As December 31st approaches, the need to decide on and implement tax planning strategies for the year becomes top-of-mind for many Canadians. Under general tax rules, tax-free savings account (TFSA) contributions and withdrawals can be made at any time during the year, and registered retirement savings plans (RRSP) contributions for 2013 don’t generally have to be made before March 1, 2014. As outlined below, there are some situations, however, in which planning strategies involving TFSAs and RRSPs have to be put in place by the end of the calendar year.
Allen Koroll
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The time of year is approaching when many Canadian employees look forward to something “extra” from their employer such as a Christmas or Hanukkah gift, a year-end bonus, or an invitation to the annual employer-sponsored holiday party. While it doesn’t necessarily fit well with the holiday spirit, it’s a fact that many such gifts (even, sometimes, attendance at the annual employee holiday party) may have tax consequences, sometimes in unexpected ways.
Every year, thousands of Canadians (mostly retirees) escape our winter by traveling south, usually to the U.S., for periods lasting up to even the entirety of winter. And while the value of the Canadian dollar relative to the U.S. dollar changes on a daily basis, the two currencies have been close to par now (or the Canadian dollar above par) for the last few years, making the cost of such a vacation easier to manage.
For most Canadians, spending hard-earned money on legal fees is about as appealing a prospect as paying income taxes. And, to make matters worse, a need for legal services is often associated with life’s more unwelcome occurrences (e.g., divorce, death, job loss, etc.). About the only thing that mitigates the pain of paying legal fees (aside, hopefully, from a successful resolution of the problem that created the need for legal advice) is being able to claim a tax credit or deduction for the fees paid.
For many Canadians planning their retirement, a pervasive worry is outliving one’s savings. A big part of the reason why they fear such an eventuality is that such savings could as a result of unexpected major medical costs be depleted.
The Canada Revenue Agency doesn’t publish information or statistics on the number of individual taxpayers who owe it money in the form of back taxes, interest, or penalties. Nonetheless, it is a safe assumption that some percentage of the 25 million or so Canadians who filed a tax return this past spring either couldn’t pay their 2012 taxes when due or still owe money from past years – or both. Being unable to pay one’s bills on time and as due obviously isn’t desirable no matter who the creditor is. There are, however, a number of detailed reasons why owing money to the tax authorities is a particularly bad situation to be in.
It shouldn’t be news to anyone that while the cost of obtaining a post-secondary education continues to rise, the government’s financial support of post-secondary institutions has, no less, declined. Additionally, the generous government student loan and grant programs available to earlier generations of students are no longer as generous as they once were. A realistic annual budget (including tuition, residence, and textbooks) for even a general arts or science undergraduate program now runs between $15,000 and $20,000. And, where a student decides to pursue post-graduate work or to enter a professional study program like law, dentistry, or medicine, those costs will skyrocket.
The baby boom generation, whose members are now between the ages of 48 and 67, is also known, with good reason, as the “sandwich generation”. Many baby boomers are now in the position of needing to provide some degree of practical support or care to aging parents while also trying to save for their own retirement and to provide for their children. Those children are, in many cases, enrolled in costly post-secondary education programs or, having finished their education, remain living in the family home.
