Archive for September, 2012

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Preparing for care, because it’s a privilege

Disability, physical and mental, all too often comes with age. And as the baby boomers get older — in 2016, 16% of Canadians will be over the age of 65 — the economic and social costs of disability will climb, for families and communities.

According to Statistics Canada’s Participation and Activity Limitation Survey, 43.5% of people aged 65 to 74 have a mental or physical disability while 56.3% of people 75 and over are disabled. Dementia is of particular concern. Currently, about one in 11 Canadians over the age of 65 lives with dementia. Within a generation, says the Canadian Study of Health and Aging (CSHA), that number will double to two in 11.

CSHA and the Alzheimer Society of Canada have calculated the economic costs of this changing demographic. Over the next 25 years, the cumulative economic cost of dementia, which includes Alzheimer’s Disease, the most common form of dementia, is expected to exceed $872 billion. The number of family caregiving hours will triple to 756 million hours in 2038 from 259 million hours in 2010.

Dementia hits women particularly hard: 72% of all Alzheimer’s cases and 62% of all dementia cases are female. According to Statistics Canada 2008 Elder Care: What we know today, women have traditionally been the caregivers. That means the burden of care will need to shift to others in the family or the community.

This is a devastating and significant issue and the federal government has started to recognize the costs to families of dealing with vulnerable family members. In the 2011 federal budget it introduced the Family Caregiver Amount. If you care for a disabled dependant, when you prepare your 2012 taxes the following non-refundable tax credits will increase by $2,000:

  • Spousal amount;
  • Amount for eligible child (claimed by a single parent for one child);
  • Amount for dependants under 18;
  • Amount for infirm dependants 18 and over;
  • Caregiver amount.

Granted, the value of the additional amount is $300, a small reward given the sacrifices made when caring for a vulnerable person. Nonetheless, that $300 will help pay for some much-needed respite. Also, if you qualify for the credit and pay your income taxes on a quarterly basis, you may wish to change your withholding tax rate for the final quarter of the year or reduce your quarterly instalment payments accordingly.

It’s Your Money. Your Life. Caring for the vulnerable is a community issue. We need to prepare for that with our precious resources of time and money, because it’s an honor and a privilege to give back with compassion and empathy to those who have done so much for us.

Evelyn Jacks is president of Knowledge Bureau, which offers bookkeeping and income tax preparation courses within its curriculum. You can also offer financial education books to your clients or other family members. For more information, click here.

Preparing your income taxes is an important life skill

Your responsibility to pay income taxes is not going to go away, so you should know how to prepare your annual tax return. How about making a tax preparation course part of your “back to school” plans?

There are three reasons to learn tax preparation. First, it is an important life skill: the more you know about your tax filing rights and opportunities, the more you are the master of your money. Second, it gives you the skill to help others with their taxes, should you wish. Third, if you work with a financial services professional, you’ll get more bang for each dollar spent because you’ll ask knowledgeable questions.

To earn more and keep more, you need to know how to do three things:

  1. Keep more of the first dollars you earn;
  2. Hold onto to your dollars longer;
  3. Ensure your dollars have purchasing power when you need them.

Your return on investment can be significantly enhanced when you work with a professional advisory team, including a tax and an investment professional. Those well-trained professionals will not only prepare and file your returns, but also work together to plan your investment strategies. Your tax advisor — who is your tax educator and advocate for your tax-filing rights — will work with your financial advisor, the steward of your family’s money. Together, you and your team can work to make sure you pay only the correct amount of taxes on your income and your capital throughout your life cycle.

So, do consider taking an income tax course as part of your personal development. Even if you plan to pass your tax preparation along to a pro, you’ll be better able to ask important tax questions of all your financial advisors. This will lead to more purposeful decisions about your investments. Investing in your tax knowledge, in other words, will increase your return on investment.

It’s Your Money. Your Life. Be prepared to speak to a professional when you have a “trigger” question, that is, when there is a life events, financial events or economic events that may trigger the need for you to make a decision.

How do you choose a tax and a financial advisor? Tune in next week when I’ll share an interview checklist. If you’re wondering how you will find time in your busy schedule to do a tax preparation course, consider the Knowledge Bureau’s great series of income tax and corporate tax courses by e-learning. Do check that out if you are interested.

Evelyn Jacks is president of Knowledge Bureau, which offers bookkeeping and income tax preparation courses within its curriculum. You can also offer financial education books to your clients or family members. For more information, click here.

Back to school tax tips

Did you just drop a bundle on school supplies, ballet shoes and hockey gear? Pressure from the precious ones can be daunting at this time of year, especially if those after-school activities are not negotiable. Fortunately, tax relief is possible if you keep the right receipts. So, take a few moments now to make some notes and file your tax receipts.

Children’s Fitness Tax Credit: This federal credit recognizes eligible expenses for sports and fitness activities in which your child participates up to a maximum of $500 for each child under the age of 16. (Parents of a disabled child under 18 can claim more.) A number of activities qualify, including sailing, bowling and golf lessons, as well as hockey and soccer.

Children’s Arts Tax Credit: If your child participates in artistic, cultural, recreational or developmental activities, you can qualify for this federal tax credit which offsets the costs of participation. Costs of instruction, equipment, uniforms, facility rental and administration costs included in the registration or membership fees all qualify for the credit. It covers music, language lessons and the literary, visual and performing arts.

Child-Care Expenses: Do no despair if the day camp in which you enrolled your little ones this past summer while you and your spouse worked does not qualify for the fitness or arts credit. Those camp costs may qualify for the deduction for child-care expenses — which gives you more bang for your buck. To claim child-care expenses, however, both parents must generally be working or in school. If an activity qualifies for both the child-care deduction and the fitness or arts tax credits, it must be claimed as a child-care expense.

Canada Child Tax Benefits. Child-care expenses reduce net income (line 236 of your tax return) and refundable tax credits are calculated on your net income. So, when you maximize your child-care expenses, you increase your possible Canada Child Tax Benefit, which generally must be claimed by the lower-income spouse.

Medical expenses. The costs for private health-care insurance that are not reimbursed by your benefits plan, glasses, braces, sports medicine, travel to health-care services not available in your local community and a host of prescription drugs qualify as medical expenses on federal/provincial tax returns. To make the most of this deduction, combine all the family’s expenses for the preceding 12 months and have the lower-income spouse, assuming he or she is taxable, claim the expenses.

Public transportation. Don’t forget to save those transportation travel passes for a federal non-refundable tax credit of 15% of your monthly expenditures. One parent can claim the travel pass costs for the whole family.

It’s Your Money, Your Life. An increased tax refund is your ticket to fast cash down the line, which is important, because any tax savings you can find will help with the financial challenges of your children’s post-secondary education. With the right education and skills, your children will be financially set. Then, you can focus without guilt on your luxury retirement.

Evelyn Jacks is president of Knowledge Bureau, which features “back to school” courses for parents who want better financial education and career opportunities in the tax and financial services. Click here for details.