1 / 27

Year End Tax Tips

Year End Tax Tips. Jamie Golombek, Managing Director, Tax and Estate Planning CIBC Private Wealth Management December 2009. 1. #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?

luisa
Download Presentation

Year End Tax Tips

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Year End Tax Tips Jamie Golombek, Managing Director, Tax and Estate PlanningCIBC Private Wealth Management December 2009 1

  2. #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. #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. #1 - Tax loss selling – spousal transfer of losses • Spousal loss transfer • Victor + Maureen • Maureen – ABC Shares - $10,000 accrued capital gain • Victor – XYZ Shares • ACB - $50,000 • FMV - $40,000

  5. #1 - Tax loss selling – spousal transfer of losses • Step one – Victor sells XYZ shares for $40,000 • Capital loss of $10,000 • Step two – Maureen buys XYZ shares, pays $40,000 • Victor’s $10,000 capital loss is now “superficial” • Added to ACBof Maureen’s shares ($10,000 + $40,000 = $50,000) • Step three – Maureen waits 30 days, sells for $40,000 • ACB - $50,000 • FMV - $40,000 • Capital loss of $10,000 can be used against ABC accrued gain

  6. #2 - Home ownership and prospective home ownership • Home Renovation Tax Credit • First-Time Home Buyers’ Tax Credit • Home Buyers’ Plan

  7. #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

  8. #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

  9. #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

  10. #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)

  11. #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

  12. #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

  13. #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

  14. #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

  15. #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

  16. #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

  17. #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

  18. #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!

  19. #8 – Spousal Loan at 1% (Example) • 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 Interest Expense – 1% Jack Diane $200,000 Income $2,000 Income $10,000Interest expense (2,000)Net income $ 8,000

  20. #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?

  21. #9 – Pay investment expenses by Dec. 31 • Investment counseling fees (non-registered only) • Professional accounting services • Safety deposit box rental • Interest expense

  22. #9 – Make Debt Tax-Deductible • “Singleton Shuffle” $300,000 $300,000 $300,000 $300,000 BANK

  23. #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, Photographer Supreme Court of Canada Collection

  24. #10 – Plan NOT to Get a Refund! in·tax·i·fi·ca·tion (in-täk-sə-fə-kā-shən) noun • the euphoria of getting a tax refund that lasts only until you realize it was your own money to begin with…

  25. 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

  26. #10 – Avoiding Clawback of 2010 OAS • Apply for 2010 reduction of clawback at source – OAS • Form T1213 OAS

  27. Questions Answers &

More Related