It’s Tax Time!
Happy Monday, !
Few things can negatively impact your financial plan more than taxes, yet they are often the most ignored aspect of financial planning. While we may gripe about taxes, we often spend little time preparing for and planning around them. It’s much easier to complain about how much taxes suck and how our hard-earned dollars are being spent than to actually engage in tax planning. However, with some forward planning, you can go a long way toward preserving the wealth you’ve worked hard to create.
This year, there are some changes to the tax code that you should be aware of. Here are a few of the bigger changes.
- Home Office Expenses: During the pandemic, you could deduct up to $2 per day from your taxable earnings, up to a maximum of $500. This flat rate no longer applies. If you’re among the many still working from home, either full-time or on a hybrid model, you will need a T2200 form from your employer. To claim a portion of your home office as a percentage of your entire home, you’ll need to be working more than half the time from home.
-
Don’t Be Late: If you’ve noticed the interest rate on your mortgage climbing, you might be surprised to find that the rate on overdue taxes is even more punitive. It has reached double digits at 10%, up from 9% last year. If you owe and can’t pay the full amount, it might be wise to tap into a “cheap” line of credit or use your emergency savings to cover the bill. Given that this rate is unlikely to decrease anytime soon, it’s prudent to discuss your situation with your tax team and devise a plan to avoid large lump sum payments in April. Small business owners with a filing deadline of June 15 still need to make their payment by the April 15 deadline.
-
The FHSA is Finally Here: After the announcement early last year, all major institutions now have access to the First Home Savings Account. This enhancement to the Home Buyer’s Plan can make home ownership possible for many young people looking to enter the housing market. If you’re considering helping a child or grandchild purchase their first home, this could be a valuable tool. However, like many government plans, there are caveats, stipulations, loopholes, and potential penalties. Unlike the TFSA, you can only accumulate carry forward room by opening a FHSA—it doesn’t accumulate automatically.
- Beneficial Ownership Drawbacks: New rules require trustees who previously didn’t have to report on their tax returns to fill out a lengthy Schedule by April 2. As is common with new tax legislation, there are many grey areas. If you are a trustee of a Bare Trust, you will be required to file this new return. There is also speculation that if you opened up an investment account for a minor child (over $50,000), or have helped out on a mortgage and are on title, that you will have to file this new return as well. If you are unclear if you qualify for this, please reach out to our team or your accountant.
Additionally, there have been changes regarding renovations to accommodate an elderly parent moving in, selling a home in the first year of ownership, and purchasing tools if you are in the trades.
There are some of us who like to file our taxes as early as possible. While this might make your accountant happy, you might not be giving them all the slips that they require. For many public, non-registered investments they can still issue T3 and T5 statements as late as the end of March. We know that our private assets will be issuing their slips on March 28th this year. This means that you will have access to the soft copies of the Rockridge Private Debt Pool, Forsyth Private Real Estate, and Laurier Private Equity Pool as of March 28th, with mailings going out at that time as well. Our team can create shared folders for you to access a secure portal for your slips as they become ready. You can also access them on your investment portal through our website (www.cherryhillprivatewealth.ca).
Until next week, Happy Investing!
Trevor
