Year-end Tax Planning – part 2!

Greetings once again – this next commentary will focus on some of the less well-known items on the list – starting with self-directed RESPs – Registered Education Savings Plans.

There are a few different types, but generically they typically invest in mutual funds, segregated funds (legally and correctly known as Individual Variable Insurance Contracts) or GICs/Term Deposits. Nothing fancy, but remember, the contribution period in order to potentially qualify for the CESG – Canadian Education Scholarship Grant – is on a calendar-year basis – no 60-day grace period as there is for RRSPs and Spousal RRSPs – it works the same as TFSAs – Tax Free Savings Accounts – calendar year deposits only.

If you are planning to make a contribution, a deposit to a plan of $2,500 should get you the annual maximum of $500 in CESG from Her Majesty. Miss it in 2012, you don’t get to “catch up” in 2013.

If the CESG is not an important factor for you, remember there is NO maximum age at which you can start a self-directed RESP! You can be 60 years of age and decide that on retirement you want to go back and get that lost BSc or MBA – you can use an RESP for yourself too!!

Switching now to self-employed people – regardless of industry – one of the key tax savings available to you is a Private Health Services Plan or PHSP. These are available through most financial advisors and you can contribute up to $1,500 per year (January 1st to December 31st – no 60-day grace period – and also not cumulative for missed deposits) for your-self, $1,500 for your spouse and $750 for each eligible dependent. Talk to an advisor to learn more about these interesting creatures – the potential benefits are very substantial!

Next for the self-employed are equipment purchases and software purchases. If you know you are going to need a new version of software for business purposes, but it now – you can generally claim the full amount as a deduction in the year of purchase if the cost is less than $1,000 (before taxes) – if more than $1,000, consult CRA tax bulletins to review write-off rates and duration.

The same applies to business equipment – if initial cost is less than $1,000, generally you can deduct it in the year of purchase – if more than $1,000, then it generally has to be amortised over a few years – again, refer to CRA bulletins or their website for more information.

For the rest of us, you may want to consider prepaying for Physical Education programs that qualify for the Fitness tax credit and getting your transit passes early if you can.

When in doubt – check with CRA via their website at www.cra.gc.ca or your tax preparer or accountant for other tips to maximise your deductions and tax credits! Cheers

Ian Whiting

Ian R. Whiting CD, CFP, CLU, CH.F.C., FLMI (FS), ACS, AIAA, AALU With more than 40-years of experience in the industry, Ian has qualified 3 times for MDRT, completed LUATC in 1979, the LUAC Financial Planning Skills Course and attended numerous Schools in Agency Management and Sales Management through LIMRA. He obtained his CLU in 1987 while also completed his IFIC qualification and completed his Fellowship in the Life Management Institute with a specialty in Financial Services in 1988. In 1989, he completed qualifications for his Chartered Financial Consultant designation. In 1992, he qualified as an Associate of the Academy of Life Underwriters (Head Office underwriter qualification) and in 1993 he completed his Associate, Customer Service designation program through LOMA. In 1997, he qualified as a CFP and also completed his courses and exams to obtain the Associate, Insurance Agency Administration designation. In 1999, he completed the study and examinations to qualify as a Trading Officer, Partner and Director for Mutual Funds with the BC Securities Commission. As a result, he is also qualified as both a Branch Compliance Manager and Head Office/Provincial Compliance Officer. He served for nearly 18 years with the Canadian Forces (Air) Reserve (reaching the rank of Captain) primarily working with Air Cadets and was award the Canadian Forces Decoration (CD) in 1982. Long known as a maverick and forward thinker in the financial services world, Ian enjoys the challenge of learning new material and planning for the future evolution of his chosen profession.