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 global financial crisis, which is of significant concern to investors and retirees in planning the right outcomes before the end of 2008, must also be considered by executors dealing with the financial consequences at death for Canada's aging demographic. The opportunity to add value as an informed executor of the estate of grandparents, parents, and siblings is both an honour and a large responsibility that can be extremely costly when the correct tax consequences are missed. Evelyn Jacks and a detailed workshop on planning with trusts with John Poyser. Tax and financial advisors who want to be up to speed on the latest information to maximize tax savings on personal transitions, will want to participate November 14 to 21 in Winnipeg, Toronto, Calgary, Vancouver and Edmonton. "Practical education on year end planning for families and individual investors in this critical time will be discussed in detail," says Evelyn Jacks, President and Founder of The Knowledge Bureau. "However, we also are very pleased to review the astute preparation of the final return of those who pass away this year, in conjunction with various trust structures available. We believe this is of particular relevance in light of the significant financial turbulence we are experiencing today." John Poyser, LL.B. from the firm Inkster, Christie, Hughes and Knowledge Bureau Faculty Member, will host a detailed discussion on that subject. Did you know, for example, that when a person passes away and their estate passes, in whole or in part, to a spouse or spouse trust, it is possible to "harvest capital losses?" John will show that is achieved by opting out of the rollover available under subsection 70(6) on an asset by asset basis. To the extent that assets might have a pent up capital gain and certain other assets might have pent up capital losses, the executors can trigger gains and losses on a targeted basis to cross-cancel them in the deceased's income tax return rather than carrying them forward into the estate where they might not be effectively used. Advisors and the executors they work with, must also be aware of rules relating to qualified farm property and qualifying small business corporations, where a capital gains exemption is available. Depending on the terms of the trust, the designation does not have to be made evenly or equally among a collection of beneficiaries, but can be made in a way where the gains are allocated to the beneficiaries who have the most opportunity to take advantage of it, and other forms of income are allocated to other beneficiaries. Early registration for The November Year End Tax Planning Workshops ends October 31. To register call 1-866-953-4769 or enrol online. Dates, cities and venues appear below:   Date City Venue Location November 14 Winnipeg The Manitoba Club 194 Broadway November 17 Toronto East Crowne Plaza Don Valley 1250 Eglington Avenue EToronto, ON M3C 1J3 November 18 Toronto West Crowne Plaza Hotel Toronto Airport 33 Carlson CourtToronto, ON M9W 6H5 November 19 Calgary Carriage House Inn 9030 Macleod Trail SouthCalgary, AB November 20 Vancouver Terminal City Club 837 West Hastings Street November 21 Edmonton Four Points by Sheraton Edmonton South 7230 Argyle Road Click here for more details.

With the creation of the Canadian Lenders Assurance Facility, The Honourable Jim Flaherty has provided Canada with greater access to international credit markets. Due to the recent financial market activity, the Minister of Finance announced the creation the facility, with its purpose of providing insurance on wholesale term borrowing for federally regulated deposit taking institutions. This step will ensure access to long-term funds for Canadian institutions so they may continue to lend to consumers and businesses throughout Canada, and are not put at a competitive disadvantage when raising funds for this market. The announcement is seen as an important part of the G7 Plan of Action to stabilize the markets and restore economic growth. The program will be monitored closely along with the credit markets, and the Minister pointed out that the program has been provided at no fiscal cost to taxpayers and with no additional risks. Consultations will be made with financial institutions regarding the Facility and additional details will be released shortly.

With the devastation wreaked upon the marketplace in October, Canadians may find that their overall income from investments or even employment and business activities may have taken a hit in the last quarter. Commission-based financial advisors in particular may find themselves in this boat this year. But there may be a bit of good news to offset the bad, at least from a tax point of view, if you are a quarterly instalment payer. Many people don't realize that instalments remitted to CRA (often by post-dated cheques) can be adjusted to actual income earned in the year. Others don't know that the CRA "billing method" of collecting quarterly instalments is only one of three methods of payment. The other two are optional: Current-Year Option. Under this option, the taxpayer's income tax liability for the current taxation year is estimated then one-quarter of the estimated amount over $3,000 is due on each of the four due dates: March 15, June 15, September 15 and December 15. (Farmers and fishers must only make one instalment payment, on December 31 on 2/3 of the estimated taxes owing.) Prior-Year Option. Under this option, the first two instalments are estimated at one-quarter of the taxes due in the second prior year (since the prior year's return is not available when these instalments are due) and the last two instalments are calculated at one-half of the excess of taxes due in the prior year over taxes due in the second prior year. If you know your income will drop this tax year over last, write a letter to CRA to recalculate your instalment payment base and return the last post-dated cheques. Note that, for 2008 and subsequent years, the instalment threshold for individuals is $3,000 ($1,800 for Quebec filers). You will not be required to make an instalment payment at all if the actual tax owing will not exceed $3,000 in 2008 ($1,800 in Quebec). Subscribe to EverGreen Explanatory Notes for more information. Or attend The Knowledge Bureau's November Year End Tax Planning Workshop coming to a city near you November 14 to 21.

It is the time of year that we must begin thinking about Year End Tax Planning, and one area that is often given little thought is the planning for charitable donations. In a vast majority of work places, the push is on to give to the United Way through either payroll deduction or a lump sum payment, so now is a good time to review what tax deductible gifts are and what the benefits are from a tax viewpoint: Tax deductible charitable gifts include the following: ¸ Money or other property ¸ Gifts of ecologically sensitive land (get Certificate for Donation of Ecologically Sensitive Land) ¸ Capital propertyócottages, securities, land, buildings, equipment at their FMV ¸ Listed personal property ¸ Inventory of a business ¸ Gift of certified cultural property to a designated institution or public authority under the Cultural Property Export and Import Act Federal and provincial credits can be claimed with official receipts: ¸ Claim eligible amount of gifts made in the year or you can carry forward for 5 years ¸ Claim carried forward gifts first; then current year gifts ¸ Gifts in kind: donation appraisal must be from knowledgeable appraisers and follow Uniform Standards of Professional Appraisal Practice. ¸ Gifts of less than $1,000 usually do not require appraisal ¸ File Schedule 9 with your Federal tax return Deductibility: ¸ 15% of the first $200; 29% thereafter plus provincial portion ¸ Up to 75% of net income can be given as charitable donations; 100% in year of death or immediately preceding year ¸ the individual's total Crown gifts ¸ the individual's total cultural gifts ¸ the individual's total ecological gifts Gifts can be made to: ¸ A registered charity ¸ Registered Canadian amateur athletic association ¸ Tax exempt housing corporation providing low-cost housing for seniors ¸ Government of Canada, province or territory, municipality ¸ The United Nation and its related agencies ¸ Prescribed university outside Canada ¸ Charitable organization outside Canada to which our government has made a donation in the tax year or previous tax year ¸ Gifts to US charities if you have US income Note: Gifts to Canada include monetary gifts made directly to the federal Debt Servicing and Reduction Account, sent to the Receiver General requesting this. A tax deductible receipt will be issued. Special Rules: Gifts of capital property: ¸ FMV at time of gift can trigger capital gains consequences ¸ Gifts of publicly traded shares should be initiated before December 21 and can be transferred on a tax free rollover basis to registered charities and private foundations (after March 19, 2007). ¸ Zero inclusion rates for purposes of capital gains and losses apply if you donate: Shares, debt obligations or rights listed on a designated stock exchange Shares of a mutual fund corporation Units of a mutual fund trust Interests in related segregated fund trusts Prescribed debt obligations Ecologically sensitive land ¸ Gifts can be made to a registered charity or after March 18, 2007 to certain private foundations. ¸ Gifts of depreciable property can trigger recapture or terminal loss ¸ Gifts of significant movable cultural property to Canadian heritage institutions or public authorities must be certified under the Canadian Cultural Property Export Review Board, which determines its FMV and provides you with a certificate for tax credit purposes (Form T871). In this case no capital gain is required to be recorded. ¸ Artists: to qualified donee, the gift is a disposition from ìinventoryî rather than capital property. The value is calculated as the cost amount or an amount not greater than the FMV and not less than the cost and any advantage received. ¸ Art or Antique dealers: objects donated are considered to be a disposition of inventory, not capital property and must be based on FMV at the time of donation. Non-qualifying gifts: ¸ Shares you control ¸ Obligation or securities issued by yourself So start planning now to meet your charitable donation goals and the receiving the best tax deduction based on your charitable giving. Attend the Knowledge Bureau's January 2009 Line by Line Tax Update and Debt Management Workshop in cities across Canada for more tax planning ideas and information on recent changes to the tax laws.

Short of Cash? Flip Investments Into RRSPs to Create More Cash strapped, but RRSP-eligible investors can use the tax system in a variety of ways to generate new money, and with tax season just around the corner it will pay to review RRSP contribution opportunities now for those reasons. Taxpayers can generate a tax deduction via an RRSP contribution without coming up with new capital simply by "flipping" assets held in interest-bearing vehicles from their maturing Canada Savings Bonds or other non-registered accounts into their RRSP. Be aware that a tax reporting event occurs before accumulations from non-registered accounts are transferred into registered accounts. That is, interest income earned up to the date of the transfer must be reported on the tax return. The same rule holds true whenever investments in non-registered accounts are transferred into any of the tax deferred vehicles mentioned above. Note that losses generated by such a flip cannot be claimed as they are considered to be superficial losses. Subscribe to EverGreen Explanatory Notes for more information. Or attend The Knowledge Bureau's November Year End Tax Planning Workshop coming to a city near you November 14 to 21. Next Time: Avoid Your December 15 Instalment to Generate Cash  

Time To Brush Up On Canada Deposit Insurance Corporation (CDIC) Protection Facts Given recent market volatility, taxpayers are concerned about the safety of their capital, and may wish to discuss what guarantees or insurance may be available to them for their money. The Canada Deposit Insurance Corporation provides some comfort, insuring deposits of their member companies which include most Canadian chartered banks, loan companies and trust companies, as well as associations governed by the Cooperative Credit Association Act. Up to $100,000 of amounts on deposit will be insured in case of failure of the member institution. However, deposits in credit unions and caisses populaires, Canadian branches of foreign banks and some Canadian chartered banks are not covered. Deposits with credit unions and caisses populaires may be covered by provincial deposit insurance programs. For a complete listing of institutions which are covered, see the CIDC web page. The following types of deposits are covered by member institutions of the CDIC, in Canadian dollars: savings accounts and chequing accounts GICs and other term deposits that mature in 5 years or less money orders, certified cheques, travellers' cheques and bank drafts accounts that hold realty taxes on mortgaged properties Accounts and products NOT insured by CDIC include: mutual funds and stocks GICs and other term deposits that mature in more than 5 years bonds Treasury bills any accounts or products in U.S. dollars or other foreign currency. any accounts or products held in banks or other institutions that are NOT CDIC members. This is information all advisors should discuss with their clients about interest-bearing investments, in conjunction with devising a tax efficient investment income plan. For more information on the new Knowledge Bureau Certificate Course entitled Tax Efficient Investment Income Planning available October 31.