-1.jpeg?width=320&name=pexels-photo-302083%20(1)-1.jpeg "Tax-free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs)")
We often discuss the benefits of Tax-free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs), as both tax planning and retirement saving tools.
As the year comes to a close many Canadians are taking advantage of year-end tax planning strategies to minimize their tax liabilities for 2017.
Even with Canada’s provincial healthcare plans, medical expenses can add up quickly. This is because the number of expenses not covered by these plans is constantly increasing.
If you are lucky enough to have a private plan through your employer, these costs may be reduced, but for many, there is no way around partially or fully paying for unavoidable medical expenses including, but not limited to:
- Dental care
- Prescription drugs
- Ambulances
- Physiotherapy
In the previous blog, we looked at the all important task of obtaining travel medical insurance before you travel. Now, let’s look at access to funds and residency.
Access to Funds
On a very practical level, such snowbirds need to think about how they will access funds needed to live out of the country for an extended period. Many snowbir
ds are eligible to receive monthly payments from both the Canada Pension Plan (CPP)and the Old Age Security (OAS). Fortunately, it’s relatively easy to arrange for payment of both while down south, as payments of both CPP and OAS benefits can be made by direct deposit to an account at a US bank where the Canadian recipient is located. Funds deposited in this way are converted to US dollars prior to deposit, and the exchange rate used by the Canadian government will typically be better than most which can be obtained locally.
As the days shorten and temperatures drop into the single digits, the thoughts of many Canadians turn to the idea of spending at least some part of the upcoming Canadian winter somewhere much warmer — most often, in one of the southern US states. And, while the less than robust state of the Canadian dollar relative to US currency has required Canadians to downsize some of those plans, it is still the case that thousands of Canadian “snowbirds” fly south during the worst of the Canadian winter.
Wherever they are going, and however long they are staying, it’s safe to say that the thoughts of those snowbirds are on enjoying the warm weather and the sunshine, and that the potential financial consequences or income tax issues raised by their trip down south are not top-of-mind.
Just about any financial or investment transaction can now be carried out online, and many Canadians conduct most or all of their financial affairs in an online environment, whether through their financial institution’s web-based banking and investment services or by using mobile apps.
The shift to managing one’s financial matters online has extended to dealing with income tax matters, and that’s a trend which has been both aided and encouraged by the Canada Revenue Agency (CRA).
The CRA’s most notable success in encouraging Canadians into the online tax world has been in relation to the filing of the annual tax return. Motivated, perhaps, by the prospect of quicker processing turnaround and faster receipt of tax refunds, Canadians have taken to online filing of returns in droves. For the latest filing year, 2016, over 24 million individual income tax returns (or 86% of total returns filed) were filed using electronic methods.
The fiscal cycle of the federal government follows a predictable annual path. Each spring, the Minister of Finance brings down a budget outlining the government’s revenues and expenditures and its surplus or deficit projections for the fiscal year (which runs from April 1 to March 31). That budget also includes the announcement of any changes to the tax system which the government wishes to implement.
In the fall, the Minister of Finance announces the Economic and Fiscal Update which, as the name implies, provides an update of the government’s finances approximately halfway through the current fiscal year. Sometimes, as was the case this year, the Update includes announcements of additional tax changes.
For most Canadians, having to pay for legal services is an infrequent occurrence, and most Canadians would like to keep it that way.
In many instances, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.
Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons — purchasing a home, getting a divorce, establishing custody rights, or seeking legal advice about the disposition of a family estate — for which most Canadians incur legal fees.
