Category Archives for "Personal Finances"

Did you Move this Year? Can you Claim Moving Expenses?

By Randall Orser | Personal Finances , Personal Income Tax

Moving is probably one of the most strenuous things we do in our lives, and, sometimes expensive. The government has seen fit to at least let you write-off your moving expenses when it’s for school, a new job, or starting a business. Of course, with anything the government does there are conditions. 

Can you claim moving expenses?  

You can claim eligible moving expenses from the employment or self-employment income that you earned at your new residence if: you moved and established a new home to work or run a business at a new location; or you moved to be a student in full-time attendance in a post-secondary program at a university, college or other educational institution.

You moved at least 40km closer to your new work or school.

You cannot deduct your moving expenses from any other type of income such as investment income or employment insurance benefits even if you received this income at your new location.  Also if you received a reimbursement for an allowance for your moving expenses you need to include this amount in your income or reduce your moving expenses by this amount.  You may also be asked to provide a letter from your employer to say that you were not reimbursed for moving expenses. 

If your moving expenses were greater than your net income earned at the new location you can carry forward and deduct the unused part of your moving expenses from employment income for the following years. 

What can you write off as moving expenses?

If you qualify, you can claim reasonable amounts that you paid for moving yourself, your family, and your household items. Not all members of your household have to travel together or at the same time.

Transportation and storage costs (such as packing, hauling, movers, in-transit storage, and insurance) for household items, including boats and trailers.

Travel expenses, including vehicle expenses, meals, and accommodation, to move you and your household members to your new home. You can choose to claim vehicle and/or meal expenses using the detailed or simplified method.

Temporary living expenses for up to a maximum of 15 days for meals and temporary lodging near the old and the new home for you and your household members. You can choose to claim meal expenses using the detailed or simplified method. If you choose the simplified method, although you do not have to submit detailed receipts for actual expenses, we may still ask you to provide documents showing how long you stayed at the temporary lodging.

Cost of cancelling the lease for your old home, except any rental payment for the period during which you occupied the residence. However, you cannot claim rental payments for any period before the cancellation of your lease, whether or not you occupied the home during this period.

Incidental costs related to your move include the following:

  • Changing your address on legal documents;
  • Replacing driving licences and non-commercial vehicle permits (not including insurance); andutility hook-ups and disconnections.
  • Costs to maintain your old home when vacant (maximum of $5,000) after you moved, and during a period when reasonable efforts were made to sell the home. This includes interest, property taxes, insurance premiums and heating and utilities expenses.

These costs must have been incurred when your old home was not ordinarily occupied by you or any other person who ordinarily resided with you at the old home just before the move. You cannot deduct these costs during a period when the old home was rented.

  • Cost of selling your old home, including advertising, notary or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity.
  • Cost of buying your new home if you or your spouse or common-law partner sold your old home because of your move. These costs include legal or notary fees that you paid for the purchase of your new home, as well as any taxes paid (other than GST/HST) for the transfer or registration of title to the new home.

How to Calculate your Moving Expenses

​​​​​​​Detailed Method 

Meal expenses
If you choose to use the detailed method to calculate your meal expenses, you must keep all your receipts and claim the actual amount that you spent.

Vehicle expenses
If you choose to use the detailed method to calculate your vehicle expenses, you must keep all receipts and records for the vehicle expenses. Claim the actual amount that you spent for your moving expenses during the tax year.

Simplified Method

Meal expenses
If you choose to use the simplified method to calculate your meal expenses, you may claim a flat rate per person. For the 2020 tax year it’s $23/meal up to a maximum of $69/day (including sales tax), without receipts. Although you do not need to keep detailed receipts for actual expenses, you may be asked to provide some documentation to support your claim.

Vehicle expenses
If you choose to use the simplified method to calculate the amount to claim for vehicle expenses, multiply the number of kilometres by the cents/km rate for the province or territory where the travel began. 

For the 2020 tax year it ranges from 47¢ for Alberta to 59.5¢ for the Northwest Territories. The CRA may still ask you to provide some documentation to support your claim. You must keep track of the number of kilometres driven during the tax year for the trips related to your moving expenses.

How to Prepare for your Taxes in 2021

By Randall Orser | Covid-19 , Investments , Personal Finances , Personal Income Tax , Retirement

For Canadians preparation for our 2020 tax return is going to look a little different this year.  Many of us take a closer look at our financial situations at the beginning of a new year with a view to reducing our tax bill and boosting our tax refund.  However this new year the two biggest changes we have to take into account are any emergency benefits and relief measures we may have received due to the pandemic and the amount that we can claim if we worked from home in 2020 due to Covid. 

Covid-19 Benefits

The CERB benefits you received are taxable - when you first received these benefits the government did not withhold the tax at source so you will have to include 100% of this money in your income for the year and you will have to pay tax on it.  The government will send you a T4A tax reporting slip for 2020 showing the amount that you will have to report.

The amount of tax that you will have to pay will depend on your total income for the year.  For example if your work income was $27,000 and you received $8000 in CERB benefits your taxable income for the year will be $35,000 and both your earnings and the CERB amount will be taxed the same way.  If your income is less than $12,000 for the year you will not have to pay any tax on your income. 

If you received the Canada Recovery Benefit, Canada Recovery Sickness Benefit or Canada Recovery Caregiving Benefit that became available in September the government withheld 10% in taxes at source.  However this may be insufficient to cover your tax due for 2020.  In addition if your additional income for 2020 is more than $38,000 then you may have to pay back the CRB at a rate of $0.50 for each dollar you received, so you should set aside some funds to cover the tax you may owe.  

If you received Covid-19 benefits that you were not entitled to, you were asked to return the funds by the end of 2020.  You were not obligated to do so but it would have been the best scenario for most people.  If you did not pay the money back then the amount will show up on your T4A for 2020 and you may have to pay taxes on it.  Any repayments will be shown on a T4A slip for 2021 which will allow you to claim a deduction on your 2021 income and benefit return.  This process is based on general rules in the Income Tax Act that apply to repayment of taxable income.  

The Simplified Home Office Deduction

2.4 million Canadians worked from home because of Covid-19 this year and may be able to claim some home office costs on their 2020 tax return without providing receipts or asking employers to fill out a T2200 form.  If you have been working from home for more than 50% of the time over at least four consecutive weeks in 2020 due to Covid-19 you will be able to claim a deduction of $2 for every day up to a maximum of $400.  The CRA calls this a temporary flat rate method of calculating the home office deduction.

For those who have more significant home expenses you will need to use the more detailed method to calculate the home office break.  You need to gather together all your home expenses including utilities, internet, heating, hydro etc to decide which method you want to use to claim your home office expenses.  For more help use the CRA's new online calculator.  

From an article by Erica Alini

2021 Tax Changes That you Need to Know About

By Randall Orser | Personal Finances , Personal Income Tax

Income Tax is the biggest expense for all Canadian families so it is important that you are familiar with changes for each tax year so that you can keep more money in their pockets.  2020 was a very unique year and many people are wondering what their taxes will look like in 2021.  In 2020 the tax filing deadline was extended to June but in 2021 the filing deadline is back to April 30th.

Here are some important changes to note for 2021

  • Federal and provincial income tax brackets are increasing to keep up with inflation.
  • Employment Insurance premiums are staying steady at 1.58% in 2020 but maximum insurable earnings will increase from $54,200 to $56,300.
  • Maximum pensionable earnings the amount used by the government to calculate contributions to the Canada Pension Plan will increase to $61,600 up from $58,700 in 2020, and the employee and employer contribution rates will be increasing to 5.45% from 5.25% in 2020.
  • The Canada Child Benefit will continue to be indexed to inflation.  The maximum that parents will receive is $6,765 for children under age 6 an increase from $6,639 in 2020.  For children ages 6 to 17 the amount will be $5,708 up from $5,602 in 2020.
  • The tax free savings account (TFSA) contribution limit for 2020 is $6000.  If you have never contributed to a TFSA and you have been eligible since 2009 you will have $75,500 contribution room.
  • The current basic personal amount a non refundable tax credit that all taxpayer can claim is $13,229 in 2020. 
  • Any maternity or parental benefits received through EI will be tax-exempt at source starting in 2020 which means an additional $1,800 a year for someone who receives EI benefits and earns $45,000 per year.  
  • For parents of disabled children the Child Disability Benefit has increased so that families could get an additional $2,000 a year.

If you are not sure what you are entitled to claim on your income tax return you should think about consulting a professional income tax preparer for help.  

From an article by Sean Cooper

When Should you Start Contributing to an RRSP?

By Randall Orser | Investments , Personal Finances , Retirement

The annual deadline for contributing to your RRSP is coming up soon, this year the deadline falls on March 1st.  This is the time of year when many Canadians consider if they should start to contribute to an RRSP, or if they already contribute, should they add to their plan, how much and when.

When you contribute to your RRSP that amount is deductible from your total income for that year which means that you can reduce your taxes due.  In addition income earned in your RRSP such as interest, dividends and capital gains grows tax free until it is withdrawn.  So if you contribute to an RRSP early in life when you retire you will benefit from the compound growth accumulated over time.  Funds in your RRSP can also be used to buy a home through the Home Buyers Plan, or to further your education using the Lifelong Learning Plan.

If you are wondering whether to contribute to your RRSP or your Tax Free Savings Account experts say that if you are in a higher income bracket should pick a RRSP over a TFSA so you can take advantage of the tax deduction today and withdraw retirement funds at a lower interest rate in the future.  If you are in a lower income bracket and you are unsure if can keep the money invested long term it is probably better to contribute to your TFSA.  

If you are wondering when you should contribute to your RRSP experts recommend contributing small amounts regularly throughout the year instead of a lump sum at the deadline, it can sit in a savings account until you are ready to invest it.  Once you do invest it leave it there to grow tax free, it is out of sight and out of mind.  As long as you do not go over your contribution room allowed (as shown on your Notice of Assessment) you can put money in and claim the deduction that year or in a future year, this is a good strategy for people who are currently have a lower income but expect it to rise in a future year.  

If you are married or common-law you can also consider contributing to a spousal RRSP.  In this instance the higher earning spouse will contribute to the spousal RRSP and will receive the tax break which will reduce the overall taxes the couple has to pay.

If you are unsure about the best way to save for your retirement it is a good idea to consult a financial advisor.

From an article by Brenda Bouw

Small Business Loans for Women

By Randall Orser | Budget , Personal Finances , Small Business

Businesses owned by women account for about 38% of small businesses in Canada and they are the fastest growing segment of entrepreneurs.  Just like other small businesses they need borrowed capital to purchase inventory and other business needs and to grow their business.  Despite the growth traditional funding sources give fewer loans to women than men despite all businesses sharing the same challenges.

Here are some financing tips for women owners that might help them to prepare and qualify for a small business loan.

1.  Do not use your personal credit to pay for business expenses - although many small business owners use their own personal credit to start their business it is not a good long term strategy as the business grows.  While your personal credit might be sufficient to get you started when your expenses are low as your need for capital increases using your personal credit can become a problem and it does not help your company to build it's own strong business credit score.   It is a good idea to open business accounts with companies such as Staples, Home Depot and Lowes to help your business credit score.

2.  Ask your suppliers if they offer payment terms - although this maybe not as good as getting a business loan but in the early stages of your business establishing a strong credit profile with your suppliers will help you to secure a loan down the road.   Many suppliers offer a credit account to their customers and this is one of the best ways to start building a strong credit score, however it is important that they also report your good credit history to business credit bureaus. As this is so important you should always encourage your suppliers to do a report for you.

3.  Look outside your bank - most business owners will try to secure a loan from the bank where they already have their business account or personal account.  Although this seems to make the most sense those banks often have more stringent requirements for loans that new businesses cannot meet.  It makes sense to look into other options for loans from lenders who are will work with younger businesses and measure the health of the whole business rather than the personal credit score of the owner.  One suggestion might be the Business Development Bank of Canada.  Visit the Canada Small Business Financing Program for more information on loans for small businesses.

From an article by Ondeck.

Working from home? Canadians may get a $400 Tax Deduction

By Randall Orser | Employees , Personal Finances , Personal Income Tax

In early December 2020 in a proposal announced by the Federal Government the CRA would allow employees working from home due to Covid-19 to claim up to $400 in modest expenses without questions.

For many of us, working from home has become the norm and it is likely to stay that way for a while if not become a permanent reality.  For many us it means working on the kitchen table, in the dining room or wherever you can set up office space, but wherever it is there is a good chance that your bills have increased.  For those people who usually work from home in their home office, deducting home expenses on their tax return is the norm, but with so many more people working in their spare room or basement the federal government is looking at ways to simplify the process of claiming expenses.

Currently salaried employees who work more than 50% of the time from home are currently eligible to deduct part of the expenses related to their workspace such as electricity, heating and maintenance as a work-space-in-the-home-expense.  

The proposal that the CRA would allow a $400 claim for modest expenses was In the government's Fall Economic Statement for 2020 released November 30th, and would help taxpayers to access the deductions they are entitled to receive while simplifying the tax filing process. It means that employees can generally avoid the T2200 form that their employer would normally complete to tell the CRA that the employee has incurred mandatory expenses while working from home.  

More information on this proposal is expected in the coming weeks.

From an article by Stefan Labbe

What can we do to Revive the Economy?

By Randall Orser | Business , Covid-19 , Investments , Personal Finances

Canada's financial experts are looking into their crystal balls and predicting what the future might hold for the Canadian economy and how it could rebound post-covid.  Until March 2020 our economy seemed stable and secure despite other world events and trade wars we had reliable growth, strong employment, steady interest rates and cities were booming.  Then the pandemic hit and the world closed down.  

The government issued massive wage and unemployment subsidies and our deficit ballooned.  One million jobs were lost resulting in 13.7% unemployment the highest that Canada has seen since the Great Depression.  The pandemic also brought to light many problems in our society that we had been largely ignoring such as massive inequality, gaps in social assistance and vulnerable supply chains.  

Vaccinations have now arrived and we can see some light at the end of the tunnel and the question is now, what will our economy look like when the dust has settled?  Here are some predictions from financial experts.

1.  "Wage subsidies will help to save retail businesses" - until most people are vaccinated there will be sporadic shut downs so continuing with wage subsidies will help to keep businesses from going under. Pedro Antunes - chief economist, Conference Board of Canada

2.  "Small businesses will need more than government loans to survive and workers will need more support." Werner Antweiler - associate professor, Sauder School of Business

3.  "Businesses will need better access to rent relief, the current government has been a failure so more help is needed."  Laura Jones - executive vice president and chief strategic officer, Canadian Federation of Independent Business

4.  "Employers need to adopt flexibility for their workers to encourage them to grow resulting in better productivity and morale."  Jean McClellan, national consulting people and organization leader, PwC Canada

5.  "Automation will replace millions of jobs - and that's not necessarily a bad thing".  Companies investing in training for their existing workforces will help to sustain livelihoods without major disruption. Linda Nazareth, senior fellow for economics and population change, the Macdonald-Laurier Institute.

6.  " Business travel will come back safer though it will probably take three years or more to return to normal levels of business travel."  Nancy Tudorache, regional vice-president, Canada, at the Global Business Travel Association.

From an article by Ali Amad

Personal Finance Resolutions for 2021

By Randall Orser | Budget , Happy New Year , Investments , Personal Finances , Personal Income Tax , Retirement

As 2020 disappears into our rear view mirror and 2021 is upon us once again it is time to think about  our financial New Year's Resolutions.  As always it is best not to be too ambitious with your financial plans for the new year or you might be unable to stick to them.  Instead take a realistic look at your current financial situation and focus on quick and easy ways to manage personal finance tasks that will help you this year and in the future.  Here are some things to consider:

Top up your Emergency Fund - Financial experts recommend setting money aside for emergencies but even so most of us do not have an emergency fund.  Many people will have dipped into their emergency fund during 2020 so now is a good time to start rebuilding it if you are able to.  You should aim to have enough to cover your expenses for 3 to 6 months should you lose your job, enough to cover unexpected vehicle repairs, house repairs or medical expenses.

Contribute to your RRSP - This is a good time to open a RRSP if you don't yet have one.  If you regularly contribute perhaps you can increase your contribution in 2021 if you have enough room without over contributing.  

Sign up for Automatic Bill Payments - This will help you to not miss payments on your bills.  Include a minimum payment on your credit card which will avoid late payment fees.  Consider an automatic payment to your savings account from each pay check, what you don't have you don't miss!  It is usually easy to set up automatic payments on your bank's website.

Switch from a Bank that Charges Monthly fees to one with no Monthly Fees - There are many banks and credit unions out there that do not charge monthly fees for regular personal banking transactions.  Switching your account could save you at least $100 a year and maybe more.  If you don't want to change banks ask if your current one will waive your monthly fees.

Make Calls and Lower your Payments - It could be worth spending time calling your service providers especially for internet and cable to see if there is a way to reduce your monthly rates.   You should also look into the interest rates that you are paying on your credit cards and think about changing to a card with lower fees or cash back.  As most of us are not travelling at present it might be a good idea to get rid of your travel points credit card with it's high fees and change it to a regular card with a lower rate.  You could also try and negotiate a lower rate with your credit card company.

Update your Beneficiaries - Have you reviewed your will lately? This is a good time to make updates to your beneficiaries or any other information as your circumstances may have changed.

Check your Credit Report - Make sure that your credit report does not contain any errors or charges relating to identity theft as your credit score will affect your ability to get loans or lower rates on your credit cards.

Change your Passwords - It's a new year and time to change those passwords especially for your bank account and credit cards.  You should be doing this every three months but at least once a year will help to avoid identity theft.

Do a Subscription Audit - Take a look at your monthly subscriptions for streaming tv services, apps, news providers etc.  How many of these do you actually use?  If you have not used it for a while and don't intend to use it in the foreseeable future then deactivate it.  You can always reactivate it later if you need to.

Tweak your Budget - Though setting a budget can be intimidating it will help you to keep track of your spending.  If you are working from home and not spending money on Starbucks and lunches perhaps you could put that money into your savings account?

From an article by Mike Winters

Tips to Avoid the Post-Holiday Finance Blues

By Randall Orser | Budget , holiday season , online shopping , Personal Finances

Every holiday season we try to resist the temptation to overspend, but for those of us who are not successful, we have to deal with the post-holiday finance blues when the credit card bills arrive in January.  2020 has been a difficult year for all of us especially financially so this season it is important more than ever to stay within our budget.  Here are some ideas that might help you to keep your spending in line.

1. Pause before you act - remember last year and how long it took you to pay off those credit cards?  This year instead of splurging too much on gifts for your family and friends, consider making home made gifts, they are often more appreciated.

2. Set a budget and stick to it - according to the annual Holiday Spending Survey by the CPA only 39% of Canadians save all year for their holiday purchases.  Maybe you should consider doing this for Christmas 2021 but in the meantime make a sensible budget for gifts and food and stay to it.  Due to the pandemic it is expected that people will spend less in 2020 as they will not be going to parties and travelling, even so it will be easy to overspend on making your Christmas at home memorable.

3. Avoid credit at all costs - Most of us get a rude awakening in January when those credit card bills arrive especially those with high interest rates.  Even though stores may be offering you a discount on purchases remember if you have to pay high interest rates on their credit cards that discount can quickly disappear if you do not pay off your bill in full.  

4. Think about an app to track your spending - tracking your spending is essential to prevent going over your budget.  Even if you have set a limit it is so easy to overspend on gifts and and all the frills for an enjoyable holiday.

5. Be creative and responsible - People you care about do not want you to go into debt to give them gifts.  Instead overspending on gifts think about what you can do for them which may mean a whole lot more, such as babysitting, making them meals or treats, help with minor repairs or just spending time with them. 

6. Give younger kids experiences not stuff - Instead of giving them lots of toys that they easily become bored with, how about signing them up for sports, or giving them event tickets to use when the pandemic is over?  

7. Resist those Boxing Day sales - Shopping on Boxing Day is a bargain hunter's dream, but in reality many items can be found cheaper at other times of the year.  You need to have amazing willpower not to impulse buy even online.  This year most of us will not be going to the mall and the good thing about online purchasing is that you can do your research for the best price, and really think about whether or not you really need to buy the item at all. 

From an article by Mathieu de Larjartre

Canadians Plan to Spend Most of Their Seasonal Budget on Gifts

By Randall Orser | Budget , holiday season , Personal Finances

A 2020 holiday spending study by CPA Canada has shown that despite the pandemic shoppers have managed to save money for holiday gifts, and most people will be spending $588 this year compared to $583 in 2019.  In a normal year most people would be busy making lists and planning celebrations but this is far from a normal year and even though Covid-19 continues to ravage the economy most people have managed to set money aside for gifts even if they cannot celebrate with work colleagues friends and loved ones.

People will spend the most on gifts this year - To try and make up for this difficult year and treat themselves people will spend money on electronics, furniture and beauty products.  Old fashioned gifts such as board games will be popular as people will be stuck at home. 

Spending on entertainment will be down - The survey showed that 13% of respondents planned to spend nothing at all on entertainment outside of the home, and those who are venturing out plan to spend less than $200.  The usual Christmas socializing will not be happening, no corporate or personal Christmas parties, so there will be no temptation to overspend, for example on fancy clothing.  

There will be a lot less travelling - Travel is expected to take a big hit, over a third of respondents to the survey said they would not be spending anything on travel, 38% will be spending less than $200.  Travel can be a big expense for families at Christmas but most will be staying close to home this holiday season.

In person shopping will be down - Only 30% of respondents to the survey planned to shop in bricks and mortar stores and will be shifting to online options.  One in three people will be doing the majority of their shopping online compared to one in five in 2019.  Rushing around crowded malls to do last minute shopping will not happen for most shoppers this year, instead they have to plan their shopping online early in order to get  deliveries in time for Christmas.

It's ok to treat yourself - Financial experts say that Canadians should not be too concerned about treating themselves this Christmas as long as they do not go too far overboard.  After a tough year everyone should enjoy themselves at Christmas.

From an article by Margaret Craig-Bourbon

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