Canadian Personal Finance Blog

… to make the financial markets even more jittery. The WHO has now moved up their scale for the pandemic to 4 out of 6 and that may mean more jitters in the financial markets.

This will make for some very interesting trade decisions in the next few days, is my guess, since a lot of produce and such come from Mexico, will we see an embargo? Will this drive up food prices (which are already sky rocketing)? Inflation, did you order Inflation with your Global Financial Apocalypse? Sorry, it comes with the deal.

Kiss the Mexican tourism trade good bye for a while, not many folks will be wanting to go Loco down in Acapulco.

Swine Flu again? I’m sure Maple Leaf is deliriously happy to give consumers ANOTHER reason not to buy their products. Stay away from pig farms would be the best advice for now.

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Let’s hope this ill wind does not kill off any kind of rally.

Tax Day – 2

Yup remember Thursday at midnight you’ll need to have filed and PAID for your tax bill if you live in Canada. Not sure if they are giving Swine Flu dispensations yet, but get it done folks.

Server Issues Return

My site was down for a good portion of yesterday, my apologies to my readers, seems my server went down for the count, but I have been told that evidently the problem is resolved for now. Might have been Swine Flu in the disk drives, not sure.

Figured I’d ask since you really only have a few days left to get it all done. You have 9 days including today to get it into the CRA, and if they owe you money, why didn’t you do this sooner, because it is your money. If you owe them money, wait until the last day to pay them, but you can still file early, just don’t pay until April 29th.  Remember the tax man in Canada may not have the sweeping powers that the IRS does in the U.S., but they can still make your life as miserable as possible, if you don’t give them their “fair share”.

Mortgage Lock In Time?

With Interest rates now at historical lows is now the time to lock into your Mortgage rate? 

That seems to be a big question going around these days, but here is a better question to ask, if interest rates go up to 10% can you still afford your house? Can you afford your debt load you are carrying? 

Those are the real questions to ask. When my wife and I bought our first house, we locked in at 12% for five years, because the world was just coming off mortgage rates of 15% and up to 20% so we thought that this was the best bargain we could make at that moment. Turned out we were completely wrong, and ended up paying a lot more than if we had gone variable or gone with shorter terms.

Were we wrong? No, is my opinion, we could afford the mortgage at that rate and did not want variance in our mortgage payments (where variance really means, didn’t want to pay MORE for the mortgage), so we locked in. There is no wrong answer in this area, it is what you feel comfortable and how you want to plan and architect your financial plan. 

For the past 8 years I have carried my house on a completely variable interest rate debt vehicle, and it has served me fairly well, but I am hoping to pay it off quickly, once I find another job. I can withstand a fairly steep interest rate jump (I’ll complain a lot mind you), but for me I feel ok with my current decision about staying at a variable rate.

The whole goal is to get rid of this debt so that you can then use your money to build wealth, not just pay off debt.

Do you feel safe with the current interest rates? What would happen if they shot up to 10% in a year (say like oil prices did)? Are you confident there is no Inflation on the financial event horizon?

April 30th (Canadian Income Tax deadline (CRA)) is starting to loom on the event horizon and for me that means paying a hefty 5 figure Income Tax bill (due to my severance payment not being taxed at the correct level). This will (hopefully) be the largest tax over-payment I need to make in my life (but who knows).  

Since I owe the government money I have filed my tax return, but I am waiting to make my payment until the end of the month (no point in giving the government any extra funds), which I will do using my Bank’s Direct Bill Payment capability.

Due to this very large bill, I have managed to find and work as many deduction and tax credit areas as I can legally think of (aside from claiming my cats as dependants, which is in the illegal side of the equation).

Some of the more important areas that I was able to take advantage of:

1. Soaking up all remaining RRSP room that I had to lower my tax payment (along with the allowance given to me for having worked for the same company between ‘85 and ‘94).
2. Ensuring I transfer over my daughter’s tuition fee deduction (she did not need it).
3. Mass transit tax credit, using the bus passes I buy my daughters to lower my taxes
4. Active Children tax credit, for two of my daughters
5. Safety Deposit box rental as a carrying charge
6. Making sure I have all of my Charitable Donations in place
7. Filling in my tax forms correctly, thanks to Quicktax (I am sure UFile would have done the same)

These and other important tax deductions and credits have helped soften a large blow to someone with no income for now either.

However, as all of these stories go, there are people worse off than I am:

1. Former co-workers who got no severance, so I am not complaining about paying a lot of tax, because it means I did get some money.
2. Other folks due to circumstance who are going to owe much more than me (see Michael James post on Phantom Income Strikes). 

Remember when you pay that big tax bill there are others worse off, so calm down and get it done, April 30th is not that far away!

Parents with Students at University

Another important tax savings to remember is if you are like me and have kids that have tuition expenses for post secondary education, remember they can transfer their:

• Tuition
• Books
• Full Time/Part Time living expense

Credits to you, but they must show that on their tax returns (and not use it themselves).

As kids earn more money, or if like me they are in a Co-Op program, students may need to use the tuition credits themselves, and also remember you only get $5000 total to transfer (and also don’t forget provincial credits as well).  

Remember students can also transfer these credits to Grandparents should they be the ones supplying the moneys as well!

Are your kids filing tax returns? If they are 18 or older (or is it 16) they should, just to get things rolling for them (and with QuickTax, it’s free anyhow). Takes about 10 minutes to do, and sometimes good things happen (like GST credits and such).

This Week in Personal Finance

Unemployment numbers come out this week, on Friday as well as a torrent of financial numbers from many areas. Will the Financial Apocalypse continue? Stay tuned!

Since I am doing my taxes here are some other important deductions you should remember (if they apply to you, of course) .

Transit Pass Credit

Remember if you take the bus (or your kids do), you can use the Public Transit Tax Credit . Remember if your kids use a bus pass the following as well:

Yes, you can claim the tax credit for public transit passes on behalf of your spouse, common law partner, and your children under the age of 19, to the extent that these amounts have not already been claimed.

So the expense is transferable as well, useful to know that one.

Education

Having a child in University means I can claim her tuition on my taxes, which is not a bad thing. Since this is the first year for me with this, it is important to get all the forms done right, so please read over the web page and such and make sure the student involved fills in all the forms to allow for the transfer of these credits to you. I am still muddling through this one and will keep you posted on my progress. 

The maximum tuition, education, and textbook amount transferred from a child (or fromeach child), is $5,000 minus the amounts that he or she uses, even if there is still an unclaimed part. Tuition, education, and textbook amounts that the student carried forward from a previous year cannot be transferred.

So $5000 max per child is another important point to remember. This is where the High Price of University comes back to help you a little.

Charitable Donations

Now is the time to rummage through your papers to find ALL the receipts that you so carefully stored away when they arrived (yes I am being sarcastic, about myself, I may one day take a picture of my home “work space” to show you just how cluttered and disorganized it is). Each one of these receipts is money back in your pocket, so make sure you find them all. 

I have a cross-reference method, since I use Quicken, I check in Quicken for my Charitable expenses and then go and hunt down the receipt (or send the charity a note asking for a duplicate).

Also make sure this is a valid charity, you can go on the CRA site to see which charities have had their Charity designations revoked.

Manual or Computer?

This is an interesting question I ask folks and sometimes get an interesting answer. I have been using various computer software to do my taxes ever since it was possible (I have a Math degree, not an Arithmetic degree), but I do know that Michael James on Money enjoys doing his taxes manually using forms and pencil.

Does anybody else use pencil and paper still? Do you use a service to make up  your taxes, and if so why? My taxes this year are going to be confusing, but still not complicated enough that I would pay to have someone else do it, but that may change in the future.