May 2nd, 2009

Would you like to find out how to fund your home purchase with a Tax Free Savings Account?

Did you know that young couples struggling to save money for their first home will find the tax free savings accounts (TFSAs) an immense help towards becoming owners.

The Financial Posts Jonathan Chevreau has been a reliable go-to financial guru, wrote the following about building equity with the TFSA.

Consider that if both spouses each put aside the $5,000 annual maximum amount, they’d have $30,000 saved within three years–plus any growth–all free of tax.

It’s possible that a risk-tolerant couple willing to put stocks into their TFSAs while values are depressed could see that $30,000 rise to $40,000 or $50,000 in a few years time, if stocks roar back.

Of course, those who want the certainty of a down payment by a set time frame should settle for more conservative interest-bearing investments such as GICs, Canada Savings Bonds, money market funds or high-interest savings accounts.

Either way, the TFSA provides a good alternative to the previous route of borrowing from RRSPs. Under the Home Buyer’s Plan introduced in 1992, a first-time home buyer can borrow $20,000 ($40,000 for a couple) from an RRSP interest-free. The catch is this loan must be repaid within 15 years or suffer the tax hit. Such withdrawals, of course, will reduce your retirement nest egg, defeating the main purpose of RRSPs.

Find out more information by reading the rest of the article here.

April 20th, 2009

Question: Does Tax Season Stress You Out?

Answer: No, just finances in general!

The Truth: The above scenario doesn’t have to be this way. The age of the Internet means information is at your finger-tips. You can’t trust everything you read online, but would you trust information coming from the managing director, tax and estate planning with CIBC Private Wealth Management in Toronto? How about if they had a bunch of official-looking fancy initials like:  CA, CPA, CFP, CLU, TEP?

Meet Mr. Jamie Golombek.

Jamie is a contributing writer to the Financial Post and National Post. His number one resolution is to open a TFSA. According to Golombek “the new tax-free savings account, launched Jan. 1, is the ideal place to put up to $5,000 of savings and earn tax-free income and/or gains for life. Any withdrawals are not taxed, do not negatively affect eligibility for government-tested benefits and can be re-contributed the following calendar year.”

Here are a few more of his financial resolutions. The full article including the rest of Golombek’s Top 10 tax tips for 2009 is available here: 

Resolution #2: Maximize RRSP contributions. The RRSP limit for 2009 is the lesser of 18% of 2008 earned income or $21,000. Get a head start on your 2009 contribution today.

Resolution #3: Set up a spousal RRSP. The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the (hopefully) lower-income spouse.

Resolution #4: Earn tax-efficient investment income. For those who have maxed out their RRSP and TFSA contributions, consider tax-efficient investment income outside of these tax-sheltered plans by investing in Canadian dividends, which are eligible for the dividend tax credit, and capital gains, which are only half-taxable.

There are many other good ideas that Jamie lays out in his article. I recommend you go and read it at your first convenience. If you are looking for more information on whether to contribute to the TFSA or RRSP this season click here.

March 26th, 2009

If you own a Stock on the CNSX you will be pleased to hear that the Canadian National Stock Exchange has been added to the list of “Designated Stock Exchanges”, allowing securities listed on the exchange to automatically be eligible for registered accounts such as RRSPs and Tax-free Savings Accounts, CNSX Markets Inc. said Tuesday.

The designation, made by federal Finance Minister Jim Flaherty, came into effect on Jan. 1, under the Income Tax Act. 

CNSX says it is the first stock exchange to achieve this designation since the new criteria and process were announced in July 2008. Accordingly, CNSX will be added to the list of designated exchanges posted on the Department of Finance Web site. 

“This designation levels the playing field among stock exchanges in Canada and means that CNSX is competitive in all respects, including allowing investors the ability to buy and hold CNSX-listed securities in their RRSPs and their TFSAs, just as they do with other securities. Along with CNSX’s listing cost advantages and streamlined regulatory model, this will encourage more companies to choose to list on CNSX,” said Rob Cook, president of CNSX.

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