Budget Contained Interesting Tax Provisions

Would you take on this assignment:  successfully introduce six federal budgets in a minority parliament throughout the most significant global financial crisis since the Great Depression?  It's not for the faint of heart, and yet that is what the current Finance Minister and his department have been challenged with. 

Yesterday's budget contemplates a course which involved managing an interest-bearing debt of close to $800 Billion dollars in a rising interest rate environment, expenses for senior programs such as the OAS rising from $35 Billion today to $47 Billion in 5 years as boomers become pensioners, and an economic environment where raising taxes too much will eradicate the fiscal stimulus benefits of the last several years that have kept companies afloat and recreated the deficit re-accumulation in the first place.

My top three favorite provisions, which I hope will survive no matter the outcome of what seems to be a sure fire spring election are:

1.  The Family Caregiver Tax Credit, which adds a $2000 amount to either the spousal, child, eligbile dependent or caregive amounts, as well as an incremental $2000 amount to the caregiver income levels subject to clawback.   

2.  The tuition and education credit enhancement for students studying abroad.  More of that is going on and so it's nice to to see that the 13 week qualifying study period has dropped to 3 weeks so that more people can use money in RRSPs (Lifelong Learning Plan) and RESPs (Education Assistance Payments) to fund often much higher tuition fees than in Canada.

3.  The Hiring Credit.  Especially for small businesses who are hiring in 2011, a $1000 credit against your increase in EI over 2010 levels, if your EI payments are under $10,000 in 2010.  That really helps and what I like about it, it's simple.

What are your favorite provisions?  You'll need to know to be a more informed voter.

It's Your Money.  Your Life.  Your opinion, your vote and your involvement in the financial future of the country is important.  Make it count.   

Japan: Helping After the Horrible

I was on a plane to Vancouver when the shocking images of the powerful earthquake and tsunami in Japan unfolded. In the aisle next to me sat a mother and her two wonderful pre-teen sons, on their way to surf in Hawaii for spring break. I flashed back to a similar adventure with my sons years ago. Only this time, we all were wondering if the waves would hit Vancouver Island by the time we got there. 
How do you help, when the horrible unfolds before you in real time? The contrast is so great: the magnificent power of nature in its most destructive form vs. the helplessness of humanity, despite all we have built to protect ourselves from just such an occurrence. There was really very little one could do against the force of Nature; but there is so much we can do in the aftermath.
Nature has left an incredible mess to clean up; more threats in the imminent future, too. Everything is broken in the zone: the tangibles–homes, industries, schools, bodies and limbs—and the intangibles too–the overwhelmed spirits dealing with death, disease and fear. It’s going to take a global village to help. We can give of our money and time, generously. 
I felt so much better when I made my donation to the Red Cross. The tax system makes it a bargain. Take the average household income in Canada of $68,000. If you live in Manitoba,  the first $1000 donated reduces federal/provincial taxes by $422. That means the donation costs $578.  Ontario residents will realize a tax reduction of $361 for the same $1000 donation, and those who reside in Nova Scotia will save $447.  Dig deep, everyone!
It’s Your Money. Your Life. Together your financial tools and your personal compassion can make a big difference in someone else’s recovery from the uncontrollable events they may be experiencing.
Evelyn Jacks is President of The Knowledge Bureau and best-selling author of 46 books on tax preparation, planning and wealth management, including Essential Tax Facts 2011.

When is the right time to talk to your partner about retirement savings?

It's a tough question for many couples in their late 40's and early 50's, particularly if they lead highly independent lives with separate careers and often separate bank accounts. The right answer, I think  is ‘with the first dollar that is invested in a retirement fund.' 
People contemplating a transition into retirement worry most about running out of money, because they really don't understand how long a period to plan for. Statistically the average retirement in Canada is about 20 years, so in preparing an income and capital preservation plan for the period, that timeline helps to establish a framework for discussion.
Planning revolves around two important issues: needs and wants. Anticipated needs must first be addressed and defined with precision. This requires stealth budgeting. Is there enough from existing sources—income, capital or ability to leverage–to fund food, shelter, medical costs, clothing? 
Wants, however, are analyzed differently. They are dependant upon different factors:  the age of each individual, a gradual or abrupt exit from the workplace, the health of each spouse, priorities for travel, and whether the family can financially adapt to the new situation. Especially if one spouse is not ready to retire, there can be friction.
The reality is that today many families must contemplate two retirements, not just one.   There are significant tax savings available through pension income splitting.   Even if the couple has never co-mingled funds before, this is the compelling reason to discuss joint income earning, income splitting and capital pooling, immediately.  
Unfortunately, many boomers are defined by a workaholic lifestyle that involves financial caregiving to numerous stakeholders in the workplace and the family. These are very busy people. It's hard for them to answer all their emails in a day, let alone have time to think ahead, and to find the time to do so together.
It's Your Money. Your Life. A well executed retirement period requires that you do exactly that: find time to look up and forward so you can build the financial roadmap and the vehicles that will take you towards your envisioned lifestyle. This is a discussion that needs to start sooner rather than later to get the results you really want.  
Evelyn Jacks is author of Essential Tax Facts and President of the Knowledge Bureau, which publishes the Tax Efficient Retirement Income Planning Course. See www.knowledgebureau.com for more information or call 1-866-953-4769.