August 2017 - Beacon Family Office

Maximizing Tax Deductions as a Parent

As a parent in modern society, it can be difficult to make ends meet given how low the Canadian dollar is and the multitude of expenses related to raising a child. However, there are several ways to minimize tax deductions and make life easier for yourself, your spouse, and your children. Here’s how to do it.

Apply for Benefits

When tax time rolls around, fill out the RC66 Canada Child Benefits Application. This used to enable parents to apply for the Canada Child Benefit (CCB), which was worth a maximum of $6,400 annually per child 6 years old or under, and $5,400 per year for each child between 6 and 17 (note that these amounts reduced when family net income exceeds $30,000). However, the Canada Child Tax Benefit (CCTB), the National Child Benefit Supplement (NCBS), and the Universal Child Care Benefit (UCCB) replaced the CCB in 2016. This means that CCB does not to be applied nor is taxable, but adjustments can be requested. You may also apply for the Child Disability Benefit (CDB) if applicable. Parents have the option of registering online as well, or even upon registering a birth. The biological mother is considered the primary caregiver, so all social benefits are directed to her, but the lower-income parent must report the income on their return regardless. Same-sex parents are permitted to designate a primary caregiver in their application to ensure that they are eligible for benefits, also.

Claim Expenses

Fees and expenses paid for by parents for child care while at work, school, or during research need to be claimed to help create comprehensive and accurate tax-deductible figures so long as the child is under 16 years old sometime during the year (this rule doesn’t apply to children with disabilities, however). The more that you include, the likelier it will be that these deductions will decrease in size. Then, attach Form T778 Child Care Expenses Deduction to your return, bearing in mind that the lower-income partner is required to claim expenses unless if enrolled in studies, suffering a long-term illness, imprisoned, or separated.

Claim Credits

While adding expenses to your forms, be sure to include those that could be credited upon your return. Children’s Fitness, Disability, and Family Caregiver amounts are examples of creditable expenditures. For sports (refundable) and arts (non-refundable) program fees, up to $500 and $250 per child under 16 (18 if disabled) can be claimed, respectively. To transfer a child’s Disability Amount to your return, use line 316 of the federal worksheet to ensure accurate calculation, followed by line 318 to calculate how much can be transferred to you, followed by entering the total on line 318 of Schedule 1. To claim the Family Caregiver Amount if your child has a long-term illness or is infirm but not necessarily disabled, include a signed doctor’s statement that details when the illness or impairment began, its expected duration, and that it makes the child depend more on personal assistance than children of their age group. Enter the number of children you are claiming for in box 352 and multiply by $2,121, then claim the calculated result on line 367.

With these adjustments applied to yours and your spouse’s return (if applicable), you can expect a decrease in tax payments and a higher payout than usual from the CRA. If you require detailed information or guidance or would like to discuss further tax planning strategies, The Beacon Group of Assante Financial Management Ltd. is ready to lend a helping hand.

Understanding Pension Splitting

Since its inception in 2007, pension splitting has enabled taxpayers in a common-law relationship or marriage to split eligible pension income with a spouse, provided they meet all requirements. A useful way of saving on taxes and mitigating credit erosion, pension splitting allows for couples to work together to create a more sound and secure future.

The Basics

Two spouses or common-law partners both residing in Canada at the end of the taxation year are able to jointly elect to split eligible pension income. Each taxpayer files CRA Form T1032 – Joint Election to Split Pension Income with their individual returns. This means that it isn’t split at source, unlike CPP sharing (when possible). One spouse can claim up to 50% of reported income, and their partner can claim a like amount. Pension splitting is subject to proration depending on changes in marital status or death, and unique elections can be made annually.

Qualifying Sources of Income

There are several sources of income eligible for pension splitting. Those aged 65 or older on December 31 of a given tax year can allocate up to 50% of qualifying income to a spouse of any age. Additionally, amounts may be paid out of RCA payments in the form of life annuities (not exceeding $102,005.40 for 2017), as well as RPPs and retroactive lump-sum payments. Taxable RRIF payments to the annuitant and/or a beneficiary also qualify, including those from locked-in plans. However, bear in mind that RRSP withdrawals do not qualify and, as a result, if an amount has rolled over to an RRSP, the RRIF or annuity can’t be split. There are many more qualifying and disqualifying sources of income, and it is recommended to consult the CRA’s list for further information.

The Advantages of Pension Splitting

The biggest benefit is that if the spouse being allocated the income is in a lower tax bracket, overall income tax savings rise dramatically. Additionally, only income qualifying for the $2000 pension credit is eligible for splitting, which means that generating income qualifying for it will save even more tax. Spouses receiving allocated amounts may also be eligible to claim this credit in certain circumstances. Another advantage of pension splitting is that it minimizes or even eliminates the erosion of the age credit, which is normally reduced once a taxpayer’s net income exceeds a threshold amount ($36,430 in 2017). The same rules apply for Old Age Security (OAS), which is also better protected against reduction.

Pension splitting enables for retirees to worry less about scraping to make ends meet, thanks to its ability to reduce taxes and raise credits while protecting against erosion. If you and your spouse or common-law partner are considering pension splitting, The Beacon Group of Assante Financial Management Ltd. can help clarify whether or not it is a viable option, and discuss this and other retirement planning strategies.

How to Improve Sleep Hygiene

Obtaining a healthy and restful night’s sleep on a regular basis helps to improve productivity and overall quality of life. However, many of us simply fall into bed when it is convenient or don’t implement lifestyle adjustments that allow for a healthier night’s rest. Here are some ways you can improve your sleep hygiene and feel more refreshed each morning.

Avoiding Stimulants, Fats, and Sugars Prior to Bedtime

That last cup of coffee or nightcap can disrupt the effectiveness of your sleep cycle, particularly during the second half of the night when your body begins to process alcohol, caffeine, and sugars. Cutting them and fats, spices, and carbonated beverages out of your evening ritual can help to enhance overall sleep hygiene, and it doesn’t hurt to make it a rule to brush your teeth a little earlier so as to avoid temptation.

Put the Phone Down

The light emitted by your smartphone’s screen can cause for a horrid night’s rest fraught with discomfort and irritability if you’re not careful. Laying in bed and scrolling through social media news feeds until you pass out is going to do you no favours in regards to a restful sleep and refreshed body — in fact, it can sap your energy even more quickly and cause you to get up n the wrong side of the bed in the morning. If you absolutely must check that final email before bed, however, enable your phone’s blue light filter to minimize eyestrain and better simulate natural lighting.

Limit Daytime Nap Length

As we get older, we fall into the habit of taking catnaps to compensate for inadequate nighttime sleep. However, sleeping for hours during the day can wreak havoc on our internal clock and mood, making it more difficult to properly sleep at regular hours. Naps are all well and good, but set an alarm and limit them to half an hour long. In fact, naps of 30 minutes or less can help to boost alertness, overall mood, mental stimulation, and even performance. Don’t waste the potential of a nap by lying down for half the day.

Regular Exercise

While it should be embraced by middle-aged people either way for various physical and health benefits, practicing regular exercise helps to promote high quality sleep. Even as little of ten minutes of aerobic exercises — such as a walk or bike ride — can make a major difference. Bear in mind that this should be approached in moderation, however, as working out strenuously close to bedtime will have negative effects on your sleep cycle. The overall effects of regular exercise vary from person to person, so try different approaches and activities to see what works best and helps you sleep most comfortably.

Good sleep hygiene promotes good mental and physical health. Feel less drained in the morning by encouraging a healthy night’s rest, and you’ll be refreshed and comfortable every morning, ready to handle each day.

5 Ways to Get the Most Out of Telecommuting

Working from home can save countless hours and untold stress when compared with commuting into the office on a daily basis and sitting in gridlock on Deerfoot Trail. Telecommuting enables you to freely perform workplace tasks from the comfort of your own home environment and gives you the flexibility to run errands or shuttle the kids from one practice to the next as needed. Working from home can supercharge your productivity, but it takes focus and discipline. Here are a few tactics that can help:

Stay Away from Social Media (During Working Hours)

This is an obvious tip, but one that many of us don’t adhere to. Minimizing our social media presence (or outright blocking it using Firefox or Chrome plugins) during preset working hours helps to eliminate distractions. That next refresh of your Twitter feed or scroll on LinkedIn can result in procrastination and a lack of focus if you aren’t careful enough. Many of us fall into this trap and there’s no shame in it, but the more you cut down or block social media out to focus on office work, the easier it will be to get things done.

Take Breaks

It’s important to not suffer from cabin fever when telecommuting. Be sure to avoid eye, neck, and back strain by getting up every once in a while to stretch, have a snack, or take a brief stroll outside. Go check on the kids, do a bit of watering, or fetch the newspaper and have a coffee — just be sure to not stray from your desk for too long, or the benefits of a restful break can turn into a nightmare for deadline-driven work. With careful balance and planning, you can fit in a brief jaunt out for lunch or a coffee and sweet treat break without impeding upon your progress. In fact, doing so may maintain your level of productivity through feeling refreshed.

Establish a Dedicated Workspace

The couch or kitchen table is not the ideal place for someone intending to work from home, as distractions abound through family interaction, visiting guests, and high traffic. Additionally, noise and sensory distractions through the barking of the dog or the smell of your spouse’s cooking can hinder progress further. Establishing a dedicated workstation for your telecommuting needs, whether comprising of an entire room or a quiet corner, can provide a psychological transition to your working hours. Filtering out noise with an ambient music playlist on your computer, putting up temporary partitions for privacy, and working in a quiet and comfortable spot free of intrusion will make it easier than ever to work. Try mimicking your office environment by utilizing similar equipment, materials, and general space to make it feel even more like a professional workstation.

Set up Adequate Security

Many who work from home worry about accessing sensitive information in areas outside of their offices. However, implementing security features to protect data can rectify these concerns. Setting up a virtual private network (VPN) is easier than ever in modern PCs and smartphones, and doing so enables for you to work with sensitive information in a private and secure pocket of the Web. Setting up a password-protected Dropbox or Evernote account is another great solution, particularly if your company doesn’t use Google Drive or Microsoft SkyDrive (just be certain to check whether or not this violates company security policies).

Video-Based Communication

It is imperative that you mimic your communications at home as closely as possible to those in a regular office environment. Higher-ups and other employees need to feel trusting of your dedication towards getting work done, and ensuring a steady and consistent method of visible communication can help in that regard. Google Talk is becoming increasingly popular for real-time communication, as is Skype’s Group Chat for paying users. Videoconferencing tools such as WebEx and Adobe Connect are other great solutions, offering face-to-face check-ins akin to poking your head over the cubicle partition at the office. That way, you won’t waste time waiting on text-based messaging replies and can instantly connect with coworkers when necessary, allowing for you to save time and be more productive. This is also where having a dedicated and private workspace at home can come in handy.

When carried out with dedication and careful planning, telecommuting can be a great opportunity to work from home and still remain highly efficient. In fact, many who work from home find they generate better results and are more focused due to being in a comfortable and personal environment. By applying these tips to your living and workplace arrangements, you too can reap the rewards.

Salary vs. Dividends – Which is Right for You?

Many business owners are unsure of whether to opt for salary-based earnings or payments in dividends. There are various advantages and disadvantages between the two, and it is important to research whether or not one of these options is suitable for your business. By comparing salaries and dividends, we can clarify the differences between the two.

CPP and RRSP Payments

Being paid a corporate salary means that you will be able to contribute towards an RRSP. This is a result of you having a personal income, and it means that you’ll also be paying into the Canada Pension Plan (CPP) to secure a financially bolstered retirement. However, take into consideration the fact that as salary is 100% taxable as opposed to dividends (the latter taxed at a lower rate), you’ll need to pay both portions of the CPP as an employer and employee.

With dividends, you won’t be required to make regular CPP payments, which can help to save money, though it may be best to invest anyway as it can increase what you are entitled to upon retirement. Also, the logging of payments is a relatively simplified process compared to that of salary-based earnings that entail setting up payroll accounts with the Canada Revenue Agency and filling out extra paperwork. That being said, by receiving dividends you forfeit the ability to make RRSP contributions as a result of not having any income.

Tax Deductions and Increases

When it comes to taxes, salaries are seen as a burden due to the fact that they are 100% taxable. This means that your personal income is subject to higher rates and a smaller return. Additionally, you may not be able to carry back a business loss in future years when paid via a salary, which is quite the reverse if you were earning in dividends. That being said, owning a corporation that pays in salaries and bonuses enables for greater company tax deductions.

Dividends are taxed at a much lower rate than that of salaries, resulting in lower personal tax rates. This can enable for easier budget management, greater savings, and opportunities for investment in order to bolster income flow. However, it can also remove some personal income tax deductions, such as those for child care expenses.

Limitations for Small Businesses

It is important to bear in mind that the Small Business Limit is $500,000, which relates to income tax deductions available to private controlled Canadian corporations (CCPCs). On many occasions, salaries and bonuses are paid to ensure a corporation’s earnings don’t exceed this amount, with dividends being utilized if further income is required. This is due to the fact that after a business exceeds this figure, it pays much more in taxes.

Depending on cash flow needs, your income level, predicted company income for the year, and RRSP and tax deduction importance, salaries and dividends both offer a wide range of pros and cons. It is highly recommended that you consult with a financial advisor from The Beacon Group of Assante Financial Management Ltd. who can help you determine which option is more suitable for your situation and discuss other tax planning strategies to put more money back in your pocket.

Making Financial Sense Out of Stay-at-Home Parenting

When you and your spouse decide to start a family together, you have to make an important decision together: will both parents return to work, or will one remain as a stay-at-home parent? While there is no right or wrong answer, it is crucial that you first weigh whether or not it is suitable from an earnings and expenses-related standpoint.

Guaranteeing Sufficient Income

The most important thing to do is work out a budget with your spouse in advance of making such a change. It is important to ensure that the household can remain financially secure with a sole breadwinner. Factor in additional bills, investments, and savings to determine whether opting to be a stay-at-home parent is a viable option. Staying at home will also shift expenses; you’ll save on gas and lunches out, but you’ll have whole new expense categories for diapers and baby clothes.

Taking into consideration the age of your children, hours that they’re home, and amount of attentive care they require (special needs, etc.), the stay-at-home spouse may be able to work part-time or launch a home-based business. This can help to maintain a steady income flow as home office-based expenses and other legitimate costs associated with a home business are tax-deductible.

Saving Opportunities

If you are looking to save on expenses as a household, having one parent remain at home with the children can be a blessing in disguise. The biggest contributor is the lack of daycare costs, which in Calgary top $1000 per month per child. Child care for infants is even more expensive. If the family unit includes an older parent or in-law in need of consistent support, there may be an opportunity to save even more money. Having someone at home helps to reduce for care-related expenses either via facility or home care.

Tax Planning and Maintaining Insurance Coverage

Income-splitting opportunities are ripe for the picking for households with a stay-at-home spouse and the other being the primary source of income. The main breadwinner can contribute towards a spousal Registered Retirement Savings Plan (RRSP). Additionally, they have the option to give funds to the spouse with a lower income to invest in their own Tax-Free Savings Account (TFSA). Combined, expect a considerable deduction on taxes. Clever spousal loan strategies involving higher earning spouses lending money to their lower-earning partner to invest and be taxed at a lower rate are also applicable. In this sense, having a stay-at-home spouse can allow for lower taxes and higher return rates.

These savings may be important in regards to maintaining adequate insurance coverage. With one spouse no longer earning an income, it is more crucial than ever that the appropriate amount of insurance is readily available to cover the cost of replacing their services. Also, you may want to consider critical illness insurance to compensate for whoever remains at home with no income being ineligible for disability insurance.

By considering your options and weighing the pros and cons appropriate for your income and expenses, becoming a stay-at-home parent may be more of an opportunity than a burden. Making sense of the financial aspects of such a lifestyle change is important to maintain a sound future, and reaching out to The Beacon Group of Assante Financial Management Ltd. to speak with one of our financial advisor will help make sense of it all. Feel free to contact us if you require further assistance with financial planning, investment planning, tax planning, and insurance planning with stay-at-home parenting in mind.

Why Practice Yoga?

In modern society, we worry. It’s perfectly natural, given that nearly everything we do affects us in the long run. Whether you’re fretting over securing a solid future for your children or are concerned about taxes, it’s important to find the time to release tension and de-stress. You might not have considered it, but yoga is a highly effective way to hone your mental focus, rid your system of harmful toxins, and lower stress levels — particularly important for those working hard to secure financial stability and support their families for the foreseeable future.

Stress Management

It has been said time and time again that practicing yoga is a fantastic way of negating stress, but there’s more to it than that. The intricate and flowing motions of yoga implement a number of meticulously tested relaxation techniques, which can enable for a calmer personality and more optimistic mood with regular practice. Yoga enables you to more readily think before speaking, and serves as an effective way of training your mind to see the bigger picture and act from integrity as opposed to becoming frustrated by pent-up stress. This is crucial in order to guarantee efficient and sensible decision-making as opposed to knee-jerk reactionary planning.

Chronic Pain Relief

Many studies suggest that the regular practice of yoga helps to reduce neck and back pain, as well as suffrage of those with cancer, multiple sclerosis, autoimmune diseases, hypertension, and arthritis. Through the carefully orchestrated stretching and bending of one’s body via fluid movements, chronic illnesses are a little bit easier to live with thanks to a decrease in aches and pains.

A Better Night’s Sleep

It is important for adults to sleep for at least 8 to 9 solid hours every evening. Through the negation of stress and increased calmness associated with regular yoga practice, you’ll sleep better than ever. This is important for those of us normally kept up at night with worries over finances, work-life balance, and risk management, as the less stressed we are, the better we sleep at night. Cancer survivors and those suffering from insomnia have benefited from many a good night’s rest upon practicing yoga, according to various studies.

Body Detoxification

Deep and natural yogic breathing enhances lung functionality, which enables for your brain to work more effectively. In addition, the physical activity associated with stretching and shaping your body through yoga helps to increase the motility and mobility of your organs and muscles. This allows your body to filter toxins out of your system more effectively, and breaking a sweat now and then ramps up the efficiency of muscle and organ detoxification even further. Burning calories through continued yoga practice will also help to control weight through reduced stress and introducing mindfulness to your diet. For those bent over a desk on a regular basis, it’s also highly effective at improving posture through core strengthening.

In essence, why not practice yoga? Even a few minutes’ worth of regular practice a day can help alleviate anxiety, reduce stress, help you breathe better, and detoxify your body. Many hold this delicate form of exercise in high regard as a cure-all of sorts, and it’s easy to see why when considering the bevy of mental and physical benefits it can bring.