Claiming Medical Expenses: Free Healthcare?

Free Health Care? Did you know that Canadians spend on average more than $1,000 on medical expenses each year? It’s estimated that government programs, via our taxes, cover about 72% of medical expenses, which means that we pay for the rest. Your clients may be over-paying on their taxes because they don’t know about medical expense deductions. 

The deadline for contributing to an Registered Retirement Savings Plan (RRSP) will be March 1, 2010.  The contribution amount allowed is equal to 18% of earned income in the prior year, up to a maximum of $21,000 in 2009.   The term "Earned Income" is used in several ways in the Income Tax Act, and its meaning varies depending on the use. It is used for the purposes of computing Child Care Expenses, Child Tax Benefits (CTB) and Registered Retirement Savings Plan (RRSP) deductions. We will discuss the earned income requirements for RRSP purposes below: A taxpayer's earned income for the year for RRSP purposes is defined in S. 146(1). It is composed of the sum of: Employment earnings minus union dues and employment expenses Net business income (subtract if a loss) CPP/QPP disability benefits Royalties from a work or invention Net rental income (subtract if a loss) Taxable support payments received Net research grants Employee profit sharing benefits Supplementary employment benefits Less: Losses from a business carried on alone or as a partner Rental losses from real property Gains of Eligible Capital Property included in business income Deductible support payments For a non-resident, during the period of non-residency, employment, business and rental income must be from Canadian sources. For more tax tips, purchase a copy of Essential Tax Facts written by The Knowledge Bureau's President, Evelyn Jacks, to learn how to ace your 2009 tax return and save money all year long.     

The Minister of Finance, The Honourable Jim Flaherty has announced that the Federal Budget will be released on March 4, 2010. The Knowledge Bureau will issue a full report of the budget changes that are introducedwithin EverGreen Explanatory Notes, as well as a highlights version in a Special Edition of Breaking Tax and Investment News on March 5th, 2010. Mr. Flaherty has also announced that consultations with Canadians are being requested with help to determine measures in the 2010 Federal Budget. The Government will be looking for answers to the following: To what level has your industry or community been impacted by measures provided by the Economic Action Plan? Do you have any suggestions for making the various programs more effective? Are there other steps that could be taken in order for the Canadian economy to remain competitive? Can you suggest a time period over which the Government can rebalance the budget? Suggestions from The Knowledge Bureau: A Tax Deduction for Volunteering: According to Statistics Canada, more than 12.5 million Canadians did volunteer work in 2007. Approximately 2.1 billion volunteer hours were provided, which is the equivalent of 1.1 million full-time jobs. Charity receipting for labour is of course not possible at this time; however, it is a trend that has an economic impact which could have "tax value" if governments allowed for a tax credit. An Increase in the Transfer of Tuition Credits. From $5000 to an unlimited amount reflective of the contributions of supporting individuals to their dependants' schooling success. Additional Educational Resource: EverGreen Explanatory Notes: Your online gateway to the latest changes at the Department of Finance and CRA.

January 28, 2010 (TORONTO) ñ Evelyn Jacks, President, The Knowledge Bureau, and Ronald Alepian, VP of Communications, TSX Markets, will open the market today to celebrate the launch of the Tax Facts & Planning section now featured on www.TMXmoney.com.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />   ìWe are pleased to offer content on tax and planning for investors,î said Andre Craig, Vice President, TMX Datalinx. "The Tax Facts & Planning section further diversifies our content offering on www.TMXmoney.com.î   The section features timely and topical articles on tax planning and preparation, including how to reduce the amount of taxes you pay, understanding how to leverage the effectiveness of family tax planning and income-splitting, and preparing for taxation changes triggered by retirement.   The content for the Tax Facts & Planning section is provided by The Knowledge Bureau, a national educational institute focused on excellence in financial education for tax and financial advisors and their clients.   "It's important that Canadians have a solid understanding of how the taxation system works,î said Evelyn Jacks, President, The Knowledge Bureau. ìThe Tax Facts & Planning section on www.TMXmoney.com will provide investors with the tools and information necessary to increase their financial literacy in this important area."   For Market Openings: Media may pick up a feed from the TOC (television operations centre) for all market open ceremonies. The feed is named TSX Transmit 2 and is produced at the TMX Broadcast Centre and sent live to the TOC. Those featured in the market opening move into position for the market open ceremony at approximately 9:27 a.m. and the markets will open with the sound of a siren (the traditional market open on <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com🏢smarttags" />Toronto Stock Exchange) at 9:30 a.m.   About TMX Group (TSX-X)   TMX Group's key subsidiaries operate cash and derivative markets for multiple asset classes including equities, fixed income and energy. Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange, Natural Gas Exchange, Boston Options Exchange (BOX), Shorcan, Equicom and other TMX Group companies provide trading markets, clearing facilities, data products and other services to the global financial community. TMX Group is headquartered in Toronto with offices in Montreal, Calgary and Vancouver.  For more information about TMX Group, visit our website at www.tmx.com.   About The Knowledge Bureau:   The Knowledge Bureau is a national designated education institute and publisher, which provides excellence in financial education to tax and financial advisors and their clients. For further information: please visit www.knowledgebureau.com or call 1-866-953-4769.   For more information please contact: Carolyn Quick Director, Corporate Communications TMX Group 416-947-4597, carolyn.quick@tsx.com

Throughout 2009 CRA announced the revocation of the charitable status of various charitable organizations. When a charity has its charitable status revoked, it can no longer issue donation receipts and is no longer considered a qualified donee under the Income Tax Act.  In addition, the charitable organization is no longer exempt from income tax and it may be subject to tax on the full value of its remaining assets (unless it is a non-profit organization). In the recent past, several donation investment offerings have been created, many of which include the "flipping" of art or other items in return for charitable donation receipts which provide a tax benefit on the investment. The offerings usually worked like this: A promoter gives a person the opportunity to purchase one or more works of art or another item of speculative value at a relatively low price. The proposal is that the promoter will work with the person to make arrangements for donating the works of art or other items to a Canadian registered charity or other specified institution. The person donates the art or other item and receives a tax receipt from the charity or other specified institution that is based on an appraisal arranged by the promoter. The appraised value of the art is substantially higher than the cost paid by the person. When the person claims the receipt on his or her next tax return, it generates a tax saving that is higher than the amount paid for the art in the first place. CRA takes a dim view of these offerings. To date over 100,000 taxpayers have learned first hand that the Canada Revenue Agency considers the donation schemes a sham, and they want their money back. It is CRA's view that the appraisal generated by the individual associated with these schemes may not represent the fair market value of the acquired property. If it did, then the property would not be sold at the lower price. On December 5, 2003 new legislation was introduced (changes to S. 248) to limit the eligible amount of a gift made after December 5, 2003 to the cost of the property to the taxpayer if the property was acquired within three years of donating it and the property was acquired for the purposes of the donation (i.e. it was acquired under a gifting arrangement as defined in S. 237.1). CRA advises that anyone considering entering into a tax shelter arrangement should obtain independent professional advice before signing any form of documents related to the donation and: know who they are dealing with, and request the prospectus or offering memorandum and any other documents available in respect of the investment and carefully read them; pay particular attention to any statements or professional opinions in the documents that explain the income tax consequences of the investment. Often, these opinions will tell the investor about the problems that can be expected and suggest that the investor obtain independent legal advice; not rely on verbal assurances from the promoter or others--get them in writing; and ask the promoter for a copy of any advance income tax ruling provided by the CRA in respect of the investment. Read the ruling given and any exceptions in it. Individual taxpayers should be aware that their tax return can be reassessed up to three years after the date of assessment. Even if the benefits of the tax shelter were accepted upon initial assessment this should not be interpreted as acceptance of the claim, it may still be subject to audit by the CRA. For free information about Breaking Tax and Investment News, self study courses on tax and personal finances, or books on personal finance. Call: 1-800-953-4769.

According to the Summary Report on Retirement Income Adequacy Research, recently released by the Department of Finance and authored by John M. Mintz, Research Director and Palmer Chair in Public Policy, The University of Calgary, financial intermediaries have some work to do in helping investors reduce risk. Here are highlights from the report, released December 18, 2009: The role of financial intermediaries is to help investors reduce risk and information costs as well as provide liquidity to investors when they need it. The objective is not to eliminate risk but to use it wisely and better distribute it in a sensible way. Some individuals may simply need government support and CPP/QPP benefits in retirement and the house they purchased during their working lives. Given the complexities involved in investment and estate-planning decisions, Canadians often pay for asset management and advice, with the most expensive fees associated with retail mutual funds (about 200 basis points). This comes at a cost to the income they earn on their investments. These costs are acceptable to the extent that they improve returns on their saving. The research suggests that active management does not provide returns on a persistent basis any better than passive management for both pension plans and mutual funds. Once taking into account active management costs, passive managed assets would provide superior returns. Individual investors do not seem to be advised sufficiently to invest in indexed and exchange-traded funds to improve fund performance. Nor is it clear as to why pension fund managers invest in active managed funds for the same reason. The research that has been undertaken to date does not explain why pension and retirement accounts are not invested more heavily in passively managed funds. What do you think? Please send your thoughts by clicking on the Add Your Thoughts button below: Educational Resources: Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital. To learn more consider the following Educational Resources available from The Knowledge Bureau: ► Tax Efficient Retirement Income Planning ► Master Your Retirement ► Master Your Taxes ► Tax Efficient Investment Income Planning ► Master Your Real Wealth ► Master Your Investment in the Family Business Additional Educational Resource: EverGreen Explanatory Notes: Your online gateway to the latest changes at the Department of Finance and CRA.

An Overview Of The Summary Report On Retirement Income Adequacy Research Jack M. Mintz, Research Director and Palmer Chair in Public Policy, School of Public Policy, The University of Calgary released a summary of research undertaken for the Research Working Group on Retirement Income Adequacy on December 18, 2009, which confirms that overall, the Canadian retirement income system is performing well, providing Canadians with an adequate standard of living upon retirement. Amongst the findings in the report, it appears that Canada has one of the lowest poverty rates among elders in the OECD coutries, and that our public pension system, that is, OAS/GIS, CPP/QPP and provincial top-up programs are ensuring that low-income Canadians are able to achieve high income replacement rates, even exceeding 100 percent. Tax-assisted saving accounts as well as transfers and pension programs have otherwise provided an adequate retirement income at all income levels for the majority of Canadians. However, the report suggests that retirement income adequacy depends not only on saving but also on the investment performance of retirement funds, and that in fact Canadians may not be well served in the retirement marketplace by their financial advisors. (See Role of Financial Intermediaries, below). Based on recent studies, Baker and Milligan (2009) provide evidence suggesting as a rough rule of thumb that 60 percent replacement levels of pre-tax incomes are adequate to maintain expenditures. Yet: Low-income Canadians need a higher level of replacement income to avoid poverty. Some middle- and high-income Canadians may need even less than 60 percent of their pre-retirement income to sustain an adequate standard of living (for example, the OECD suggests 50 percent for individuals with incomes over $90,000 in Canada, twice the median). Much depends upon individual circumstances that affect personal consumption levels, including the need to support dependants, health requirements and the cost of housing and other basic necessities. Join us next week for a discussion on the Role of Financial Intermediaries. Educational Resources: Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital. To learn more consider the following Educational Resources available from The Knowledge Bureau: ► Tax Efficient Retirement Income Planning ► Master Your Retirement ► Master Your Taxes ► Tax Efficient Investment Income Planning ► Master Your Real Wealth ► Master Your Investment in the Family Business   Additional Educational Resource: EverGreen Explanatory Notes: Your online gateway to the latest changes at the Department of Finance and CRA.