I just graduated and started a job so I'll only be working 6 months this year making ~34k gross (65k salary).

Can I file a T1213 to reduce my taxes taken off my paycheck since I won't be making my full salary in 2015? The CRA website doesn't seem to mention a partial working year as a valid reason.

I'm in Ontario btw.

I would recommend that you use your RRSP deduction in 2016 instead of 2015. Your marginal tax rate in 2015 is about 20% and your rate in 2015 will be 31%. By delaying the deduction by one year your risk free rate of return will be 55% (31%-20%/20%).

K-ice

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #286 on: July 05, 2015, 11:33:23 AM »
Thanks for this great post.

I found the following and want to crunch some of my own numbers so I get better asset allocation and location.

http://www.moneysense.ca/taxes/making-smarter-asset-location-decisions/

I'll get some # in a few days. I just wanted to say "hi" so I can easily find you later. :)


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #287 on: July 05, 2015, 01:01:17 PM »
Don't think I've already asked this...

I sold a house in the UK last year. UK tax year is April 6th-April 5th. I've paid Canadian cap gains on the sale. Now I have to pay UK cap gains.

I'm right in thinking the cap gains get deducted from *last year's* Cdn return (under DTA etc, UK gets dibs because house is in UK), because the sale date is when the liability occurs - not when the tax year ends?

So I file an amendment to 2014 Cdn tax return showing all I pay to the UK, Canada gives me that money back.

Rite?
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dess1313

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #288 on: July 06, 2015, 09:41:34 PM »
Couple questions for you.  Maybe this has been covered before but one is RRSP and one is TFSA

RRSP
I have a pension coming if i spend enough years at work.  I was hoping to delay taking my pension after retirement and planned on contributing to a RRSP in the mean time to reduce taxes.  Would there be any complications with my in the future for example if i stop part time work at age 52, and then pull from my RRSP for the next 3-10 years?  Then after using up my RRSP i would take my pension and get a higher amount then.  This would let me claim my RRSP (probably at 30-40k per year withdrawn) at some of the lowest possible tax brackets if had had little or no other income if i am not missing any other points.  are there any other withdrawl problems like age requirements?  Current income is ~$80k depending on OT and such

TFSA
I understand the limits of the TFSA, but i have a question on how compound interest will affect my limit.  For a simplified question, Say i had $19,000 dollars in my TFSA in february and the limit was $20,000.  And then i got a magical amount of $2000 in interest later that year before the new year's increase.  I'm now officially over my limit am i not?  Would i have to withdraw money so i would stay under the limit?  How do i account for interest gained?
« Last Edit: July 06, 2015, 09:49:34 PM by dess1313 »
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Kaspian

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #289 on: July 06, 2015, 10:01:36 PM »
Couple questions for you.  Maybe this has been covered before but one is RRSP and one is TFSA

RRSP
I have a pension coming if i spend enough years at work.  I was hoping to delay taking my pension after retirement and planned on contributing to a RRSP in the mean time to reduce taxes.  Would there be any complications with my in the future for example if i stop part time work at age 52, and then pull from my RRSP for the next 3-10 years?  Then after using up my RRSP i would take my pension and get a higher amount then.  This would let me claim my RRSP (probably at 30-40k per year withdrawn) at some of the lowest possible tax brackets if had had little or no other income if i am not missing any other points.  are there any other withdrawl problems like age requirements?  Current income is ~$80k depending on OT and such

TFSA
I understand the limits of the TFSA, but i have a question on how compound interest will affect my limit.  For a simplified question, Say i had $19,000 dollars in my TFSA in february and the limit was $20,000.  And then i got a magical amount of $2000 in interest later that year before the new year's increase.  I'm now officially over my limit am i not?  Would i have to withdraw money so i would stay under the limit?  How do i account for interest gained?

I have sort of the same question about RRSPs and early withdrawals.

As for the TFSA, any growth (interest, dividends, etc.) which occurs inside the TFSA is (obviously) tax-free and does not count toward your contribution limit.  There are people who have done frightening well with their TFSA and have close to $100K in there.  If your $19,000 grows to $25,000 or more, it doesn't matter--you still get to put in $10K next year anyway.  So, the TFSA doesn't count growth, it only counts your actual contributions into it.
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #290 on: July 08, 2015, 04:25:31 PM »
I just graduated and started a job so I'll only be working 6 months this year making ~34k gross (65k salary).

Can I file a T1213 to reduce my taxes taken off my paycheck since I won't be making my full salary in 2015? The CRA website doesn't seem to mention a partial working year as a valid reason.

I'm in Ontario btw.

You can try! But as others have stated, it's an uphill battle. Include your tuition amounts on your TD1 though - this will help to reduce the with-holding.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #291 on: July 08, 2015, 04:30:03 PM »
400$ is good, for 100$ more, you can get a mandatory as well. I got both 15 years ago.

If the assets are significant, I would recommend looking into a "Testamentary" Trust - or a Trust that is triggered on your demise for the assets. You'll avoid probate and can designate the beneficiaries.

Again - significant assets though - a few hundred thousand at a minimum...

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #292 on: July 08, 2015, 04:37:21 PM »
Don't think I've already asked this...

I sold a house in the UK last year. UK tax year is April 6th-April 5th. I've paid Canadian cap gains on the sale. Now I have to pay UK cap gains.

I'm right in thinking the cap gains get deducted from *last year's* Cdn return (under DTA etc, UK gets dibs because house is in UK), because the sale date is when the liability occurs - not when the tax year ends?

So I file an amendment to 2014 Cdn tax return showing all I pay to the UK, Canada gives me that money back.

Rite?

So - you sold the house in Calendar year 2014?

You're correct in asserting that the UK has the first 'right' on taxation in terms of the capital gains. Did you declare the gains in Canada in 2014?

Now, when you file your amendment, you'll effectively receive a tax credit which is more or less a pro-rata amount of your UK taxes paid. I don't want to get into the logistics of the calculation, but suffice it to say, it isn't a flat rate deduction, it's ground down.

Also, there are a variety of circumstances in which you could claim the principal residence deduction here. Principal residences do not need to be located in Canada, so there's the opportunity here to offset the gains. If you can, you want to claim at least 1 year of PR (so you get 2 years overall due to the 'plus one' rule), and your house in Alberta will be fully covered as well.

Hope this helps!


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #293 on: July 08, 2015, 04:44:56 PM »
Couple questions for you.  Maybe this has been covered before but one is RRSP and one is TFSA

RRSP
I have a pension coming if i spend enough years at work.  I was hoping to delay taking my pension after retirement and planned on contributing to a RRSP in the mean time to reduce taxes.  Would there be any complications with my in the future for example if i stop part time work at age 52, and then pull from my RRSP for the next 3-10 years?  Then after using up my RRSP i would take my pension and get a higher amount then.  This would let me claim my RRSP (probably at 30-40k per year withdrawn) at some of the lowest possible tax brackets if had had little or no other income if i am not missing any other points.  are there any other withdrawl problems like age requirements?  Current income is ~$80k depending on OT and such

TFSA
I understand the limits of the TFSA, but i have a question on how compound interest will affect my limit.  For a simplified question, Say i had $19,000 dollars in my TFSA in february and the limit was $20,000.  And then i got a magical amount of $2000 in interest later that year before the new year's increase.  I'm now officially over my limit am i not?  Would i have to withdraw money so i would stay under the limit?  How do i account for interest gained?

Hi,

TFSA - the limit is on money deposited (principal), rather than total amount. So in your case, you'd be fine.

As for the RRSP - no issues in terms of age requirements, my only concern in your case is delaying the pension.

Pensions are hard to value - but you want to consider your options here. By deferring your pension, this likely means you'll have to keep contributing to it, and you also 'lose' those years of cash flow in terms of collecting the funds. In this sense, there is rarely a 'loss' if you take your pension early, unless you live past at least about 80 years of age. If you give me more details - year of birth, pension contributions per annum, and your pension amount at 52 and another age, I can roughly give you an idea in terms of present value of the pension in both scenarios.

Good luck!

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #294 on: July 08, 2015, 04:46:26 PM »
Couple questions for you.  Maybe this has been covered before but one is RRSP and one is TFSA

RRSP
I have a pension coming if i spend enough years at work.  I was hoping to delay taking my pension after retirement and planned on contributing to a RRSP in the mean time to reduce taxes.  Would there be any complications with my in the future for example if i stop part time work at age 52, and then pull from my RRSP for the next 3-10 years?  Then after using up my RRSP i would take my pension and get a higher amount then.  This would let me claim my RRSP (probably at 30-40k per year withdrawn) at some of the lowest possible tax brackets if had had little or no other income if i am not missing any other points.  are there any other withdrawl problems like age requirements?  Current income is ~$80k depending on OT and such

TFSA
I understand the limits of the TFSA, but i have a question on how compound interest will affect my limit.  For a simplified question, Say i had $19,000 dollars in my TFSA in february and the limit was $20,000.  And then i got a magical amount of $2000 in interest later that year before the new year's increase.  I'm now officially over my limit am i not?  Would i have to withdraw money so i would stay under the limit?  How do i account for interest gained?

I have sort of the same question about RRSPs and early withdrawals.

As for the TFSA, any growth (interest, dividends, etc.) which occurs inside the TFSA is (obviously) tax-free and does not count toward your contribution limit.  There are people who have done frightening well with their TFSA and have close to $100K in there.  If your $19,000 grows to $25,000 or more, it doesn't matter--you still get to put in $10K next year anyway.  So, the TFSA doesn't count growth, it only counts your actual contributions into it.

Same as answered below - but for RRSPs remember if you're withdrawing significant funds you're looking of a withholding tax of 15-25%.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #295 on: July 08, 2015, 05:32:19 PM »
Hello my Can"EH"dians!

Just wanted to thank everyone for the great questions, comments, and helping me out (when I run out of time).

I wanted to point out that we are Royalty in terms of a tax topic here - 305 responses, which is first in terms of responses by a long-shot. Apparently Hockey, Taxes, and complaining about the weather are our national pastimes.

Also, a quick shout-out to Cathy "The Citation" for managing to fit eleven, that's right, ELEVEN, "§" into one response last Friday.

Keep the questions coming! I'm delighted that something I started on a whim has turned out so useful to you folks.

Hope everyone is enjoying the two weeks of summer! It'll be time to start re-building that Igloo before you know it.

CPA CB

dess1313

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #296 on: July 08, 2015, 08:47:50 PM »
Couple questions for you.  Maybe this has been covered before but one is RRSP and one is TFSA

RRSP
I have a pension coming if i spend enough years at work.  I was hoping to delay taking my pension after retirement and planned on contributing to a RRSP in the mean time to reduce taxes.  Would there be any complications with my in the future for example if i stop part time work at age 52, and then pull from my RRSP for the next 3-10 years?  Then after using up my RRSP i would take my pension and get a higher amount then.  This would let me claim my RRSP (probably at 30-40k per year withdrawn) at some of the lowest possible tax brackets if had had little or no other income if i am not missing any other points.  are there any other withdrawl problems like age requirements?  Current income is ~$80k depending on OT and such

TFSA
I understand the limits of the TFSA, but i have a question on how compound interest will affect my limit.  For a simplified question, Say i had $19,000 dollars in my TFSA in february and the limit was $20,000.  And then i got a magical amount of $2000 in interest later that year before the new year's increase.  I'm now officially over my limit am i not?  Would i have to withdraw money so i would stay under the limit?  How do i account for interest gained?

Hi,

TFSA - the limit is on money deposited (principal), rather than total amount. So in your case, you'd be fine.

As for the RRSP - no issues in terms of age requirements, my only concern in your case is delaying the pension.

Pensions are hard to value - but you want to consider your options here. By deferring your pension, this likely means you'll have to keep contributing to it, and you also 'lose' those years of cash flow in terms of collecting the funds. In this sense, there is rarely a 'loss' if you take your pension early, unless you live past at least about 80 years of age. If you give me more details - year of birth, pension contributions per annum, and your pension amount at 52 and another age, I can roughly give you an idea in terms of present value of the pension in both scenarios.

Good luck!

Okay i would have to look into that for sure then.  I thought you would be able to delay a year or three with out penalty.  I figured a good way to pull RRSPs without a lot of taxes paid.  Pension contributions was 5500, now up to about 6000 per year matched 1:1 by employer.  Full time right now, age 30/1984, been working 7 years.  Have 21-22 years to go(age 52).  Would like to do the last 10 years at part time maybe .7eft if possible or less, depends on where i am by that point.  Let them pay for my fun at that point.  Work's pension estimators show a income of $3000/month before taxes depending on a bunch of variables by the end of my career and i think it assumes full time throughout.  Current income is ~80k depending on OT    At age 55 i would have estimates of $3600 monthly.  both of those estimates are bound to drop a tiny bit if i go down in eft.

I love the idea of using RRSPs to reduce taxes, but if i have a solid pension, and not able to do a few years of low income, its not such a great option.  I'd have to be very careful how i handled it down the road and would be easy to mess up especially if taxes go up
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SweetLife

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #297 on: July 09, 2015, 07:33:01 AM »
Hello my Can"EH"dians!

Just wanted to thank everyone for the great questions, comments, and helping me out (when I run out of time).

I wanted to point out that we are Royalty in terms of a tax topic here - 305 responses, which is first in terms of responses by a long-shot. Apparently Hockey, Taxes, and complaining about the weather are our national pastimes.

Also, a quick shout-out to Cathy "The Citation" for managing to fit eleven, that's right, ELEVEN, "§" into one response last Friday.

Keep the questions coming! I'm delighted that something I started on a whim has turned out so useful to you folks.

Hope everyone is enjoying the two weeks of summer! It'll be time to start re-building that Igloo before you know it.

CPA CB


Thank you for the response CPA CB!! And as for the igloo building ... boo .... I am not looking forward to colder weather anytime soon lol... :) keep the info coming I am trying to soak it all up lol...
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Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #298 on: July 09, 2015, 07:54:10 AM »
400$ is good, for 100$ more, you can get a mandatory as well. I got both 15 years ago.

If the assets are significant, I would recommend looking into a "Testamentary" Trust - or a Trust that is triggered on your demise for the assets. You'll avoid probate and can designate the beneficiaries.

Again - significant assets though - a few hundred thousand at a minimum...

How much would be enough to think about that?
Our family NW is 850k$ actualy (RRSPs, TFSAs, RESP, taxable account and house minus mortgage). We also got a life insurance for 500k$/each. This mean if we both pass out, beneficiaries would get over 1,5M$...
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daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #299 on: July 09, 2015, 09:29:35 AM »
Don't think I've already asked this...

I sold a house in the UK last year. UK tax year is April 6th-April 5th. I've paid Canadian cap gains on the sale. Now I have to pay UK cap gains.

I'm right in thinking the cap gains get deducted from *last year's* Cdn return (under DTA etc, UK gets dibs because house is in UK), because the sale date is when the liability occurs - not when the tax year ends?

So I file an amendment to 2014 Cdn tax return showing all I pay to the UK, Canada gives me that money back.

Rite?

So - you sold the house in Calendar year 2014?

You're correct in asserting that the UK has the first 'right' on taxation in terms of the capital gains. Did you declare the gains in Canada in 2014?

Now, when you file your amendment, you'll effectively receive a tax credit which is more or less a pro-rata amount of your UK taxes paid. I don't want to get into the logistics of the calculation, but suffice it to say, it isn't a flat rate deduction, it's ground down.

Also, there are a variety of circumstances in which you could claim the principal residence deduction here. Principal residences do not need to be located in Canada, so there's the opportunity here to offset the gains. If you can, you want to claim at least 1 year of PR (so you get 2 years overall due to the 'plus one' rule), and your house in Alberta will be fully covered as well.

Hope this helps!

House sold in Nov I think it was, so Cdn 2014, UK 14-15; yes, tax paid to Canada. Principal res ded - no point AFAIK as it's been a rental since '07 or '08, and the amount paid to the UK is more than that deduction.. I think... I'm happy with what I've paid so far so don't want to get more complex, bad enough with all the currency changes. If it ends up that I get reassessed (likely?) and they want mucho mucho $$$ then I guess I'll go and see a professional and get them to redo the last 5 years, and probably find I'm owed rather than owe ;)

Thanks anyway. I think it's line 450 I need to amend online once I've paid the UK (or at least, when I get the bill).

Oh - one more - can I use the current exchange rate for when I pay the bill, or does that have to be the exchange rate from when the liability arose to the UK (what with the CAD weakening against the GBP, it'll be better to pay 2500 "now" pounds rather than 2500 "8 months ago" pounds - and it seems fair as in theory I have to transfer CAD to GBP NOW to pay the bill!).
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