April 1, 2013

2012 Tax Season

Filed under: Taxes — MikeT @ 9:15 am

One month left to get your taxes submitted to CRA – have you filed yet?

If you haven’t gotten around to it yet, let me handle it for you.  With minimal cost, everything can be prepared and efiled for you.  No software to buy, no double checking or second guessing that you’ve filed correctly.  Nice and easy!

Do you know anyone, whether it be a friend, family member or coworker, that is putting off doing their taxes because they hate the annual ritual?  Feel free to pass along my name and contact info – I’m happy to help!



March 15, 2013

Achieve Tax Balance & Increase Cash Flow

Filed under: Taxes — MikeT @ 4:54 pm

For many Canadians, filing a tax return is a day of reckoning. In 2013, April 30 is circled in red on the calendar of those Canadians who are not self employed and June 15 for those who are. However, with careful tax planning throughout the year these dates could be celebratory affairs that validate the actions and decisions that are made during the year.

While many Canadians like to get a tax refund, few recognize that a refund essentially represents an interest free loan made out by you, the taxpayer, to the federal government. On the other hand very few Canadians want to pay more tax than they already do. One reason for this is that if additional tax is owed upon filing a tax return, it may necessitate the requirement to prepay tax going forward in the form of quarterly installment payments. (Note that quarterly tax installments are required when tax owed is estimated to be more than $3,000 in the current year, and tax payable in either of the two preceding years has been $3,000 or more.)

The challenge, then, is in achieving “Tax Balance”, a term that essentially means finding the right mix between tax payable and tax refundable. Some strategies to consider are:

Reduce Income Tax Payable at Source

When RRSP contributions are made through payroll deduction, income tax remittances can usually be reduced. An ideal way to do this is through a Group RSP as contributions to these plans are made on a pre-tax basis.  Those whose employer does not provide a Group RSP may still apply to have their RSP contributions accounted for at source by completing “T1213 Form” to reduce tax deductions at source.  This form may also be used to account for child care expenses.

Another way to increase your take home pay is to complete and provide your HR department with form “TD1 Personal Tax Credit Return”. This form takes into account tax credits such as the basic personal amount, child amount, spouse or common law partner amount, caregiver amount, and tuition and education amounts, along with other factors. Completing it will enable you to receive the benefit of these tax credits throughout the year as opposed to waiting to file your tax return.

Canadians also often overlook the following tax deductions and tax credits. 

Medical Expenses

Eligible medical expenses are perhaps the most overlooked tax credit, as many don’t believe that claiming them is worth it. However, eligible medical expenses can be found everywhere and include prescription glasses, dental and drug expenses for you, your partner, and your minor children. In order to claim medical expenses your total expenses must be more than the lower of either 3% of your net income or $2,109. Your medical expenses are claimed on line 330 of Schedule 1, while the medical expenses for other dependants are claimed on line 331. These expenses can be claimed for any 12 month period ending in the current tax year as long as they were not claimed in the previous tax year.

Disability Tax Credit

The disability amount is a valuable non refundable tax credit that taxpayers with disabilities can use to reduce the amount of income tax that they have to pay. In order to be eligible, a medical professional has to fill out and sign the “T2201 Tax Form”, the Disability Tax Credit Certificate, and the Canada Revenue Agency has to approve the application. The credit may also be shared with a spouse, common-law partner or dependant, in circumstances where the full amount of the credit does not fully eliminate tax payable. Additionally if you have had a disability for some time, your tax returns can be reassessed as far back as 10 years.

Family Caregiver Amount

Available for the first time in 2012, the family caregiver tax credit is a 15 per cent non-refundable tax credit on an amount of $2,000 that provides tax relief to caregivers of infirm, dependant relatives. This includes, for the first time, infirm spouses, common-law partners, and minor children.  It is also not a standalone tax credit, as it also includes enhancements to the calculation of other dependency-related credits.

Moving Expenses

If you’ve moved to a new location that is at least 40 kilometers closer to your new job or post secondary educational institution you can claim a tax credit for your moving expenses. Note that eligible expenses could include the commissions you paid to your realtor when selling your old home.

Carrying Charges

One of the most overlooked tax deductions are carrying charges. Deductible carrying charges or investment expenses include the following as well as interest, if the cost has been incurred in order to earn income from your investments:

  • Safety deposit box fees - note that the 2013 federal budget proposes to eliminate the deduction associated with this carrying charge.
  • Fees paid for the management of your investments.
  • The cost of having your tax return prepared, only if you had property or business income and you did not use the cost to reduce your business or property income.

Charitable Donations

Small donations to eligible charities can add up over the year as charitable donations, receive a 15% federal tax credit on the first $200 (worth $30) and a 29% credit on donations in excess of $200, up to a maximum of 75% of income in the current tax year. Consider optimizing charitable donations by combining the donations made by each spouse on one return.

Achieving “Tax Balance” is a constant strategy that must be continuously reviewed and evaluated, while it requires a significant amount of time throughout the year, doing so can have positive effects on cash flow and prosperity.

April 4, 2012

2011 Tax Season

Filed under: Taxes — MikeT @ 9:23 pm

Less than one month left to get your taxes submitted to CRA – have you filed yet?

If you haven’t gotten around to it yet, let me handle it for you.  With minimal cost, everything can be prepared and efiled for you.  No software to buy, no double checking or second guessing that you’ve filed correctly.  Nice and easy!

Do you know anyone, whether it be a friend, family member or coworker, that is putting off doing their taxes because they hate the annual ritual?  Feel free to pass along my name and contact info – I’m happy to help!


November 11, 2011

Did you know …. all about dividends?

Filed under: Investments — Tags: , — MikeT @ 8:17 pm

Dividends have long been associated with stability and strength. After all, it is usually the strongest and most stable companies that can pay, maintain and even grow their dividends year in and year out. Given the current investment environment; slowing economic growth, a sovereign debt crisis, general economic uncertainty, there has never been a better time to focus on the strong and stable.

Typically defined as the regular payments that are paid out to investors out of a company’s profits, dividends also form an important role in the calculation of total investment return. From a historical perspective reinvested dividends have been responsible for approximately 40% of the investment return of the TSX/S&P over the past 10 years. Although this return representation is impressive domestically it is even more so globally, as dividends have contributed approximately 60% to the return of the MSCI World Index over the last 40 years.

More recently the effect that dividends have on return can also be seen. Over the past 10 years (period ending August 31/2011) the MSCI World Index has experienced a negative return of 10% (this is a simple return and is not compounded) vs. a return of 7% on the MSCI Total Return Index. Although these indexes are comprised of exactly the same stocks the return differential can be explained simply by dividends, which are assumed to be reinvested in any total return index.

While the investment rationale for investing in companies that pay a dividend is compelling, it is not without risks. Beyond the dividend payout, one must also consider the stability of the dividend. In other words, how likely is it that the company will be able to continue to pay their dividend going forward?  To their dismay many investors in Manulife Financial discovered this in the first quarter of 2009 when the company cut its dividend in half, with the share price following.

Manulife may be a high profile example of a dividend cut, however, the reality is that more often than not, many corporations actually increase their dividends. In fact, despite the slow pace of the economic recovery, numerous companies have recently raised their payouts. For example of the 60 companies listed on the S&P/TSX 60 index, 58 pay a dividend and approximately 35 of those companies have increased their dividend payout over the past year. Moreover up until 2008 the big six Canadian banks had all increased their dividends almost every year. In December of 2010 after a three year hiatus National Bank of Canada became the first of these big banks to raise its dividend since the financial crisis. Since then all of the big six with the exception of Bank of Montreal have followed suit.

Though the dividend payout ratio may be one aspect of the investment selection process, it is far from the only one. Traditionally companies with high payout ratios have experienced one of two events. They have either increased their payout or the valuation of their shares has fallen substantially.  Consideration should then be given to those companies with strong balance sheets, a history of growing their dividends and the ability to sustain them. With US non financial companies now holding nearly $2 trillion in cash on their balances sheets, a level that is the highest in about 50 years, the possibility of further dividend increases and shareholder reward certainly exists.

And really, who doesn’t love being rewarded? There is perhaps no better feeling. On this topic oil tycoon John D. Rockefeller once said “Do you know the only thing that gives me pleasure? It’s to see my dividends come in”. This also brings to mind the old proverb “a bird in hand is worth two in the bush”, as its lesson suggests that one should not be motivated by greed. As the adage implies if you already have a bird in your hand you will be well fed. However, if you let it go to pursue two birds that you see in the bush, you may catch neither, and as a result wind up hungry for the night. This proverb points out that by passing up pay- off for one with more promise you run the risk of losing both the pay-off as well as the promising possibility.



February 4, 2011

2010 Tax Season

Filed under: Financial Planning,Taxes — Tags: , — MikeT @ 10:16 am

It’s tax time again!  I hope you’re as excited as I am.  It’s a great time to look at your entire financial picture and determine ways to cut your annual tax bill, freeing some cashflow to help move closer to your financial goals.

I’m happy to help with your tax preparation and filing needs – contact me to arrange or click here for details.  Don’t leave it to the last minute!



May 31, 2010

Your Most Valuable Asset

Filed under: Financial Planning — Tags: , , — MikeT @ 5:03 pm

As a financial planner, I’ll admit that insurance is not the most interesting topic.   Not surprising; who really wants to talk about death, critical illness or being disabled!?  For fear of losing you too quickly, I’m going to throw out some stats to think about:

  • 35yr olds have a 50% chance of disability lasting longer than 90 days; 40% for 45yr olds (1)
  • the average length of disability for a 35yr old is 2.8yrs; 3.2yrs for a 45yr old (1)
  • 1 in 4 Canadians will develop heart disease during their lives; with 1 in 2 before age 65 (2)

Canadians tend to consider life insurance before disability insurance but I think the above stats show why it’s also important to purchase disability insurance or make sure the coverage you currently have protects you properly.  Many people fall into the latter, where they already have coverage at work, but the policy payout isn’t enough to cover monthly family expenses or it only covers for 2 or 3 years (not to age 65 like you may need it!)

A colleague of mine recently shared her own personal experience with her husband’s disability.  He worked for a large company in the oil & gas industry and was given group benefits that included disability insurance as part of his typical employment package.  One day he was involved in a car accident that left him disabled and unable to work.  His group disability policy covered him for two years after the accident but that was it.  Without his pre-disability income or disability coverage, my colleague’s family struggled to make ends meet.  Canada Pension Plan payments, which took over four years to get approved, helped to replace some of the missing income but even that wasn’t enough.  It has been over twenty four years since the accident and he still is unable to work.

Having the proper disability coverage in place would have helped this family avoid the financial hardships they experienced as a result of the accident.

Many people would say their house, cottage, or retirement portfolio is the most valuable asset they have but I would argue it’s their ability to make a living.  If you or someone you know feels that they would benefit from a disability insurance coverage review, I am more than happy to help.  I recommend that this be reviewed as soon as possible.

(1) 1985 Commissioners Individual Disability Table A
(2) Heart & Stroke Foundation



February 16, 2010

2009 Market Recap

Filed under: Financial Planning,Investments — MikeT @ 7:37 pm

So how do you think stock markets performed in 2009? If you’re like 74% of investors in a recent survey, you thought the S&P/TSX was flat, down or you didn’t know (1). Only 14% in the survey actually knew the S&P/TSX posted a return over 20% (1). In fact, our major Canadian stock index posted 30.7%, its best return since 1979 (2 & 3). Although I don’t have a survey or any stats to prove my theory, I believe that investors were far more cognizant of poor market performance in 2008 when the S&P/TSX’s return was -33% (2). I’m sure the media is to blame for much of investor’s knowledge of market conditions, with their tendency to focus and trumpet the negative as oppose to the positive.

For the record, the S&P500 (a major U.S. index) and the MSCI World index produced returns of 23.5% and 27% respectively (2).

At the end of the day it really doesn’t matter if you’re up-to-date with market returns as long as they don’t swing your emotions enough to make trading decisions. Investors that get caught up in emotions are more likely to make investment decisions that lead to timing the market, resulting in buying high and selling low.

Reviewing your portfolio annually in conjunction with your financial plan is the best way to support long-term financial health. Evaluating performance and matching it to your financial goals will ensure you remain on the financial path mapped and will help eliminate the emotions involved in investing.

(1) Angus Reid Survey Results (Jan 5, 2010)
(2) globeadvisor.com
(3) Bloomberg



May 20, 2009

Financial Planning Notes – May 2009

Filed under: Uncategorized — MikeT @ 12:00 am

In my January newsletter, I suggested that when the economy recovers that it will be led by equity markets. Although it is difficult to say where we exactly are in the economic downturn, it is my opinion that the worst is behind us.

We have seen the major Canadian stock market, the S&P/TSX, wipe out losses experienced in the beginning of the year and move strongly into positive territory, up to 9.6% year-to-date(1). A major stock index in the U.S., the S&P 500, has also made up ground from the beginning of the year with only a slight year-to-date loss of -1.1%(1). While as of April 30th, the MSCI World Index has shown a 3-month return of 7.6%(1). Equity markets have traditionally been leading indicators of where the economy is headed so these potentially are signs of a recovery on the way.

Further, an economic recovery can be anticipated with signs that the global credit market is stabilizing and improving. The LIBOR, which is the interest rate offered to the world’s most preferred borrowers (strongest banks), is now down almost 5% in May 2009 on the 3-month rate from its peak in October 2008(2). My belief is that this is significant progress as it strongly encourages banks around the world to lend more money to credit worthy companies that have been struggling since the credit freeze began (hope you’re still awake after that bit of news). More borrowing is not what consumers need but is vital for companies to survive and grow, supporting commerce and keeping people employed.

There will continue to be bad news as we move along in the recession but keep in mind that this is often fallout from earlier problems that started the recession. The ripple effect is normal and usually signals the stage we are at in the economic cycle.

Whether you pay attention to economic news and indicators or ignore them, remain focused on your financial goals and stick to your plan. Economic downturns tend to be brief while short-term equity market fluctuations provide great opportunities for our professional fund managers to grow our investment portfolios.

1 – Globeadvisor.com (May 14, 2009)
2 – Dow Jones Newswire (May 14, 2009)



December 23, 2008

Financial Planning Notes – December 2008

Filed under: Uncategorized — MikeT @ 12:00 am

It has been a tough year for investing to say the least.  With 2008 nearing a close, major markets around the world have dropped 35 – 40+% this year (Source: Globeadvisor.com).  The steep decline in equity markets (publicly traded companies) has been broadly based leaving virtually nowhere to hide in terms of sectors or geographical areas.

Although some in the media may have you believe otherwise, this downturn is no different from any other in the past.  History has proven that the economy recovers after bad times, often led by a revival of equity markets.  Recovery takes time and patience.

It is natural to want to minimize losses in the short-run by moving out of equity investments and into cash.  The problem is timing the market, to get out early enough or back in before the upswing, is extremely difficult.  My belief is that past success in doing this is based mainly on luck.  Further, those choosing to time the market are potentially limiting their long-term return through missed opportunity.

The graph below shows the risk of not participating in the best performance days on the Canadian and U.S. markets from 1998 to 2007.  Moving from left to right, the first set of bars show the returns one would realize in the respective indexes if money was invested and held for 10 years.  The next set shows what would happen to returns if the investor removed money from the respective indexes and missed the 10 best days.  In the case of the Canadian index, the return would fall from an average annual return of 10% to only 5.7%, nearly losing 5%.  The remaining bars illustrate what happens if we remove additional best performance days for each index.

Staying Invested

Staying Invested

The point to take from this is investors can damage their portfolio’s long-term performance by temporarily moving out of equities during tough market conditions.  The best days on the market do not necessarily occur in consecutive strings, making it difficult to identify what opportunity has been missed.  Based on this, I believe keeping money invested in portfolios is the key to maximizing long-term returns.  Further, you may miss some great opportunities if you “wait for the market to recover” when adding new money to your investment portfolios.



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