The end of 2023 is quickly approaching – which means it’s time to get your paperwork in order so you’re ready when it comes time to file your taxes!
In this article, we’ve covered five different major types of 2023 personal tax tips:
Investment Considerations
Tax-Free Savings Account (TFSA)-You can contribute up to a maximum of $6,500 for 2023. You can carry forward unused contribution room indefinitely. The maximum amount you’re allowed to make in TFSA contributions is $88,000 (including 2023) if you have been at least 18 years old and resident in Canada since 2009.
Registered Retirement Savings Plan (RRSP) – For the 2023 tax year, you have until February 29, 2024, to contribute to your Registered Retirement Savings Plan (RRSP) or a spousal RRSP. However, contributing earlier can benefit you more due to tax-deferred growth. Your deduction limit for 2023 is 18% of your 2022 income, up to $30,780, but this will reduce if you have pension adjustments. Don’t forget, any unused contribution room from previous years or pension adjustment reversals can increase your limit.
Also, you can deduct contributions on your 2023 income if they are made within the first 60 days of 2024. It’s possible to defer these deductions to a later year if that suits your financial strategy better. To optimize your RRSP, consider holding investments that have the potential for growth outside of your RRSP to take advantage of lower taxes on capital gains and dividends. Within your RRSP, keep investments that generate regular interest income. If you’re unsure about the best investment strategy for your RRSP, our team is ready to provide expert advice to help you maximize your retirement savings.
Do you expect to have any capital losses? If you have capital losses, sell securities with accrued losses before year end to offset capital gains realized in the current or previous three years. You must first deduct them against your capital gains in the current year. You can carry back any excess capital losses for up to three years or forward indefinitely.
Interest Deductibility – If possible, repay the debt that has non-deductible interest before other debt (or debt that has interest qualifying for a non-refundable credit, i.e. interest on student loans). Borrow for investment or business purposes and use cash for personal purchases. You can still deduct interest on investment loans if you sell an investment at a loss and reinvest the proceeds from the sale in a new investment.
Tax Loss Selling- Tax-loss selling is when you sell investments that have lost value by the end of the year from accounts that are not tax-deferred. This helps to offset any profits you made from other investments. If your losses are greater than your profits, you can use these extra losses to reduce taxes on profits from the last three years or save them to lower taxes on future profits.
For your losses in 2023 (or the past three years) to count, you need to complete the sale by December 27, 2023. This is because it needs to be settled by the end of the year, and December 30th and 31st are on a weekend in 2023.
If you sell an investment at a loss and plan to buy it again soon, you should know about the “superficial loss” rule. This rule applies if you sell something for a loss and buy it back within 30 days before or after selling it. It also applies if someone close to you, like your spouse or partner, a company they or you control, or a trust where you or they are the main beneficiaries (like your RRSP or TFSA), buys it within 30 days and still has it after 30 days. If this happens, you can’t use that loss to reduce your taxes right away. Instead, the loss gets added to the cost of the investment you bought back. You’ll only get the tax benefit from this loss when you sell this investment later.
When it comes to transferring investments, you might think about moving one with a loss into your RRSP or TFSA to count the loss without really selling it. But the tax rules don’t allow this, and there are big penalties for swapping an investment from a regular account to a registered account like an RRSP or TFSA.
To avoid these issues, it’s better to sell the investment that’s lost value and, if you have room, put the money from the sale into your RRSP or TFSA. Then, if you want, your RRSP or TFSA can buy the investment again after waiting for 30 days since the initial sale. This way, you avoid the superficial loss rule.
Individuals
The following list may seem like a lot, but it’s unlikely every single tip will apply to you. It’s essential to make sure you aren’t paying taxes unnecessarily.
COVID-19 federal benefits – If you return any amounts you received from COVID-19 benefits before the year 2023, you have the option to deduct the amount you paid back from your income for the year when you originally received the benefit, rather than the year in which you repay it.
Income Timing – If your marginal personal tax rate is lower in 2024 than in 2023, defer the receipt of certain employment income; if your marginal personal tax rate is higher in 2024 than in 2023, accelerate.
Medical expenses – If you have eligible medical expenses that weren’t paid for by either a provincial or private plan, you can claim them on your tax return. You can even deduct premiums you pay for private coverage. Either spouse can claim qualified medical expenses for themselves and their dependent children in a 12-month period, but it’s generally better for the spouse with the lower income to do so.
Charitable donations – Tax credits for donations are two-tiered, with a more considerable credit available for donations over $200. You and your spouse can pool your donation receipts and carry donations forward donations for up to five years. If you donate items like stocks or mutual funds directly to a charity, you will be eligible for a tax receipt for the fair market value, and the capital gains tax does not apply.
Moving expenses – If you’ve moved to be closer to school or a place of work, you may be able to deduct moving expenses against eligible income. You must have moved a minimum of 40 km.
Alternative Minimum Tax (AMT)- The AMT framework is a taxation system that sets a minimum amount of tax for individuals who utilize specific tax deductions, exemptions, or credits to substantially reduce their tax liabilities to exceedingly low levels. With AMT, there’s a parallel tax calculation that doesn’t allow as many deductions, exemptions, or credits as the regular way of calculating taxes. If the tax amount computed under the AMT system exceeds the tax liability determined under the regular tax system, the surplus amount becomes payable as AMT for the year.
Recent government proposals have outlined forthcoming adjustments to the AMT system, set to take effect in 2024. These proposed modifications encompass elevating the AMT tax rate, enhancing the AMT exemption threshold, and expanding the AMT tax base by constraining specific exemptions, deductions, and credits that serve to reduce overall tax obligations.
For individuals whose taxable income surpasses approximately $173,000, and who derive income subject to lower tax rates than standard income, or those who benefit from deductions or credits that mitigate their tax liabilities (such as capital gains, stock options, Canadian dividends, unused non-capital losses from preceding years, or non-refundable tax credits like the donation tax credit), it is anticipated that their AMT liabilities in 2024 may exceed those incurred in 2023.
To navigate these impending changes effectively and make financial decisions, it is advisable for individuals to seek counsel from a tax professional.
Families
Childcare Expenses – If you paid someone to take care of your child so you or your spouse could attend school or work, then you can deduct those expenses. A variety of childcare options qualify for this deduction, including boarding school, camp, daycare, and even paying a relative over 18 for babysitting. Be sure to get all your receipts and have the spouse with the lower net income claim the childcare expenses. In addition, some provinces offer additional childcare tax credits on top of the federal ones.
Caregiver – If you are a caregiver, claim the available federal and provincial/territorial tax credits.
Children’s fitness, arts and wellness tax credits – If your child is enrolled in an eligible fitness or arts program, you may claim a provincial or territorial tax credit for fitness and arts programs.
Estate planning arrangements
-
Periodic Review: It is imperative to conduct an annual review of your estate planning arrangements to verify that they are in alignment with your objectives and compliant with current tax regulations.
-
Probate Fee Mitigation: Deliberate strategies should be explored to minimize probate fees.
-
Will Examination: Regularly reviewing your will is crucial to ensure it remains valid and aligns with your evolving life and estate planning requirements.
Registered Education Savings Plan (RESP) – can be a great way to save for a child’s future education. The Canadian Education Savings Grant (CESG) is only available on the first $2,500 of contributions you make each year per child (to a maximum of $500, with a lifetime maximum of $7,200.) If you have any unused CESG amounts for the current year, you can carry them forward. If the recipient of the RESP is now 16 or 17, they can only receive the CESG if a) at least $2,000 has already been contributed to the RESP and b) a minimum contribution of $100 was made to the RESP in any of the four previous years.
Registered Disability Savings Plan (RDSP) – If you have an RDSP open for yourself or an eligible family member, you may be able to get both the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) paid into the RDSP. The CDSB is based on the beneficiary’s adjusted family net income and does not require any contributions to be made. The CDSG is based on both the beneficiary’s family net income and contribution amounts. In addition, up to 10 years of unused grants and bond entitlements can be carried forward.
First Home Savings Account (FHSA) – If you are a Canadian resident, age 18 or older and planning to become first-time homebuyers. Starting from April 1, 2023, this account serves as a valuable tool for saving towards the purchase of a qualifying first home.
The FHSA program comes with an annual contribution limit of $8,000, and a cumulative lifetime cap of $40,000, with the flexibility to carry forward up to $8,000 in unused contributions. Importantly, contributions made to the FHSA are tax-deductible, offering potential tax benefits. Additionally, the returns earned on your savings within this account are not subject to taxation, which can enhance the overall growth of your savings. Most notably, when you make qualifying withdrawals to buy your first home, these withdrawals are non-taxable.
Retirees
Registered Retirement Income Fund (RRIF) – Turning 71 this year? If so, you are required to end your RRSP by December 31. You have several choices on what to do with your RRSP, including transferring your RRSP to a registered retirement income fund (RRIF), cashing out your RSSP, or purchasing an annuity. Talk to us about the tax implications of each of these choices.
Pension Income- Are you 65 or older and receiving pension income? If your pension income is eligible, you can deduct a federal tax credit equal to 15% on the first $2,000 of pension income received – plus any provincial tax credits. Don’t currently have any pension income? You may want to think about withdrawing $2,000 from an RRIF each year or using RRSP funds to purchase an annuity that pays at least $2,000 per year.
Canada Pension Plan (CPP) – If you’ve reached the age of 60, you may be considering applying for CPP. Keep in mind that if you do this, the monthly amount you’ll receive will be smaller. Also, you don’t have to have retired to be able to apply for CPP. Talk to us; we can help you figure out what makes the most sense.
Old Age Security – For individuals aged 65 or older, securing enrollment in Old Age Security (OAS) benefits is essential. It’s important to note that retroactive OAS payments are limited to a maximum of 11 months plus the month in which you apply for your OAS benefits. Moreover, if you encounter OAS clawback challenges due to exceeding income thresholds, there are strategic measures you can take including income splitting or reduction.
If eligible, you can opt to defer the initiation of your OAS benefits for up to 60 months after turning 65. This choice results in a permanent increase of 0.6% in your monthly OAS payment for each month of deferral.
These financial strategies, when combined with timely enrollment in OAS benefits, can help you navigate OAS-related matters effectively, ensuring you receive the maximum benefits available to you while optimizing your retirement income.
Estate planning arrangements – Review your estate plan annually to ensure that it reflects the current tax rules. Consider strategies for minimizing probate fees. If you’re over 64 and living in a high probate province, consider setting up an inter vivos trust as part of your estate plan.
Students
Education, tuition, and textbook tax credits – If you’re attending post-secondary school, claim these credits where available.
Canada tuition credit – If you’re between 25 to 65 and enrolled in an eligible educational institution, you can claim a federal tax credit of $250 per year, $5,000 maximum lifetime tax credit. You can claim tuition paid on your taxes, carry the amount forward, or transfer an unused tuition amount to a spouse, parent, or grandparent.
Need some additional guidance?
Reach out to us if you have any questions. We’re here to help.
2023 Personal Year-End Tax Tips
/in 2023, Blog, individuals, tax /by Coulas Insurance Ltd.The end of 2023 is quickly approaching – which means it’s time to get your paperwork in order so you’re ready when it comes time to file your taxes!
In this article, we’ve covered five different major types of 2023 personal tax tips:
Investment Considerations
Individuals
Families
Retirees
Students
Investment Considerations
Tax-Free Savings Account (TFSA)-You can contribute up to a maximum of $6,500 for 2023. You can carry forward unused contribution room indefinitely. The maximum amount you’re allowed to make in TFSA contributions is $88,000 (including 2023) if you have been at least 18 years old and resident in Canada since 2009.
Registered Retirement Savings Plan (RRSP) – For the 2023 tax year, you have until February 29, 2024, to contribute to your Registered Retirement Savings Plan (RRSP) or a spousal RRSP. However, contributing earlier can benefit you more due to tax-deferred growth. Your deduction limit for 2023 is 18% of your 2022 income, up to $30,780, but this will reduce if you have pension adjustments. Don’t forget, any unused contribution room from previous years or pension adjustment reversals can increase your limit.
Also, you can deduct contributions on your 2023 income if they are made within the first 60 days of 2024. It’s possible to defer these deductions to a later year if that suits your financial strategy better. To optimize your RRSP, consider holding investments that have the potential for growth outside of your RRSP to take advantage of lower taxes on capital gains and dividends. Within your RRSP, keep investments that generate regular interest income. If you’re unsure about the best investment strategy for your RRSP, our team is ready to provide expert advice to help you maximize your retirement savings.
Do you expect to have any capital losses? If you have capital losses, sell securities with accrued losses before year end to offset capital gains realized in the current or previous three years. You must first deduct them against your capital gains in the current year. You can carry back any excess capital losses for up to three years or forward indefinitely.
Interest Deductibility – If possible, repay the debt that has non-deductible interest before other debt (or debt that has interest qualifying for a non-refundable credit, i.e. interest on student loans). Borrow for investment or business purposes and use cash for personal purchases. You can still deduct interest on investment loans if you sell an investment at a loss and reinvest the proceeds from the sale in a new investment.
Tax Loss Selling- Tax-loss selling is when you sell investments that have lost value by the end of the year from accounts that are not tax-deferred. This helps to offset any profits you made from other investments. If your losses are greater than your profits, you can use these extra losses to reduce taxes on profits from the last three years or save them to lower taxes on future profits.
For your losses in 2023 (or the past three years) to count, you need to complete the sale by December 27, 2023. This is because it needs to be settled by the end of the year, and December 30th and 31st are on a weekend in 2023.
If you sell an investment at a loss and plan to buy it again soon, you should know about the “superficial loss” rule. This rule applies if you sell something for a loss and buy it back within 30 days before or after selling it. It also applies if someone close to you, like your spouse or partner, a company they or you control, or a trust where you or they are the main beneficiaries (like your RRSP or TFSA), buys it within 30 days and still has it after 30 days. If this happens, you can’t use that loss to reduce your taxes right away. Instead, the loss gets added to the cost of the investment you bought back. You’ll only get the tax benefit from this loss when you sell this investment later.
When it comes to transferring investments, you might think about moving one with a loss into your RRSP or TFSA to count the loss without really selling it. But the tax rules don’t allow this, and there are big penalties for swapping an investment from a regular account to a registered account like an RRSP or TFSA.
To avoid these issues, it’s better to sell the investment that’s lost value and, if you have room, put the money from the sale into your RRSP or TFSA. Then, if you want, your RRSP or TFSA can buy the investment again after waiting for 30 days since the initial sale. This way, you avoid the superficial loss rule.
Individuals
The following list may seem like a lot, but it’s unlikely every single tip will apply to you. It’s essential to make sure you aren’t paying taxes unnecessarily.
COVID-19 federal benefits – If you return any amounts you received from COVID-19 benefits before the year 2023, you have the option to deduct the amount you paid back from your income for the year when you originally received the benefit, rather than the year in which you repay it.
Income Timing – If your marginal personal tax rate is lower in 2024 than in 2023, defer the receipt of certain employment income; if your marginal personal tax rate is higher in 2024 than in 2023, accelerate.
Medical expenses – If you have eligible medical expenses that weren’t paid for by either a provincial or private plan, you can claim them on your tax return. You can even deduct premiums you pay for private coverage. Either spouse can claim qualified medical expenses for themselves and their dependent children in a 12-month period, but it’s generally better for the spouse with the lower income to do so.
Charitable donations – Tax credits for donations are two-tiered, with a more considerable credit available for donations over $200. You and your spouse can pool your donation receipts and carry donations forward donations for up to five years. If you donate items like stocks or mutual funds directly to a charity, you will be eligible for a tax receipt for the fair market value, and the capital gains tax does not apply.
Moving expenses – If you’ve moved to be closer to school or a place of work, you may be able to deduct moving expenses against eligible income. You must have moved a minimum of 40 km.
Alternative Minimum Tax (AMT)- The AMT framework is a taxation system that sets a minimum amount of tax for individuals who utilize specific tax deductions, exemptions, or credits to substantially reduce their tax liabilities to exceedingly low levels. With AMT, there’s a parallel tax calculation that doesn’t allow as many deductions, exemptions, or credits as the regular way of calculating taxes. If the tax amount computed under the AMT system exceeds the tax liability determined under the regular tax system, the surplus amount becomes payable as AMT for the year.
Recent government proposals have outlined forthcoming adjustments to the AMT system, set to take effect in 2024. These proposed modifications encompass elevating the AMT tax rate, enhancing the AMT exemption threshold, and expanding the AMT tax base by constraining specific exemptions, deductions, and credits that serve to reduce overall tax obligations.
For individuals whose taxable income surpasses approximately $173,000, and who derive income subject to lower tax rates than standard income, or those who benefit from deductions or credits that mitigate their tax liabilities (such as capital gains, stock options, Canadian dividends, unused non-capital losses from preceding years, or non-refundable tax credits like the donation tax credit), it is anticipated that their AMT liabilities in 2024 may exceed those incurred in 2023.
To navigate these impending changes effectively and make financial decisions, it is advisable for individuals to seek counsel from a tax professional.
Families
Childcare Expenses – If you paid someone to take care of your child so you or your spouse could attend school or work, then you can deduct those expenses. A variety of childcare options qualify for this deduction, including boarding school, camp, daycare, and even paying a relative over 18 for babysitting. Be sure to get all your receipts and have the spouse with the lower net income claim the childcare expenses. In addition, some provinces offer additional childcare tax credits on top of the federal ones.
Caregiver – If you are a caregiver, claim the available federal and provincial/territorial tax credits.
Children’s fitness, arts and wellness tax credits – If your child is enrolled in an eligible fitness or arts program, you may claim a provincial or territorial tax credit for fitness and arts programs.
Estate planning arrangements
Periodic Review: It is imperative to conduct an annual review of your estate planning arrangements to verify that they are in alignment with your objectives and compliant with current tax regulations.
Probate Fee Mitigation: Deliberate strategies should be explored to minimize probate fees.
Will Examination: Regularly reviewing your will is crucial to ensure it remains valid and aligns with your evolving life and estate planning requirements.
Registered Education Savings Plan (RESP) – can be a great way to save for a child’s future education. The Canadian Education Savings Grant (CESG) is only available on the first $2,500 of contributions you make each year per child (to a maximum of $500, with a lifetime maximum of $7,200.) If you have any unused CESG amounts for the current year, you can carry them forward. If the recipient of the RESP is now 16 or 17, they can only receive the CESG if a) at least $2,000 has already been contributed to the RESP and b) a minimum contribution of $100 was made to the RESP in any of the four previous years.
Registered Disability Savings Plan (RDSP) – If you have an RDSP open for yourself or an eligible family member, you may be able to get both the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) paid into the RDSP. The CDSB is based on the beneficiary’s adjusted family net income and does not require any contributions to be made. The CDSG is based on both the beneficiary’s family net income and contribution amounts. In addition, up to 10 years of unused grants and bond entitlements can be carried forward.
First Home Savings Account (FHSA) – If you are a Canadian resident, age 18 or older and planning to become first-time homebuyers. Starting from April 1, 2023, this account serves as a valuable tool for saving towards the purchase of a qualifying first home.
The FHSA program comes with an annual contribution limit of $8,000, and a cumulative lifetime cap of $40,000, with the flexibility to carry forward up to $8,000 in unused contributions. Importantly, contributions made to the FHSA are tax-deductible, offering potential tax benefits. Additionally, the returns earned on your savings within this account are not subject to taxation, which can enhance the overall growth of your savings. Most notably, when you make qualifying withdrawals to buy your first home, these withdrawals are non-taxable.
Retirees
Registered Retirement Income Fund (RRIF) – Turning 71 this year? If so, you are required to end your RRSP by December 31. You have several choices on what to do with your RRSP, including transferring your RRSP to a registered retirement income fund (RRIF), cashing out your RSSP, or purchasing an annuity. Talk to us about the tax implications of each of these choices.
Pension Income- Are you 65 or older and receiving pension income? If your pension income is eligible, you can deduct a federal tax credit equal to 15% on the first $2,000 of pension income received – plus any provincial tax credits. Don’t currently have any pension income? You may want to think about withdrawing $2,000 from an RRIF each year or using RRSP funds to purchase an annuity that pays at least $2,000 per year.
Canada Pension Plan (CPP) – If you’ve reached the age of 60, you may be considering applying for CPP. Keep in mind that if you do this, the monthly amount you’ll receive will be smaller. Also, you don’t have to have retired to be able to apply for CPP. Talk to us; we can help you figure out what makes the most sense.
Old Age Security – For individuals aged 65 or older, securing enrollment in Old Age Security (OAS) benefits is essential. It’s important to note that retroactive OAS payments are limited to a maximum of 11 months plus the month in which you apply for your OAS benefits. Moreover, if you encounter OAS clawback challenges due to exceeding income thresholds, there are strategic measures you can take including income splitting or reduction.
If eligible, you can opt to defer the initiation of your OAS benefits for up to 60 months after turning 65. This choice results in a permanent increase of 0.6% in your monthly OAS payment for each month of deferral.
These financial strategies, when combined with timely enrollment in OAS benefits, can help you navigate OAS-related matters effectively, ensuring you receive the maximum benefits available to you while optimizing your retirement income.
Estate planning arrangements – Review your estate plan annually to ensure that it reflects the current tax rules. Consider strategies for minimizing probate fees. If you’re over 64 and living in a high probate province, consider setting up an inter vivos trust as part of your estate plan.
Students
Education, tuition, and textbook tax credits – If you’re attending post-secondary school, claim these credits where available.
Canada tuition credit – If you’re between 25 to 65 and enrolled in an eligible educational institution, you can claim a federal tax credit of $250 per year, $5,000 maximum lifetime tax credit. You can claim tuition paid on your taxes, carry the amount forward, or transfer an unused tuition amount to a spouse, parent, or grandparent.
Need some additional guidance?
Reach out to us if you have any questions. We’re here to help.
Financial Advice for Business Owners
/in Blog, business owners, Estate Planning, Family, individuals, Retirees /by Coulas Insurance Ltd.We can help you determine where you are today financially and where you want to go. We can provide you guidance on how to reach your short, medium and long term financial goals.
Why work with us?
Worry less about money and gain control.
Organize your finances.
Prioritize your goals.
Focus on the big picture.
Save money to reach your goals.
What can we help you with?
We can help you with accumulation and protection
Accumulation:
Cash Management – Savings and Debt
Tax Planning
Investments
Protection:
Insurance Planning
Health Insurance
Estate Planning
How do you start?
Establish and define the financial advisor-client relationship.
Gather information about current financial situation and goals including lifestyle goals.
Analyze and evaluate current financial status.
Develop and present strategies and solutions to achieve goals.
Implement recommendations.
Monitor and review recommendations. Adjust if necessary.
Next steps…
Talk to us about helping you get your finances in order so you can achieve your lifestyle and financial goals.
Feel confident in knowing you have a plan to get to your goals.
How To Use Insurance To Provide Your Family With Financial Protection
/in Blog, life insurance /by Coulas Insurance Ltd.How To Use Insurance To Provide Your Family With Financial Protection
The best way to provide your family with financial protection is with solid insurance planning. These three types of insurance will ensure your family has the financial resources they need if you die, are injured, or become ill:
Life Insurance
Life insurance is an inexpensive way to ensure your family will have access to a tax-free lump sum payment after your death. Whether you want to give your grandchildren a helping hand getting started in life or provide financial resources for a stay-at-home parent, life insurance can be a great way to do it!
You have two main options when it comes to life insurance – term insurance and permanent life insurance.
With term insurance, you’ve got life insurance coverage for a set period (for example, five years). Premiums for term insurance are lower than for permanent life insurance, but they will rise as you age or your health changes.
With permanent life insurance, you’ve got lifetime coverage. You’ll pay more in premiums at first, but the cost will be less overall than if you buy term insurance for your entire life. Some permanent life insurance policies also allow you to contribute money beyond your premiums, where it can grow tax-free.
Not sure which type is best for you? We can help you figure this out!
Critical Illness Insurance
With critical illness insurance, you will be eligible for a tax-free lump sum of money if you’re diagnosed with a significant illness such as cancer or a stroke. While anyone can benefit from this insurance, it’s essential for self-employed people who don’t have employee benefits to help tide them over while recovering or receiving treatment.
You can spend the lump sum any way you want, including paying off your mortgage, paying for treatment not covered by provincial health care, or putting aside money for your children’s future.
Depending on the type of critical illness policy you select, you may be able to get a “return of premium” option, which means your premiums will be returned to you if you never make a claim. We can explain how to option works and what coverage we think is best for you.
Disability Insurance
Most people assume that they’ll never become disabled. But the stark reality is that 1 in 5 Canadians are considered to be living with a disability. If you couldn’t work anymore because you became disabled, this could have a disastrous impact on your family’s financial stability – especially if you’re self-employed.
With disability insurance, you’ve got financial protection to ensure you can pay your bills and maintain your family’s standard of living. We can explain how to minimize the cost of your premiums while still getting the coverage you need.
Protect Your Family
Book a meeting with us today to get started with insurance planning.
Saving for Education
/in Blog, Debt, Family, life insurance /by Coulas Insurance Ltd.Post-secondary education can be expensive, however, having the opportunity to plan for it helps with making sure that you’re capable to meet the costs of education. In addition, when you have a plan, it’s easier to make financial decisions that align with your goals and provide peace of mind. In the infographic checklist, we outline 6 factors to consider when paying for education:
For parents:
How much to save and when will your child start school?
Registered Education Savings Plan – have you set up a family RESP plan and received the Canadian Education Savings Grant? If your income is low enough, you could qualify for the Canada Learning Bond.
Savings- are you saving separately for your child’s education? Cash Value Life Insurance- have you considered using this as a savings vehicle for your child’s education. What happens if your child decides not to go to school? These alternative savings vehicles provide flexibility so that you can use the funds for something else such as a down payment for a future home.
For children:
Will the child be working part-time and have their own savings for school?
Can the child apply for scholarships, bursaries or grants?
Will they need to apply for government student loan, personal loan or personal line of credit?
If you need help planning to save for your child’s post-secondary education, contact us!
10 Essential Decisions for Business Owners
/in Blog, business owners, Estate Planning, financial advice, Financial Planning, Group Benefits, health benefits, Insurance, Investment, tax /by Coulas Insurance Ltd.10 Essential Decisions for Business Owners
Business owners are busy… they are busy running a successful business, wearing lots of hats and making a ton of decisions. We’ve put together a list of 10 essential decisions for every business owner to consider; from corporate structure to retirement and succession planning:
Best structure for your business (ex. Sole Proprietor, Corporation, Partnership)
Reduce taxes
What to do with surplus cash
Build employee loyalty
Reduce risk
Deal with the unexpected
Retire from your business
Sell your business
Keep your business in the family
What to do when you’re retired
Financial advisors are uniquely positioned to help business owners, talk to us about your situation and we can provide the guidance you need.
Why Life Insurance Should Be Part Of Your Estate Planning
/in Blog, Estate Planning, life insurance /by Coulas Insurance Ltd.Why Life Insurance Should Be Part Of Your Estate Planning
You’ve worked hard and managed your money carefully throughout your life. So rest easy knowing that you will have more than enough assets to fulfill your needs during your retirement years.
You also need to think beyond your retirement years and consider what will happen to your assets after your death. For example, it is essential to consider whether your assets could result in tax liabilities for your heirs.
Generally, there are three types of assets during estate planning:
Capital assets – shares in public or private companies, or real estate such as a second home or cottage.
Income-producing assets – assets that produce income, such as RRSPs and RRIFs.
Non-taxable assets – such as cash, TFSAs, your principal residence, and the proceeds from a life insurance policy.
How can life insurance help my heirs cover their tax liabilities?
There’s an old saying that there are only two things certain in life – death and taxes. So naturally, you do not want your loved ones to be burdened with tax liabilities when they inherit capital or income-producing assets from your estate. In most situations, the estate may not have enough cash to leave to your heirs to cover those tax liabilities.
Providing the means to cover tax liabilities upon your death is where life insurance can be such a valuable part of estate planning. With life insurance, you can both guarantee your heirs have the funds when they need them, as well as receive the death benefit tax-free. In addition, your heirs won’t have the stress of how they’ll come up with the money to pay taxes on any assets they inherit.
Are there any other reasons I should include life insurance as part of my estate planning?
Since life insurance death benefit is tax-free, it is an excellent source of liquidity to include in your estate planning. Your heirs can use the funds for a variety of purposes, including:
Paying off debts
Covering funeral expenses
As a source of income – If your family has suddenly gone from two income-earners to one, this can significantly affect their standard of living.
Provide funding for a considerable expense, such as college or university tuition.
We can help with estate planning
If you’d like to include life insurance as part of your estate planning but aren’t sure where to start – we can help you with that! We’ll talk to you about different types and amounts of life insurance coverage to see what works for you – call us or email us today!
First Home Savings Account (FHSA): What You Need to Know
/in Blog, Investment /by Coulas Insurance Ltd.The First Home Savings Account (FHSA) is a savings plan designed for first-time home buyers in Canada, which allows them to save up to $40,000 tax-free. Contributions to an FHSA are tax-deductible, similar to Registered Retirement Savings Plans (RRSP). Additionally, income and gains earned inside the account and withdrawals are tax-free, like a Tax-Free Savings Account (TFSA).
In this article and accompanying infographic, we will provide you with the necessary information you need to know about FHSA, including eligibility requirements, contributions and deductions, income and gains, qualifying investments, withdrawals, and transfers.
Eligibility Requirements
To be able to open an FHSA, you need to meet all the following eligibility requirements:
Residency: You must be an individual who is a resident of Canada.
Age: You must be at least 18 and not reach 72 in the current year.
First-time Home Buyer: You must be a first-time home buyer, which means that neither you nor your spouse had owned a qualifying home that was your principal residence at any point during the calendar year or the preceding four calendar years before the account was opened.
Contributions and Deductions
There are limits to the amount you can contribute to your FHSA.
The annual contribution limit is $8,000.
The lifetime contribution limit is $40,000.
If you do not contribute the full amount each year, the contribution room carries forward to the following year. However, carry-forward amounts only start accumulating after you open an FHSA for the first time, and they do not automatically begin when you turn 18.
Any excess contributions are subject to a penalty of 1% per month.
Tax Deductions
By claiming contributions made to FHSA accounts as a deduction against all taxable income sources, the amount of taxable income for the year can be reduced, resulting in a decrease in the amount of taxes payable.
Suppose you choose not to claim the FHSA deduction in the year. In that case, you can carry forward the unused contribution amounts indefinitely and claim them as a deduction later, like RRSP deductions.
Qualifying Investments
Qualifying investments for an FHSA are like those allowed in RRSPs and TFSAs, including mutual funds, segregated funds, ETFs, stocks, bonds, and GICs.
Incomes and Gains
The income and capital gains earned in an FHSA are not included in your annual income for tax purposes and therefore are not deductible. This means that the investment can continue to grow and compound within the FHSA tax-free like a TFSA.
Qualifying Withdrawals
Withdrawals from an FHSA are subject to specific rules and conditions. Qualifying withdrawals made to purchase a home are tax-free but must meet specific criteria:
The person making the withdrawal must be a first-time home buyer and a Canadian resident.
They must also intend to use the property as their primary residence within one year of purchasing or building it.
The home being purchased must be in Canada, and a written agreement to buy or build the home must be in place before October 1st of the year following the withdrawal.
It is not possible to restore FHSA contribution limits by making withdrawals or transfers.
Transfers
Unused funds in an FHSA account following a qualifying withdrawal can be transferred tax-free to an RRSP or Registered Retirement Income Fund (RRIF) until the end of the following year from the year of the first withdrawal. Transfers do not affect the available RRSP contribution room, but the transferred funds will be taxable when withdrawn from the account.
It’s important to remember that there are limitations on how long you can keep your FHSA account. You must close your FHSA after you’ve held it for 15 years or by the end of the year in which you turn 71, whichever comes first.
If you’re considering opening an FHSA or saving for a home, we can help; contact us.
Essential tips and tricks for paying less tax and keeping more of your retirement income
/in Blog, retirement /by Coulas Insurance Ltd.Essential tips and tricks for paying less tax and keeping more of your retirement income
Most of your retirement income sources are taxable; Canadian Pension Plan (CPP), your personal pension plan (if you have one) and income from your RRIFs. However, if you’ve set up a TFSA in addition to your RRSPs, then you’re in luck – money you take out of your TFSA isn’t taxable!
We have some tips on combining savvy withdrawal strategies with retirement-related tax deductions to keep more of your retirement income.
Make a Plan
Determine all the different sources of retirement income you’ll have – don’t forget about things like annuities, GICs or income from a rental property if you have one. Once you have a complete list, a professional financial advisor can give you tips on when it’s best to start collecting pension income as well as how much to withdraw from your taxable investments. A strong plan can help reduce the amount of tax you have to pay and extend the life of your retirement income!
Split your pension income
If you have reached the age of 65 and have a pension, you can split up to 50% of the pension income with your spouse. Splitting your pension with a lower-income spouse can add up to savings, as this will cut down on the amount of taxes you’ll have to pay overall.
While rewarding, the process to split your pension income can be complicated, so it’s best to get professional advice before starting this process.
Buy an annuity
Annuities are a financial product that will provide you with a guaranteed regular income – a good choice if you are worried about your retirement savings running out.
These are the most common types of annuities:
Life annuities provide you with a guaranteed lifetime income, with the option for the annuity to be paid to a beneficiary after you die.
Term-certain annuities provide guaranteed income payments for a fixed period. A beneficiary or your estate will receive regular payments if you die before the term ends.
Variable annuities will provide you with both a fixed income and a variable income. The variable income will be based on the return of the annuity provider on the performance of the investments your annuity provider invests your money in.
All types of annuities will spread out the income from your retirement savings to lessen the tax you pay each year.
Take advantage of tax breaks
Now that you’re retired, there are retirement-related tax breaks you need to know about. Here are some of the tax breaks or credits you may be eligible for:
The age amount
The home accessibility tax credit
The medical expense tax credit
The disability tax credit
The pension income tax credit
We can help!
We can put together a plan that helps you keep more of your retirement income – call us today!
Tax Tips You Need To Know Before Filing Your 2022 Taxes
/in 2023, Blog, disability, tax /by Coulas Insurance Ltd.Tax Tips You Need To Know Before Filing Your 2022 Taxes
This year’s tax deadline is May 1, 2023, as April 30 falls on a Sunday this year. It’s important to make sure you’re claiming all the credits and deductions you’re eligible for. In this article, we’ll provide you with tips to help you maximize your tax refund and ensure you’re taking advantage of all the available tax benefits.
Canada Workers Benefit
The Canada Workers Benefit (CWB) is a refundable tax credit designed to help low-income working families and individuals. The credit is made up of two parts:
The basic amount
A disability supplement (if you qualify).
To determine whether you qualify for the tax credit, you’ll need to consider your net income and where you live. The CRA website provides full details about the net income qualification amounts.
The maximum amounts you can qualify for are as follows:
The maximum basic amount is $1,428 for single individuals and $2,461 for families.
The maximum amount for the disability supplement is $737 for single individuals and $737 for families.
Claiming Home Office Expenses Due To COVID-19
You can still claim home office expenses if you’re not self-employed but worked from home due to the pandemic. You can:
Claim the temporary flat amount if you worked more than 50% of the time from home for at least four consecutive weeks in 2022. You can claim $2 for each day worked from home, up to a maximum of $500. No paperwork or forms are required!
Use the detailed method and claim the actual amounts. In this case, you’ll need supporting documentation, plus a completed and signed T2200S form from your employer. You can claim various applicable expenses, including home Internet access fees.
The Tax Deduction for Zero-Emissions Vehicles
A capital cost allowance (CCA) is a tax deduction that helps cover the cost of an asset’s depreciation over time. The CRA created two new capital cost allowances, which apply to zero-emission vehicles bought after March 18, 2019.
They are as follows:
Class 54. This class is for motor and passenger vehicles, excluding taxis or vehicles used for lease or rent. It has a CCA rate of 30%. For 2022, capital costs will be deductible up to $55,000, plus sales tax. This amount will be reassessed every year.
Class 55 is for leased and rented vehicles or taxis. The CCA rate is 40%.
Return Of Fuel Charge Proceeds To Farmers Tax Credit
You may be eligible for this tax credit if you are either self-employed or part of a farming partnership in Alberta, Manitoba, Ontario and Saskatchewan.
This tax credit aims to help farmers offset the high cost of the carbon tax.
Eligible Educator School Supply Tax Credit
You can claim up to $1,000 of eligible supplies and expenses if you qualify for the educator school supply tax credit.
The tax credit rate for the 2022 tax year is 25%, with a maximum credit of $250.
Need help?
Do you qualify for a credit or deduction? Call us – we’re here to save you money on your taxes!
Why A Buy-Sell Agreement Is Vital For Your Business
/in Blog, business owners, buy sell /by Coulas Insurance Ltd.Why A Buy-Sell Agreement Is Vital For Your Business
The purpose of a buy-sell agreement is to establish a set of rules or actions (that are legally binding) for what must happen to a business if one or more of the business owners is no longer involved.
Why does my business need a buy‐sell agreement?
A buy-sell agreement is vital for your business as it protects the shareholders and the business itself if one of the partners exits the business for any reason.
A buy-sell agreement offers so many benefits for your business. It:
What are the different types of buy-sell agreements?
These are the most common types of buy-sell agreements:
What do I need to cover in my buy‐sell agreement?
Your buy-sell agreement must address the following:
What is the best way to fund my buy-sell agreement?
This needs to be addressed when putting the buy-sell agreement together and can be challenging in the case of some “triggers,” such as a business owner getting a divorce or a disagreement between business owners.
In the case of the death of a business owner or a business owner becoming disabled, the buy-sell agreement can be funded by insurance. Insurance provides both immediate capital and significant tax benefits.
We Can Help!
Buy-sell agreements can be complex and challenging, but they are vital to protect your business and your personal interests. We can explain the best way to set one up – reach out to us today to get started!