Canada Money CA

Taxes in Canada are a real financial issue for many Canadians. As a Canadian you pay out large amounts of cash every year for Income Tax and will usually see little or no return. Very few of us are financially free and you may well have to consider extending your working life or, worse, having to deny your family those little important things on a daily basis just so you can meet your mortgage payments.

Ring any bells for you? It did for me.

During the last 5 years, together with my wife, I have been researching ways to be financially free. That is, to find ways for me to live the kind of life I want and deserve. We started looking into the ways we could maximize our income and reduce our expenses, which is when we came across the figures outlining the crazy tax burden of Canadians.

Whereas most Canadians pay $500,000 in tax over their lifetime, their average savings stand at only $5000 at the age of 65. Does this seem right? I am not saying we should not pay taxes; we have a healthcare and education system most of the world does not. It is just that during my research I also found out that 99% of Canadians are not using the tax system legally to get everything we are entitled to. It is this that made us focus on reducing the Canadian Income Tax burden for us.

Your money….in your pocket

Although the Canadian Revenue Agency does not advertise this fact, if Canadians make charitable donations intelligently they can maximize Income Tax returns for their benefit. This really blew my mind at first so I will explain it as clearly as I can. I discovered tax shelters. This is NOT tax evasion, which is entirely illegal (otherwise known as tax fraud); this is tax avoidance, which is what the rich use to get richer.

The details…how it works

Basically:

· Tax shelters are ways, thought up by very smart lawyers and accountants, to use the tax system legally to benefit you.

· Under the terms of Canadian law we are all expected to save as much tax as possible, even if the tax man doesn’t like it.

· This is the legal principle which allows tax shelters to function, much to the frustration of the Canadian Revenue Agency.

There are many different types of tax shelters, as with any industry, some are really not a good idea and you should really do some good research before deciding on a particular shelter. After a lot (really a lot) of research my wife and I went for an Open Market Structure program, one of the main reasons for this decision was:

· This shelter uses fair market value, which means that, when an item is donated to charity, they get an independent evaluator to make an appraisal of the item, rather than someone connected to the program. So far, only tax shelters that have not followed this rule have ended up in court. Make sure your program does not have this issue.

Below I will try and outline the principle as I understand it:

· I want to buy 100 laptops for children in India. So, I go to a bank and I ask loan for the money for the 100 laptops.

· The loan will be for 4 years and I will immediately pay off the interest for 3 years of the loan. I then go to a technology company who give me 100 laptops.

· I get an agreement from them that I can return the same item back to them and get the full money I spent returned to me.

· I now donate the 100 laptops to a registered Canadian charity and get a donation receipt for the amount I paid. I attach this to my tax return and get 50% tax credit.

· 3 years and 1 day later I take my 1 year’s worth of interest payment I have remaining and go to the overseas market and buy 100 laptops much cheaper than I could get from the Canadian technology company.

· After returning these to the technology company, they give me back my money which I use to pay back my loan in full.

· My tax benefit is bigger than my cost, which is the definition of a tax shelter in the Income Tax Act of Canada.

Actually, the tax shelter program does all of this process for me, so all I really had to do was to pay the pre-paid interest on the initial loan.

It worked for me!!

This is the system me and my wife used last tax year and received a big, fat cheque from the Canadian Revenue Agency for our efforts!

I chose this system after a lot of due diligence research, a lot of which I have included in my blog (details below), so please feel free to use this as a spring board for your own research!

Remember the only thing stopping you from being financially free is your dedication to being financially free; use financially intelligent solutions to increase your income and minimize your expenditure. Live the life you deserve!

Resource box:

Taxes in Canada can be reduced! A free, easy to follow, step-by-step guide is available on my website at http://www.mytaxmoneyback.com

Income Tax FAQ:

Question: When doing income taxes in Ontario, where should Alimony be claimed?
My fiancee has all of his paper work to claim the alimony he pays his ex, and we were told he is allowed to claim it but we cannot figure out where it should go on his return? We are doing our income taxes ourselves and using Studio Tax 2009.

Answer: Support payments made go on lines 220 and 230 of the tax return (in the “Net Income” section of the T1 General).

Question: Can I claim the mortgage interest in my tax return?
I’m in Ontario, Canada. I also want to know if I can claim the home and car insurance as an expenses. My main income is from rental properties.

Answer: It all depends, are you renting some or all of the house. If you are renting some or all you can claim part of the amount you are renting out (20%, 30%, 50% or 100%) you get the idea.
As for the car if you have more than one rental unit in more than one location you could claim a part of the expenses on the car. You may want to check out the CRA site, it should answer all your questions.

Question: I am working in Canada. My son is in the Philippines. Can I claim him on my taxes as I send money to support?
I send money back to the Philippines regularly to pay for schooling and upkeep of my son. Where can I claim this on my income tax?

Answer: Unfortunately, if you are a Canadian Resident, you can’t. To be considered a dependant, your son must live with you (even if he goes away to school).

If CRA considers you a Deemed Resident, but your tax home is in the Philippines, and you maintain a home there with your son, then you can claim him as a dependant. If you are not filing as a Deemed Resident, this is not the case.

Question: QuickTax – First time filing taxes online (Canada)?
My dad’s accountant usually filed taxes for me but I didn’t like his new accountant so I thought I would try it myself this year. Anyone have any experience with Quick Tax? I chose this option only because you can do it online (ie. I don’t have to go and buy a program to download to my computer). I don’t have very complicated taxes. Pretty much just my income tax and I’m a home owner…which leads me to my other question. Anything I should look to claim being a home owner? So far I know:
- Property Tax
- Home Renovation Tax Credit and that’s it!

One more question, I hear you have to have a U File number to file online – how do I go about getting this?

Answer: Quicktax is great and handles very very complicated taxes. The interview will guide you through all the things you need to claim.

I think you mean “NETFILE”, not “U-File”. Your four-digit access code that enables you to use NETFILE is printed on the information sheet of your T1 personal income tax return package.

Question: When was income tax introduced in Canada? date?

Answer: July 25, 1917. It was introduced as a temporary measure, “the War Tax Upon Income.”

Question: Taxes and Bankruptcy (Canada)?
My husband filed for bankruptcy last year and is discharged. Any refund he gets from this tax season will go to his trustee. As his income is lower he would normally claim the children (there are 3 of them). If I claim the children my refund goes up. (Yeah) If he claims them my refund goes down and his goes up and straight to his trustee. Who should claim the children, me or him? Is it mandatory that the lower income earner claim the children?

Answer: There is no rule as to who must claim them as long as they all lived with both of you the entire year. Either one of you can claim them, so long as that one person claims ALL of them. You can’t split children.

Question: Do I have to pay tax in Canada if I made under $20 000 and am a full time student?
I am a student and I made under $20,000 last year, I did my return on quick tax and I’m told I have to pay but when I did it last year with similar income I got a refund. Does anyone know why?

Answer: It depends on what kind of income you got. Student loans are not taxable, but scholarships are, and having a higher proportion of your income as working income will also change your return. So, if you got more scholarships/grants and worked more, you could end up owing more even if the income is technically the same.

If you had unused tuition and education amounts from last year, they can be carried forward to this year to reduce your tax owing. You file an adjustment request to do this.

Question: Income tax in Canada?
I’ve turned 18 last November, live in British Columbia. I was told that this year I am required to do income tax return before April. Last year I’ve only earned about $500 from a summer job. Is it definitely required for me to file the income tax return? If so, could you tell me how/point me to some website that have guides?

Answer: You should check out the CRA website. It has general info about taxes, and info about doing your taxes.

You aren’t required to file, but it is a darn good idea. You’ll qualify for GSTC after you turn 19 next November. If you file now, you’ll get GSTC starting the payment after your birthday. They go out quarterly.

Generally, a person is only required (under the income tax act) to file if they owe money, or if they are asked to file. If you don’t owe, it is usually a good idea to file so you can get any credits, refunds or refundable tax credits you’re entitled to.

Lots of people pay to have their taxes done, or buy software to do them. You don’t really need to. The forms have instructions right on them, and there is a guide. It does seem daunting at first, but just follow the forms, and read the relevant section of the book if there’s something you don’t understand on the form.

Random Posts