Author Archives: Brooks Financial

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Brooks Financial 2017 Income Tax Changes

What’s New and Revised for the 2017 Personal Income Tax Return?

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The Government of Canada has announced several changes and improvements to personal income tax benefits and credits. The following should be considered for your 2017 personal income tax return:

  1. Those responsible for raising children under 18 years of age may be eligible for the tax-free monthly Canada Child Benefit (CCB) payment, which has replaced the Canada Child Tax Benefit. The Child Disability Benefit and provincial and territorial programs, may be included in the CCB. The National Child Benefit Supplement and the Universal Child Care Benefit have also been replaced.
  2. To qualify for the Northern Residence Deduction, you have to have been a permanent resident in a qualifying zone for a minimum of six months. The Basic and Additional Residency amounts have now been increased to $11 per day.
  3. As an Eligible Educator, you may qualify for a 15% tax credit for teaching supplies purchased in 2017 school year, to a maximum of $1000.

For more information on what’s new for the 2017 income tax season, contact Brooks Financial to discuss filing your 2017 personal income tax.




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An OAS and CPP Primer, understanding sources of government retirement income

An OAS and CPP Primer

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Understanding Government Sources of Retirement Income in Canada

The majority of Canadians spend their lives drawing income from one main source or employer during employment years. Retirement income, however, requires careful planning since we can no longer depend on one main source for our income.

Old Age Security (OAS) and Canada Pension Plan (CPP) are the two sources of retirement benefits that come from the Government of Canada. Both are significant components of your retirement income plan.

Old Age Security

  • Your monthly OAS benefit payment is based on your individual income (not household income), and you do not pay into it directly
  • You may still collect this benefit even if you’ve never worked or are still working
  • Monthly benefit payments are available to seniors age 65 and up
  • You can apply for OAS as early as 11 months before you want your benefits to commence
  • If you don’t meet the full criteria, you may still be eligible to receive a partial pension
  • You may defer receiving OAS benefits up to 5 years after you become eligible to get a higher monthly amount
  • There are no survivor benefits
  • Eligible seniors are automatically enrolled and do not need to apply for this benefit
  • This benefit is fully taxable
  • Visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html for more information on OAS Payment Amounts

Canada Pension Plan

  • Your monthly CPP benefit payment depends on the level of contributions made by you and your employer during your employment
  • You may choose to receive your full benefit at age 65
  • You may receive your benefit as early as age 60 with a deduction
  • You may postpone your benefit payments until the age of 70 to receive an increase in your monthly payment
  • Upon death, a lump sum is paid to your estate, up to a maximum of $2500
  • You must apply for this benefit, it does not commence automatically
  • This benefit is taxable income
  • Visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html for more information on Canada Pension Payment Amounts

Old Age Security and Canada Pension Plan are just two of several possible retirement income sources. Contact Brooks Financial today to get started on creating a retirement income plan that will minimize your tax payments and maximize your income during your retirement.


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Creating a Holistic Retirement Income Plan: Income Tax and Portfolio Plan

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In our last two posts, we discussed the three main considerations when creating a holistic retirement plan – lifestyle plan, after tax income sources and income tax and portfolio plan. This week, we will discuss your income tax and portfolio plan.

Income Tax and Portfolio Plan

At Brooks Financial, our goal is to help you to determine the most effective way to draw the income you need during retirement, while paying the least amount of tax, with the lowest risk possible. We will align your investments with your income needs and conduct an ongoing assessment of the impact of your plan on your net worth. A plan like this will act as a starting point from which Brooks Financial can also help you:

  • Calculate the gap – essentially your savings deficit or surplus.
  • Account for investment income and inflation (CPP and OAS is protected from inflation but work pensions often are not. Given our low interest rate environment, GICs and annuities do not provide enough return to provide protection from inflation).
  • Assess your current investments and rate of return.
  • Determine what additional investments are appropriate to accommodate your plan going forward.
  • Identify whether you need an annuity if your current guaranteed income sources will not cover your expenses, insuring your income for the duration of your life.

It’s never too soon to plan for a happy, comfortable and secure retirement. At Brooks Financial, we calculate a few alternative scenarios for your income tax and portfolio plan in the event that your retirement income and returns are lower, or your expenses are actually higher than expected. Retirement income planning must be strategic in nature, and you have only one real chance to get it right. We conduct a thorough, methodical assessment to leave no stone unturned. Let’s get started! Contact Brooks Financial to create your holistic retirement income plan today.


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Creating a Holistic Retirement Income Plan: After Tax Income Sources

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Last week, we introduced the three main considerations when creating a holistic retirement plan – lifestyle planafter tax income sources and income tax and portfolio plan. In our last post, we focused on lifestyle plan – determining your goals and main priorities for retirement. Once this has been established, we calculate how much money you will actually have during retirement, versus how much you will need to meet your goals and lifestyle plan.

The next step is collecting the information we require to help you calculate your after tax income sources.

Fixed Income Sources

Prior to meeting, we ask that you list and evaluate your fixed retirement income sources. In Canada, this would generally include your:

  • Canada Pension Plan income and your spouse’s CPP income
  • Old Age Security (OAS) for you and your spouse
  • Work pensions
  • Annuities you plan to collect
  • Additional income from working part-time during your retirement
  • Alimony
  • Income from any rental properties you may have
  • One-time lump sum income sources such as life insurance proceeds, inheritances, the sale of any properties such as you home, cottage or vacation and investment properties

Retirement Expenses and Tax Owing

First, list and calculate your retirement expenses. This will include:

  • Living expenses such as accommodations (rent or mortgage payments)
  • Utilities
  • Food and entertainment
  • Transportation
  • Travel
  • Memberships

Next, we can determine if you qualify for any tax credits or deductions, what you will be paying tax on and how much you will be paying.

At this point, you will have a few other important considerations:

  • Going forward, will you require more insurance than you and your spouse have currently?
  • How much money will you put into an emergency fund?

Once we calculate and analyze your total assets, tax owing and your projected after tax investment income, we can establish when you will be able to afford to retire, and will be prepared to move on to the final step of your holistic retirement plan – your income tax and portfolio plan.


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Creating a Holistic Retirement Income Plan: Your Lifestyle Plan

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Are you prepared for retirement? Do you know where your income will come from? The retirement landscape has changed considerably and people can no longer depend on a traditional pension income from a single employer. Fewer people have pension plans and many have had multiple jobs over the years. People are retiring later, and part time work is becoming more common during retirement. These changes, combined with advances in health care and an increase in life expectancy, leaves many people concerned they may outlive their retirement income and not be able to retire when they had hoped to. Now, more than ever, it is important to have a retirement income plan you can feel confident about.

There are three main considerations when creating a holistic retirement plan – lifestyle plan, after tax income sources and income tax and portfolio plan.

Lifestyle Plan

First, we will discuss the components of your lifestyle plan. Prior to meeting, we ask that you determine:

  • Your goals and main priorities for retirement.
  • What do you and your spouse plan to do?
  • How old will you be when you retire?
  • How your current lifestyle and spending pattern compare to how you plan to live and what you plan to spend during retirement.
  • If you plan to continue working part time?
  • If you will be required to support any dependents during your retirement?
  • Where and how do you plan to live?
  • If you plan to travel?
  • What hobbies will occupy your spare time?
  • If you expect to have additional expenses as you grow older?

You and your spouse play an integral role in the planning process, particularly in the early stages, however working with an experienced financial planner will introduce a holistic approach, drawing valuable resources from a pool of experienced professionals. At Brooks Financial, we understand and recognize that each part of the planning process is interrelated. No two situations are the same, which is why a holistic financial planner needs to understand the whole picture, including your goals and plans for retirement, as well as your income sources before they can help. We spend time, especially during the first interview with you, to listen to your full story. Based on your individual goals and circumstances, we will devise a customized investment strategy, recommend the appropriate insurance to protect and guarantee your income, identify unnecessary liabilities and assist in estate planning for the surviving spouse. We are confident our holistic approach to retirement income planning will help you navigate the uncertainties and establish a plan that will make you feel very secure and positive about your future.


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Forget to Record RRSP Contributions on Last Year's Income Tax Return

Did You Forget to Record RRSP Contributions on Last Year’s Income Tax Return? We Can Help!

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Canada Revenue Agency requires that all RRSP contributions be reported on Schedule 7 for the past calendar year, as well as any contributions made within the first 60 days of the current year. If you forgot to report, CRA will allow you to file an adjustment to record any RRSP contributions missed when you filed your income tax form. If you do not currently have all your receipts, you can still file a T1-Adj online, and then supply receipts later if CRA asks to see them. See Schedule 7 and General Income Tax and Benefit Guide page 23.

You can report your adjustments by making a request online or by mail. To complete an online request, log in to My Account on the CRA website. You can complete more than one request if necessary, as long as you do each on separately. To complete a mail-in request, you will need to print and complete the T1-Adj, T1 Adjustment Request Form.

Most tax return adjustments may be made within CRA’s 10 year time limit. You can expect online adjustments to take approximately two weeks to process and eight weeks for any mail-in requests.

Do you still have questions or need help requesting adjustments to your tax return? Brooks Financial is available year-round to offer tax preparation, tax planning and other income tax services. Learn more about our services here or contact us now for assistance.


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Signing up for a CRA My Account is convenient, secure and paperless

The Benefits of the CRA My Account and Online Mail

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There are 4 days left to file your Personal Income Tax. If you haven’t done so already, remember you have until Monday, May 1st to complete your return.

Are you missing a certain benefit notice or can’t remember your RRSP Limit? Lost a Notice of Assessment from a previous year? Sign-up for My Account for Individuals http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html on the Canada Revenue Agency’s website to find all of this info in one place.

Benefits

Go Paperless. Your Tax Professional can sign you up to receive Online Mail when filing your tax return. It’s as easy as authorizing them to give your email address to the CRA. You will be notified via email when your tax or benefit information is ready to view. Then simply login into My Account to view the information.

Convenient. You can read your online mail, update your contact info, submit documentation, add or update your direct deposit info to get your payments faster and much more.

Secure. Emails from the CRA will never ask for your personal or financial details. You must login to your secure My Account to access your tax information.

Top Tip!

Do you bank online? You can sign into My Account using the same login as your other online service with one of the CRA’s Sign-In Partners. All of the major banks offer this service. That’s one less password to remember. Important! Your login information will never be shared with the CRA and your Sign-In partner won’t know which government service you are accessing.


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2016 Personal Income Tax Changes

What’s new on the 2016 tax return?

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Personal Income Tax rules change every year in Canada. Deductions and credits are added, amended and removed. You can be sure that the Canada Revenue Agency will inform you of anything you have failed to report, but do not expect them to point out if you have missed a deduction or tax credit. Brooks Financial has outlined some of the more significant changes for Individuals and Families in 2016.

Tax Reporting Change on Sale of Principal Residence

Starting in 2016, all principal residence dispositions must be reported on your tax return. This is true even if the entire gain is fully protected by the principal residence exemption. The penalties for not reporting are steep, $100 per month to a maximum of $8,000.

http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa11-eng.html

http://www.theglobeandmail.com/globe-investor/personal-finance/taxes/how-new-tax-changes-will-impact-every-canadian-homeowner/article32271116/

Marginal Tax Rates

Government has decreased the second marginal tax rate from 22% to 20.5% and introduced a new top marginal tax rate of 33% for income above $202,800 (applicable in 2016 and subsequent tax years).

http://www.budget.gc.ca/2016/docs/plan/ch1-en.html

Canada Child Benefit (CCB)

The CCB has been introduced to replace the current Canada child tax benefit and universal child care benefit. CCB payments will begin in July 2016. The CCB will provide an annual benefit of up to $6,400 per child under six years of age and up to $5,400 per child aged six through 17 years old. The benefit will be phased out as adjusted family net income increases. An additional amount of $2,730 per child eligible for the disability tax credit will continue to be provided. These amounts will be paid monthly to eligible families, will not be taxable and will not reduce the amount eligible for the goods and services tax (GST) credit, the guaranteed income supplement, the Canada Education Savings Grant, the Canada Learning Bond and the Canada Disability Savings Grant. If your household income is more than $200,000 you will not receive a CCB amount.

http://www.cra-arc.gc.ca/bnfts/ccb/menu-eng.html

Income Splitting Credit

Previously, a non-refundable income splitting tax credit was available for couples with at least one child under the age of 18. This credit has been eliminated.

http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa05-eng.html

Increase to Northern Residents Deduction

The maximum residency deduction that each member of a household may claim has increased from $8.25 to $11 per day and, where no other member of the household claims the residency deduction, the maximum residency deduction has increased from $16.50 to $22 per day. Residents of the Intermediate Zone will be entitled to deduct half of these increased amounts.

http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa02-eng.html

Teacher and Early Childhood Educator School Supply Tax Credit

A new refundable tax credit for teachers and early childhood educators to help cover out-of-pocket supplies acquired on or after January 1, 2016. This measure will allow an employee who is an eligible educator to claim a 15% refundable tax credit based on an amount of up to $1,000 in expenditures made by the employee in a taxation year for eligible supplies. For the cost of supplies to qualify for the credit, employers will be required to certify that the supplies were purchased for the purpose of teaching or otherwise enhancing learning in a classroom or learning environment. Individuals making claims will be required to retain their receipts for verification purposes.

Education and Textbook Tax Credits

These credits are being eliminated as of January 1, 2017. The education credit is worth 15% of $400 for each month a student is enrolled in school full-time, while the textbook credit is set at 15% of $65 per month. This measure does not eliminate the tuition tax credit. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in 2017 and subsequent years.

Children’s Fitness and Arts Tax Credit

As of January 1, 2017, these credits will begin to be phased out. Eligible expenses will be cut in half for 2016 and eliminated for 2017. The fitness credit is now worth up to $150 on expenses of as much as $1,000, while the arts credit is worth up to $75 on expenses of up to $500.

Old Age Security and Guaranteed Income supplement

The age of eligibility has been restored to 65 from 67.

Canada Student Grant

Beginning August 1, 2016 Canada Student Grant amounts will increase by 50%. The grants will increase from $2,000 to $3,000 a year for students from low-income families; from $800 to $1,800 for students from middle-income families; and from $1,200 from $1,800 per year for part-time students from low-income families.

http://news.gc.ca/web/article-en.do?nid=1105439

Canada Student Loan Repayment

Students will not have to repay money borrowed under the Canada Student Loan program until he or she is earning at least $25,000 per year. Previously, single graduates had to start repaying their loans when they were earing at least $20,210 while families of 5 or more would have earn more than $67,825 before starting to repay.

https://www.canada.ca/en/employment-social-development/services/student-financial-aid/student-loan/student-loans/student-loans-repayment-assistance-plan.html

https://www.liberal.ca/realchange/post-secondary-education/

https://www.liberal.ca/files/2015/10/A-new-plan-for-a-strong-middle-class.pdf

To learn more about the 2016 tax return, visit the Government of Canada website:

http://www.budget.gc.ca/2016/docs/bb/brief-bref-en.html

http://www.budget.gc.ca/2016/docs/tm-mf/toc-tdm-en.html

 


Income from Share Economy sources must be reported on your tax return.

DID YOU KNOW?

With the news that the Provincial Government is looking into allowing ride-sharing companies, like Uber, to operate in Manitoba, it’s important to remember that the Canada Revenue Agency considers income derived from Sharing Economy activities to be taxable income. In addition to ride-sharing, the term “Sharing Economy” encompasses: accommodation sharing (Airbnb), music and video streaming (Spotify), online staffing (Freelancer.com), crowdfunding (GoFundMe), etc.

Just like any other business, you are required to report all income earned through sharing-economy activities. As well, you must meet all the GST reporting and remittance obligations. Not reporting this income would be viewed by CRA as tax evasion leaving you subject to fines, penalties or even jail time. If you have missed reporting this income in the past it would be prudent to correct your tax affairs by having your previous tax returns adjusted.

http://www.canadianbusiness.com/innovation/canada-sharing-economy-uber-airbnb/

Did you know… that if you have received money under a crowdfunding arrangement, Canada Revenue Agency could consider it as taxable income? Funds raised through crowdfunding could represent a loan, capital contribution, gift, income, or a combination thereof. The terms and conditions of each situation may vary greatly, consider hiring a tax professional to help you understand what your tax obligation will be.

http://www.cbc.ca/news/business/taxes/tax-season-2016-crowdfunding-1.3460787

Contact Brooks Financial today for help with your Personal Income Tax Return. Only 24 days left until it is due (May 1, 2017).


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