Here is an updated list of tax software for 2011 that you can use to file your return.
Which software do you use?
Posted in General, Tax
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Tagged Tax, Taxes
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Just a heads up on some of the important dates for filing your taxes this year.
- RRSP Contribution Deadline: February 29th, 2012
- 2011 Tax Return Filing: April 30th 2012
Plan accordingly  .
Posted in Tax
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Tagged Tax, Taxes
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Given what we now know about the health risks of smoking it’s generally not a smart thing to do, but what about the financial costs? I’m, not just talking short term financial costs, but over the long term.
Let’s take a look at some numbers.
Assuming that you smoke two packs of cigarettes per day at a cost of $7 per pack it will cost you $5,110 a year. To most people, $5K a year represents a sizeable proportion of their after tax income. Note that my assumption of $7 per pack is probably on the lower end of the cost spectrum as some brand name cigarettes cost north of $9 per pack.
Extrapolating my calculation to smoking for 45 continuous years and the numbers expands to a cost of $229,950. Some of you may be thinking that $230K over 45 years isn’t too bad, but what that figure fails to consider is the time value of money. And this is where the cost of smoking gets scary.
If I chose not to smoke and instead invested what I would have spent on smoking into a diversified set of investments over 45 years here is what the opportunity cost adds up to.
If you are able to achieve a modest 5% average rate of return on your investments, the cost of smoking over the 45 year period quickly balloons to a future value of $1,806,813 or $410,650 in present day dollars when you take the time value of money into account.
Now this begs the question… what could you buy with that $1.8 million in 45 years?
 How about an annual vacation or two…
Morale of the story? Don’t smoke… you’ll die earlier and it will cost you an arm and a leg.
Found an interesting set of stats today on undergrad tuition fees by field of study (full time students). I was interested in seeing what the relative costs were for each discipline and what the average growth rate of tuition fees was from year to year.
For those without perfect eyesight (like me), click the image below to see a larger version.
Interesting takeaways:
- The average tuition fee growth rate over the last 5 years was 3.3%, which is slightly above what inflation clocked in at over that same period.
- Field of study with the largest growth rate in tuition fees: Pharmacy
- Field of study with the highest relative cost compared to average tuition fees: Dentistry
Source: Stats Canada
Tax season is just around the corner. This year don’t forget to claim these common income tax deductions to help maximize your tax return.
Education Expenses
Attending post secondary education is costly, but a gold mine of tax deductions. First of all you are able to deduct all eligible tuition fees that you pay for courses that you took. Secondly you can deduct $400 for each month that you attended a qualifying education program on a full time basis or $120 for each month that you attended part time as an “education amount” credit. Thirdly you can deduct $65 for each month that you attended a qualifying education program on a full time basis or $20 for each month that you attended part time as an “textbook amount” credit. The textbook amount credit is only available if you claim the education amount credit.
Medical Expenses
You can claim certain medical expenses that you incurred throughout the year. Some of the more common eligible medical expenses include:
- Ambulance service
- Crutches
- Dental services
- Drugs
- Gluten-free products
- Hearing aids
- Laser eye surgery
- Vaccines
- Wheelchairs and wheelchair carriers
Moving Expenses
Did you move more than 40 kilometres to attend post secondary education, start a new job or business within the last year? If so, you can deduct “eligible moving expenses” on your tax return.
What qualifies as an eligible moving expense?
- Transportation and storage costs
- Travel expenses including vehicle expenses, accommodation and meals
- Temporary living expenses for up to 15 days
- Cost of cancelling a lease for your old residence
- Cost to maintain your old residence up to a $5,000 maximum
- Cost of selling your old residence, including advertising, notary or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity
Charitable Donations
If you make a charitable donation of cash or other property to an eligible charity or institution then you may be eligible to claim a federal and provincial or territorial non-refundable tax credit when you file your return.
Interest on Funds Borrowed to Invest
Did you borrow funds to invest in income producing assets? You can deduct the interest on the borrowed funds. Careful though you must be able to prove the the borrowed funds were invested in assets with the intent of producing investment income (interest or dividends) and not purely capital gains.
Contributions to an RRSP
Contribute to your RRSP? All contributions to your RRSP are tax deductible as long as the amount that you contribute is below your RRSP deduction limit. Your RRSP deduction limit can be found on your last notice of assessment.
Public Transit Passes
Ride the bus or take the subway this year? You can deduct the cost of your monthly pass on your tax return.
As you can see there are many common tax deductions that you’ll want to take advantage of this year.
Posted in Tax
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Tagged Tax
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The Canadian Centre for Policy Alternatives has released a new report that looks at compensation for Canada’s top CEOs. Specifically, the report focuses on the top 100 CEOs who took home an average $8.4 million in 2010.
Here are some interesting stats from the report.
By 12:00 noon January 3, the first official working day of the year, Canada’s Elite 100 CEOs already pocketed $44,366 — what it takes the Average Joe an entire year, working full-time, to earn.*
By the end of 2010, Canada’s Elite 100 CEOs had pocketed an average $8.38 million. That’s a 27% increase over the average $6.6 million they pocketed in 2009.
At this rate, the average of Canada’s CEO Elite 100 make 189 times more than Canadians earning the average wage. If you think that’s normal, it’s not. In 1998, the highest paid 100 Canadian CEOs earned 105 times more than the average wage.
The most shocking statistic for me is that CEO pay expanded from 105x the average joe’s pay in 1998 to 189x in 2010! That is huge growth and evidence that the rich are in fact getting richer.
Source: View the report (PDF)
What is an RESP?
An RESP is a savings vehicle used to save money to support the post secondary education of a Canadian child.
There are three parties to an RESP, the subscriber, the beneficiary and the promoter. The subscriber is an individual who makes contributions to the RESP. Typically this would be the parents, grandparents or other relative of the beneficiary. The beneficiary is the child that will receive the benefit of the savings accumulated in an RESP to pay for their post secondary education. The promoter is an individual or an organization that manages the RESP on behalf of the subscriber and is responsible for submitting contributions to the plan and making payments to the beneficiary when it comes time to fund their post secondary education.
Generally the subscriber enters into an RESP contract with the promoter. The subscriber then names one or more beneficiaries and agrees to make contributions to the RESP for those beneficiaries over the course of several years.
What is the different between a Family Plan and a Specified Plan?
A Family Plan can name more than one beneficiary. Additionally, all beneficiaries must be related to the subscriber(s) by a blood relationship or by adoption. A Specified Plan is an RESP for a single beneficiary.
What are the main benefits of an RESP?
- Income generated off the assets inside an RESP is allowed to grow tax fee
- The Canadian Government provides several grants as an incentive to invest in RESPs
- If your child does not pursue post secondary education the subscriber is entitled to receive their RESP contributions back tax free.
Are contributions to an RESP tax deductible?
No. Contributions by a subscriber to an RESP are not tax deductible. However, if the beneficiary of an RESP does not pursue a post secondary education then the subscriber is entitled to receive their RESP contributions back without paying any tax.
Are there any RESP contribution limits?
Yes. The lifetime limit on contributions to an RESP for a beneficiary is $50,000. For any year after and including 2007 there is no annual limit to the amount you can contribute to an RESP, as long as the amount does not exceed the 50,000 lifetime limit.
What government grants are available?
Canadian Education Savings Grant (CESG): Regardless of your family income you will receive a grant worth 20% of your annual contributions up to a maximum of $500 per year or $7,200 over the life the RESP.
If you income is less than $40,970 you will receive a 40% CESG grant on the first $500 contributed to an RESP. If you income is between $40,970 and $81,941 than you will receive a 30% CESG grant on the first $500 contributed to an RESP.
Canada Learning Bond (CLB): Provides an additional incentive of up to $2,000 to help modest-income families start saving early for their child’s education. For families entitled to the National Child Benefit (NCB) supplement for their child, the CLB will provide an initial $500 to children born on or after January 1, 2004. Thereafter, the CLB will also pay an additional $100 annually for up to 15 years for each year the family is entitled to the NCB supplement for the child.
What are the eligibility requirements to become a beneficiary?
- the individual’s must have a SIN number
- the individual must be a resident of Canada
Where can I find an RESP promoter?
Most Canadian banks sell RESPs. There are also several companies the focus specifically on selling RESPs. Canadian Scholarship Trust and Heritage come to mind.
I’d like to share with you a useful budgeting tool that I developed in Excel. My objective was to calculate a quick and dirty forecast of my monthly cash flow based on my monthly income and expenses. I’ve officially named the tool “Quick Budget” to reflect that it only takes between 5 – 20 minutes to throw together a household budget.
I chose to develop the tool as an Excel spreadsheet because I find Excel the most flexible and easy to work with for these types of things.
Feel free to download Quick Budget and try it for yourself. I hope you find it useful.
Quick Budget is very simple and easy to use.
Step 1: Input you income. Precisely your monthly after tax income. If you have more than one earner in your family you can easily add additional rows to capture each person’s income. Don’t know your after tax monthly income? Calculate it using my 2011 Income Tax Calculator.
Step 2: Input your expenses. I’ve included the most common expense categories such as housing, food & groceries, transportation, clothing, communication, entertainment etc. Simply input an estimate of what you pay for each expense line each month and the template will automatically calculate out what you’ll pay for the entire year. If you pay additional expenses that are not included in my template feel free to enter new rows to account for those expenses. Just make sure you adjust the “total expenses” formula to capture all expenses.
Step 3: View your monthly cash flow. There is no action required on your part for this step. The template will automatically calculate your monthly cash flow and cumulative cash flow by month based on the income and expenses you entered previously.
Download: Quick Budget Excel Template
This is version 1.0 of my Quick Budget Excel Template. If you have any constructive feedback on how to improve the tool please send me an email.
What is Employment Insurance?
Employment Insurance (EI) provides temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own (due to shortage of work, seasonal layoffs, or mass layoffs) and who are available for and able to work, but can’t find a job.
For the purposes of this post I will be referring to regular employment insurance benefits.
What are the eligibility criteria to receive regular employment insurance benefits?
- You have paid premiums into the EI Account;
- You lost your employment through no fault of your own;
- You have been without work and without pay for at least seven consecutive days in the last 52 weeks;
- You have worked for the required number of insurable hours in the last 52 weeks or since the start of your last EI claim, whichever is shorter;
- You are ready, willing, and capable of working each day; and
- You are actively looking for work (you must keep a written record of employers you contact, including when you contacted them).
You may not be entitled to receive EI regular benefits if:
- You voluntarily left your employment without just cause;
- You were dismissed for misconduct; or
- You are unemployed because you are directly participating in a labour dispute (strike, lockout, or other type of dispute).
Do I need to apply for employment insurance benefits?
Yes you do need to apply for employment insurance benefits. EI benefits are not paid out automatically.
When should I apply for employment insurance benefits?
Apply as soon as you stop working. If you wait longer than 4 weeks after you stop working you risk losing your employment insurance benefits. Also, it takes a while for the Government of Canada to process your application so the early you submit the better.
How do I apply for Employment Insurance benefits?
To apply for employment insurance benefits you must submit an application online through the Service Canada Website.
How do I know if my application for employment insurance has been processed?
You can track the status of your application through “My Account” on the Service Canada Website.
When will I start to receive employment insurance benefits?
Once you submit your application, all the necessary documentation and your application is approved you will begin to receive payments within 28 days.
What will I be paid for my employment insurance benefits?
Numerous factors go into determining your specific employment insurance benefit so it is tough to know. The basic formula is 55% of your average insurable weekly earnings. The maximum insurable earnings (as of January 1st 2012) is $45,900. That means the maximum you will receive per week is $485.
How long will I be paid my employment insurance benefits?
Another tough one to estimate, but the range is between 14 – 45 weeks. The number of weeks that you are eligible to receive employment insurance benefits depends on several factors. Those factors include the number of hours of insurable employment that you accumulated during the previous 52 weeks prior to your claim and the unemployment rate in your region.
What types of Employment Insurance benefits are there?
There are essentially 3 types of employment insurance.
- Employment Insurance Regular Benefits are available to individuals who lose their jobs through no fault of their own (for example, due to shortage of work, seasonal layoffs, or mass layoffs) and who are available for and able to work, but can’t find a job.
- Employment Insurance Maternity and Parental Benefits provide support to individuals who are pregnant, have recently given birth, are adopting a child, or are caring for a newborn.
- Employment Insurance Sickness Benefits are for individuals who are unable to work because of sickness, injury, or quarantine.
Where can I find more information on Employment Insurance?
I have no plans to retire any time soon, but I thought it would be interesting to see how much Canadian Pension Plan (CPP) benefit I had accrued to date.
I’ve been contributing to the CPP since I started working in 2004, so I figured I must have some CPP pension benefit accumulated for when I retire after age 60.
The Government of Canada will provide you with an estimate of your monthly CPP pension benefit through their Service Canada website. Here is how you can access yours.
Step 1: Go to the Service Canada Website
Step 2: Login to your account (or register if you don’t already have one). Click the “estimate my CPP benefit” link.
Step 3: View your CPP benefit estimate summary
My CPP pension benefit estimate tells me that if I retire at age 65 I would be entitled to $408.32 per month or $4,899.84 per year. The maximum retirement pension monthly amount at age 65 for this year is $986.67 so that means I am eligible for ~41% of the maximum benefit amount.
I was quite shocked at how high these estimates were considering that I have only been contributing to CPP for 7 years and did not contribute anywhere near the maximum CPP amount in my first years of working.
So, what is your monthly CPP pension benefit estimate?
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youngandthrifty
Haha, I should get my boyfriend to read this. Le sigh. Here in Canada, it's $10 a pack! Even m...