Unimor Capital Corporation

Tag: taxes

  • Maximizing Your Tax Return

    Maximizing Your Tax Return

    If you filed your taxes and found you’re getting a refund this year, you might be wondering how to use the money. Once you’ve determined you’ll be getting a tax refund this year, you’ve got options when it comes to using your extra cash. It can be tempting to spend the sudden windfall on a shopping spree, but if you’d rather play it safe this year, we’ve put together seven sensible — but satisfying — ways to use your tax return.

    1. Pay Down Your Debt
    If you’re carrying personal debt, you’re not alone. The average household debt hit $72,950 at the end of 2019, up 2.7% from the previous year, according to a recent consumer debt study. By using your refund to pay down your debt, not only will you lower your current balance, but you’ll also reduce the amount of interest you’ll pay on your remaining balance — and that will put more money in your pocket down the road.

    2. Open or Contribute to a Tax-Free Savings Account (TFSA)
    A TFSA is a great savings tool for both short- and long-term goals. It’s a flexible savings plan that lets Canadians who are 18 years and older save and invest tax-free, with competitive interest rates. Anything you contribute to a TFSA, as well as any income earned in the account (such as investment income and capital gains), is generally tax-free, even when it’s withdrawn.

    3. Boost Your Registered Retirement Savings Plan (RRSP)
    If you’re getting money back in the form of a tax refund, a smart way to use the money is to stash it away in your RRSP. An RRSP is one of the most effective retirement saving tools available to most Canadians. And since your money is sheltered and doesn’t get taxed until you withdraw it, your funds can grow even faster.

    Another benefit is that RRSP contributions are tax-deductible, which means they lower your annual taxable income for the next year. To find out your RRSP deduction limit, look at your latest notice of assessment or check with the Canada Revenue Agency (CRA).

    4. Spend a Little, Save More
    If you’d really like to treat yourself to something new with your tax refund, there’s a way to do it without feeling guilty. A good compromise is to buy one (reasonably priced) treat and put the rest of the money into your savings. Where you save the money is up to you. You’ve got plenty of options: a regular savings account, a Tax-Free Savings Account (TFSA), or an RRSP. Putting a good chunk of your tax return in your savings is a smart move, especially during tough financial times.

    5. Save for Your Kids’ Future
    If you have kids, you can use your tax refund to boost their education funds. The cost of university is steadily rising, and the sooner you can start saving for it, the better. A four-year degree is likely to cost more than $100,000 — making a Registered Education Savings Plan (RESP) one of the best investments you can make in your child’s future.

    6. Invest in Your Home
    We’re spending more time at home than ever, so why not use your tax refund to improve where you live? You can do this in a couple of ways. If you’re thinking of buying a new home, you can use your refund to save up for your down payment (you may even be eligible for a first-time home buyers’ tax credit). Or if you already own a home and you’re content, consider investing in renovations, whether it’s a big project like giving your bathroom a total refresh, or a smaller investment like creating an office nook to make working from home more enjoyable. It may seem like an indulgence, but by upgrading your home, you’re actually adding value to it for the future.

    Getting a tax refund can feel like an unexpected gift. To make the most of the money and bring yourself peace of mind, it’s a good idea to resist the urge to spend it all, and instead take the time to think about how you can use your refund to make the biggest impact.

  • The Smart Way to Use Your Tax Refund

    The Smart Way to Use Your Tax Refund

    There’s at least one nice thing about doing your taxes: the possibility of getting a refund. According to figures from Revenue Canada, just over half of the nearly 25 million tax returns filed in 2019 received a refund, at an average amount of $1,670.

    If you did receive a refund, you need to decide what to do with it. The temptation to spend your refund immediately can be strong. Who doesn’t want a vacation, a new car, or that kitchen renovation you’ve been hoping to start? However, it’s important to consider all your options, such as paying down debt or saving for the future.

    Whether you’re beginning your career, starting a family, or saving for a down payment on a home, below are some suggestions about smart ways you can put your tax refund to use.

    Pay Down Your Debt
    According to a survey conducted by Global News at the end of 2019, the demographic with the most debt appears to be Generation X (loosely defined as people aged 35-54), who report an average debt of over $10,000, not including their mortgage. This includes credit card debt, which can carry interest rates nearing 20%. Monthly payments at such high rates can quickly eat a big hole into your budget.

    The Financial Consumer Agency of Canada (FCAC) offers advice on how to manage your debt. It recommends paying off higher-interest debt first, such as payday loans and credit cards. This will help lower your interest costs and free up more money to reduce your overall debt.

    The debate about whether you should invest your money or use it to pay down debt is strong and ongoing. This choice depends heavily on prevailing interest rates, the amount you owe, and your financial situation. Online calculators can be a great resource to help you decide whether paying down your debt is the right choice for you.

    Save for Retirement
    The internet is full of statistics about Canadians not saving enough for retirement. Government programs such as the Canada Pension Plan and Old Age Security will provide a basic income for many Canadians in retirement, but you need to consider your own retirement wants and needs in deciding how much more savings you need. The good news is that the earlier you start saving, the more your money could grow with the benefit of smart investment choices.

    A Registered Retirement Savings Plan (RRSP) is the most well-known retirement savings option in Canada. It allows you to contribute money each year, while avoiding taxes on those contributions until you withdraw it later in life (hopefully at a lower tax rate). In fact, RRSP contributions can help increase the amount of money you receive as a tax refund.

    Tax Free Savings Accounts (TFSA’s) are another great option for long-term savings, as any capital gains you accumulate inside a TFSA are not taxable. Luckily, there is no shortage of options when it comes to saving your money for retirement. Canada Life offers a range of saving and investing solutions, including mutual funds and more comprehensive retirement plans.

    Start an Emergency Fund
    There are several reasons to save beyond the long-term goal of retirement. The FCAC recommends Canadians set up an emergency fund to cover unexpected expenses, such as the loss of employment or a medical emergency. An emergency fund can be set up slowly, with small weekly contributions to a dedicated savings account. You can also use part of your tax refund to set up a base from which to build over time.

    This process can also be applied to other savings goals, such as a wedding or a down payment on a new home. You can set aside a portion of your tax refund, and then make smaller contributions on a regular basis to meet your goal.

    Save for a Child’s Education
    If you are expecting a child, or are the parents of a recent newborn, you’ve probably thought at least in passing about the costs associated with their education. The average cost for a year of undergraduate tuition in Canada hit $6,571 in 2019, reports Statistics Canada. And tuition levels are widely expected to continue rising. Luckily, there are government programs to help you save money for your children, the most well-known is the Registered Education Savings Plan (RESP).

    You can open an RESP as soon as your baby is born. The earlier you start saving, the more you can potentially grow your money by the time he or she is ready for post-secondary studies. The federal government will contribute up to $500 per year to any deposits you make into an RESP (based on a formula of matching your own contributions to the account at a rate of 20% annually). So if you’re putting in less than $2,500 each year (about $200 per month) to your child’s RESP you’re missing out on those government amounts.

  • How to Prepare for the Upcoming Tax Season

    How to Prepare for the Upcoming Tax Season

    Many Canadians’ year-end tax prep may be a little different as 2020 draws to a close. Taking a close look at your personal balance sheet before December 31 is a routine exercise that can help you make the most of your savings, reduce your tax bill and boost your tax refund in the new year. But a slew of pandemic-linked emergency benefits and relief measures this year means there may be some additional financial housekeeping you need to do this time. Here are some tips to make sure you start off the 2021 tax season on the right foot:

    Paying Taxes on Your Emergency Benefits
    The first round of emergency benefits Ottawa rolled out during the pandemic did not have any tax withheld at source. If you received either the Canada Emergency Response Benefit (CERB) or the Canada Emergency Student Benefit (CESB), you’ll have to include 100% of those payments in your 2020 tax return. The government will send you a T4A tax reporting slip for 2020 showing the total amount you report.

    How much tax you’ll actually end up paying depends on your overall income for 2020. For example, if you made $27,000 from work in 2020 and received $8,000 worth of CERB, your taxable income for the year would be $35,000. Both the income you received from CERB and your job would be taxed in the same way.

    You May or May Not Have to Pay Taxes
    “If you’re under $12,000 in total income for the year, you don’t have to worry about any income taxes next year,” says Frank Fazzari, a chartered professional accountant at Fazzari & Partners. With the second round of COVID-19 benefits that became available in September—the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), and Canada Recovery Caregiving Benefit (CRCB)—the government is withholding 10% in taxes at source.

    This, however, may be insufficient to cover your tax liability, Jamie Golombek, managing director of Tax and Estate Planning with CIBC Private Wealth Management. In addition, when it comes to the CRB, you may have to pay money back if your additional income for 2020 is more than $38,000. The claw back rate is $0.50 for each dollar of CRB received for net income over this amount. If you’ve received either round of benefits you may want to set aside some funds to cover any taxes or payments, you may owe come tax season next April.

    Repaying Emergency Benefits You Don’t Qualify For
    If you have to repay any COVID-19 benefits you didn’t qualify for, it would be best to return the funds by the end of the year. There is no obligation to return the payments by the end of the year. But repaying after December 31 means the amounts will show up on your T4A for 2020 and you may have to pay taxes on them. If you end up paying taxes on money you return, the CRA will eventually make you whole but you may have to wait until you file your 2021 tax return in the spring of 2022 until that happens. The process is based on general tax rules in the Income Tax Act that apply to repayments of taxable income.

    The Simplified Home Office Deduction
    If you’re one of the 2.4 million Canadians who’ve been working from your couch, the kitchen table or the kids’ bedroom this year because of COVID-19, you’ll likely be able to claim some home-office costs on your 2020 tax return without having to sift through receipts or ask your employers to fill out forms.

    If you’re an employee who’s been toiling at home more than 50% of the time over at least four consecutive weeks in 2020 due to COVID-19, you’ll be able to claim a deduction of $2 for every work-from-home day up to a maximum of $400. This is what the CRA is calling a temporary flat-rate method of calculating the home office deduction. If you’re an employee with significant home office expenses, you can use the current “detailed method” of calculating the home office tax break, the CRA has said.

    TFSA Withdrawals
    There are no COVID-19 rule changes affecting tax-free savings accounts, but many Canadians have ramped up their contributions this year, according to a recent study from BMO. While a smaller percentage of Canadians was able to put as much money as they had planned into a TFSA this year, those who did were able to save up a little extra, the data suggests. Overall contributions were up 9.5% year over year.

    If you’re planning to draw down on some of your TFSA savings soon, you may want to do so before the end of the year. Whenever you take money out of a TFSA, an equivalent amount of TFSA contribution room frees up in your account—but that doesn’t happen until the following calendar year.

    RRIF Withdrawals
    If you turned 71 in 2020, you have until December 31 to convert your registered retirement savings plan (RRSP) into a registered retirement income fund (RRIF) or registered annuity—that’s standard. If you already have an RRIF, though, remember Ottawa reduced the required minimum withdrawal for 2020 by 25%.

    One-time COVID-19 Payment for Persons with Disabilities
    Ottawa has also established a one-time, non-taxable payment of up to $600 for persons living with disabilities to help soften the impact of extra expenses caused by the pandemic. Being eligible and applying for the disability tax credit is one of the qualifying criteria to receive the payment. If you haven’t applied for the DTC yet, you’re still in time. Ottawa moved the application deadline from September 25 to December 31.

    Charitable Donations
    Charitable donations are especially important in a year that has seen jobless numbers skyrocket, domestic violence spikes, and marginalized communities struggle disproportionately with the impact of COVID-19. Both the federal and provincial governments offer donation tax credits that, when combined, can result in tax savings of around 50% of the value of your gift in 2020, depending on where you live. From the federal government alone, Canadians get a tax credit of 15% credit on the first $200 of charitable donations and 29% on anything beyond that amount.

     

  • Inside the Mortgage Approval Process

    Inside the Mortgage Approval Process

    Documents Required to Get the Best Mortgage Rate

    So, you’ve found the perfect home, you put in an offer and it’s accepted­­—with the condition of financing, of course. Now it’s time to seal the deal and this boils down to money. So you call your lender to finalize the mortgage. That’s when you’re going to get hit with a list of paperwork that’s required for your application. Below is a list of paperwork that you may need to complete your mortgage application:

    Personal information: Age, marital status, number, and age of kids.

    Employment details: This includes proof of income (such as T4 slips, copies of your last two paystubs, personal income tax returns, Notice of Assessments from CRA for the last two tax filing years, and a letter from your company stating your position, length of employment and salary).

    If self-employed you’ll need to provide: Incorporation documents, if applicable, as well as financial statements for the corporation for the last two to three tax years. You’ll also be required to submit full personal tax returns as well as CRA Notice of Assessments for both the corporation, as well for you personally. The lender may also ask to see portions of your books, such as your General Ledger or Profit & Loss statements. Talk to your accountant or bookkeeper for these reports.

    Other sources of income: Typically this is a statement on your part, but the lender could ask for back-up documentation. Other income can include pension, rental income, part-time work, etc. You’ll probably be asked for copies of your tax returns, or copies of paystubs or rental income documentation.

    If you already own property: A copy of the mortgage statement on your current property and a copy of last year’s property tax statement and, perhaps, this year’s up-to-date property tax statement.

    Current banking information: Including bank, branch, accounts, and balances.

    Verification of your down payment: This can be a snapshot of a bank account where the money is currently deposited, or a letter from a family member stating that the money is a loan or gift.

    Consent to run a credit history search: Every lender will either verbally ask for permission (and then obtain your Social Insurance Number) or ask you to sign an authorization form allowing them to pull your credit history.

    List of debts (otherwise known as liabilities): This is where people sometimes opt to exclude a few items owed, but you need to resist this urge. Your credit history will show all outstanding money owed, so be upfront and honest. Provide a list of what is owed, to whom you owe it to and what monthly payments, if any, you put towards paying down the debt. The list should include student loans, credit card balances, car loans, monthly lease (or lease-to-own) arrangements and personal loans.

    Copy of the listing: You will need to print off a copy of the listing and include this in your mortgage documentation package.

    Copy of purchase document: You will need a copy of the document you signed to buy the home. Known as the Agreement to Purchase and Sale, it’s the document that states the address, what’s included/excluded and the price, deposit, and down-payment you agreed to.

    Condo documentation: If you’re buying a condo or strata-townhome, you’ll also need to include the condo corporation’s financial statements and status certificates.

    Rural property: You’ll need to include the certificate for the well and/or septic tank if you’re property isn’t on municipal water and sewer.

    If you want to reduce your stress during the financing phase of your home purchase, and you don’t want to or can’t submit all this information prior to finding a property then consider gathering up all this documentation ahead of time. Just having all the documentation at the ready will reduce your workload and free you up to concentrate on last-minute requests.