Every year, an RDSP holder gets an update about how much money can be put into their RDSP. The statement of Grant Entitlement, says how much money and how much the government will match, with a Grant.
As you can see this is an important piece of information. I now know I can deposit $1000 in my son’s RDSP (this year) and it will be matched with $1000 in grants.
This amount will increase once my son is over the age of 17, as the income they will use to determine the grant will be his income, instead of our household income. When he turns 18, his grants should be much higher, due to his estimated income at that age.
I think I have learned a great deal about SEO (mostly what not to do), a fair amount about money and investing (mostly I don’t know what I am doing, and need help) and mostly about life. I have written through:
My daughter offered to write an article about the COVID-19 and its impact on her life. She is a self-employed Chiropractor, so she is directly affected by this Pandemic. Small businesses and entrepreneurs will be impacted by this harshly. She is also at risk due to asthma and lung issues. I offer this for your consideration.
COVID-19 From the Self-Employed and Small Business Perspective
Work from home if you can! No sick notes needed! Waived week long waiting period for E.I. applications! Relief funding for those unable to work due to closures! The Canadian Government is stepping in to pledge 1 billion dollars to help with the repercussions of the current COVID-19 crisis. I am self-employed as a chiropractor and my business will be affected by COVID-19, even if I don’t contract the virus. Somewhere down the line, there may be some relief funding specifically for small businesses and the self-employed, but I am not holding my breath that it will be any time soon.
Currently in Ottawa, we have 10 confirmed cases. Schools, libraries, museums, and city recreation complexes, are all closed as of March 16th and will stay closed until at least the beginning of April. Private health clinics have not been given any guidance (as of March 15th) on whether to stay open or close. Hourly, we are checking multiple sources and updating our policies based on our best judgement of what is safe for our clinic but also protects our livelihood.
Social distancing is effective, no argument on that one. I fully support trying to “flatten the curve”, and as an individual who would most likely end up very sick if she contracted this virus, I am happy to limit my social outings. However, being within a metre of other people is a part of my job. Touching people is my job. I sit in a difficult situation trying to balance having an income, and protecting mine and my patients’ (sub customer/ client/ consumer for other small businesses) health.
As a health care practitioner, I have always washed my hands between patients, my equipment and room has always been cleaned according to health regulations. Lately, I’ve upped my game, as much as possible, to keep my patients safe and my businesses going. I can’t get hand sanitizer, disinfecting wipes are at a premium and I am continually being asked if it’s safe to come to our clinic. Even if we do stay open, there is no guarantee patients will feel safe and comfortable coming to the office to be treated.
Financially, I feel lucky to have parents who have tolerated me living in their house since I graduated 18 months ago. I don’t have a mortgage or children. I also don’t have a spouse with benefits or a salaried income. I do have a load of student debt and am grateful for the Bank of Canada’s recent interest rate cuts. As an independent contractor I get paid based on the number of patients I treat. Full stop. Not salaried, no benefits, no E.I.. Working from home is not an option. Small businesses will feel the hurt from this situation for the next 6 months to 1 year. We are stressed. Yes, an emergency fund is vital. Most financial folks say 3-6 months worth of expenses is what you should have put away. There are people much more qualified than I am to comment on that factor.
Now that I have sufficiently indulged in standing on my soapbox and yelling my problems at the internet, here are some tips to continue to supportsmallbusinessesif you are healthy, not self-isolating and able:
That local coffee shop you frequent on the weekend or before work, continue to go if you are healthy and not at risk. Get some of their beans/ tea leaves/ product to use in your own home. Buy a gift card to boost their income and help them float until things return to normal.
See if take-out or delivery is an option for your favourite local restaurant.
Keep your appointments with your health care professional/ hair-dresser/ personal trainer/ etc etc. If you are not able to keep your appointment, reschedule for a few weeks time rather than flat out cancelling.
If your gym/ yoga studio/ health clinic of choice has closed as a result of COVID-19, make a mental promise to yourself to go back, put a reminder in your calendar a month from now to get yourself back into your routine.
Stress has you online shopping? Need to buy gifts for a birthday? Choose a Canadian small business that has an online store.
Ask if there is an opportunity online or phone interaction with professionals that have that capability like your accountant or nutritionist.
Monitor information channels that are giving accurate information on the current state of affairs rather than relying on social media or other social channels that tend to spark fear and panic.
Educate yourself on the actual symptoms of COVID-19, and how the spread can be prevented. I am not writing this from a health care practitioner point of view, so I won’t give any advice.
Save your advice on financial planning in case of an emergency for 6 months from now. The last thing a person in my position wants to hear is advice, however well meaning, on how they could have prevented getting into this awful position. Once we are recovering, that is the time to offer help on that subject.
Be Kind. We are all trying to make our way through this situation the best we can. Being angry, greedy or selfish will get you no further in life than being kind, patient and fair.
So before you start investing in toilet paper stocks, complaining you have to deal with your kids for 3 weeks, hoarding hand sanitizer or making jokes about the person sneezing in a coffee shop, think of the people in your life who are self-employed. Reach out, ask them how you can help support them, stop the spread of misinformation, and wash your damn hands.
I guess this is topical for these days (written during the COVID-19 pandemic), but let’s do a quick wander through what your Financial Disaster Plan might need to include.
Will and Power of Attorney
Doesn’t matter if you think this will not affect you, you need to have these documents in place. If you are single, OK it isn’t urgent, but if you have a spouse or more, do this first. Plenty of easy on line sites to do it with, or call a lawyer or notary.
For the Power of Attorney, different provinces have different rules, so make sure you set that up correctly too. I have learned too much about Quebec’s rules lately, thanks to a loved one still living there (and their POA).
If you have a family you should have life insurance. It should at least pay out to leave your family debt free should you die. It would be better to leave them more money to help out given the loss of your income. No, not full life or any stuff like that, TERM life insurance (5 or 10 year terms) is fine.
Disability insurance should be considered as well, especially if you are the sole income earner for your family.
A certain amount of actual cash available to you would not hurt. No I am not saying have $10,000 in cash hidden in your house, but a couple of hundred couldn’t hurt having around. Maybe a little US Cash too? If you live near the border, never a bad idea
Dear Lord, why do people hoard toilet paper during a crisis? You are assuming there will be toilets (or something like that) during this crisis? Maybe some canned food, and some water would make sense, but bum wad? Really? COVID-19 is a respiratory sickness (i.e. your lungs not your bum).
List of Critical Information
What if you become incapacitated, how will your designated helper do things without the hundreds of passwords needed to do your banking, or anything else? Who will scrub clean your Google and Search logs?
Somewhere, somehow but securely you will need to have that information available to the people you trust, to act for you. A list inside a safety deposit box? An encrypted Word document somewhere?
What about all of your insurance policy numbers, your pension information, and anything else loved ones might need should you find your untimely demise? How do they get at the “safety blanket” you left for them?
Registered Education Savings Plans (RESPs) are a great vehicle to save money for your children’s post-secondary education in a tax efficient way. This article will explain the tax treatment of withdrawing from this plan.
Basics of RESPs
Before we get into the tax treatment of RESP withdrawals, we
need to understand certain fundamental concepts of the plan.
Contributions to the plan are made by a subscriber (parent
of the child or children) to a promoter (financial institution) for the benefit
of the beneficiary (child or children). The plans can be individual plans
(single beneficiary) or family plans (multiple beneficiaries).
Contributions into the plan are not tax deductible; however,
the earnings within the plan accumulate on a tax-free basis. The contributions
and accumulated earnings can stay in the account for up to 35 years after the
plan is established.
The lifetime contribution limit per child is $50,000.
Canada Education Savings Grants (CESGs)
Apart from the tax deferral of earnings, another major benefit of contributing to the RESPs is the Canada Education Savings Grant (CESG). In simple terms, the CESG is an additional amount the Federal government adds to every dollar contributed into the RESP. The basic grant is 20% of the current year contributions up to a maximum of $500 per beneficiary. This translates to a yearly contribution maximum of $2,500. The lifetime CESG is $7,200. An additional grant of 10% or 20% is given to low income families. The table below summarizes the grant amount:
Family net income of
$47,630 or less
Family net income of
more than $47,630 but less than $95,259
Family net income of
more than $95,259
Basic CESG on the first $2,500 of annual RESP
20% = $500
20% = $500
20% = $500
Additional amount of CESG on the first $500 of annual
20% = $100
10% = $50
Beneficiary is not eligible
Maximum yearly CESG depending on income and
Lifetime maximum CESG for which you may qualify
Source: RC4092 guide
Depending on the province you live in, you can get an
additional grant on top of the CESG.
Canada Learning Bond (CLB)
On top of the CESG above, the Federal government provides an additional amount for low-income families in the form of the Canada Learning Bond (CLB). The difference with the CESG is that fact that no contribution is requires to get the CLB; it is deposited directly into the RESP account. An initial payment of $500 is made for the first year the child is eligible; then $100 is deposited for each additional year of eligibility, up to age 15, for a maximum of $2,000. For 2019-2020, the income eligibility threshold is $47,630 for up to 3 children and increases for every additional child.
Tax treatment of withdrawals
Now to the question at hand: what is the tax treatment of
Since the contributions do not benefit from a tax deduction
(in other words, after-tax dollars were contributed), the contributions can be
withdrawn tax free to the subscriber (parent or grandparent of the child or
children) or beneficiary (child or children). These are called “refund of
Education Assistance Payments (EAP)
Payment of the Canada Education Savings Grant, Canada
Learning Bond and accumulated earnings are called Education Assistance Payments
(EAP) and are payed to beneficiaries (children). These payments are taxable in
the tax return of the beneficiary.
In order to receive an EAP, the recipient must be enrolled in
a qualifying educational program, which is an educational program at
post-secondary school level, that lasts at least three consecutive weeks, and
that requires a student to spend no less than 10 hours per week on courses. The
recipient must also be at least 16 years old.
Although the income received by the student is taxable,
remember that it is likely that this student has little to no other income to
declare while attending school full-time; therefore, these payments will be
subject to a low income tax rate.
Accumulated Income Payments (AIPs)
These are payments made from Canada Education Savings Grant,
Canada Learning Bond and accumulated earnings to subscribers (parents). These
are possible under 3 conditions:
the payment is made after the year that includes
the 9th anniversary of the RESP and each individual (other than a deceased
individual) who is or was a beneficiary has reached 21 years of age and is not
currently eligible to receive an EAP (see above)
the payment is made in the year that includes
the 35th anniversary of the RESP
all the beneficiaries under the RESP are
deceased when the payment is made
In this case, the income will be taxed in the subscriber’s
tax return (income tax rate based on all income), and an additional 20% tax is
added as well. Subscribers can reduce both the income tax and the additional
20% by transferring the AIP into an RRSP, provided the subscriber has enough
contribution room to do so. The limit of
this transfer is set at $50,000.
Gerry Vittoratos is the national tax specialist at tax
software provider UFile,
which has been helping millions of Canadian taxpayers file smart for the past