Archive for March, 2007

Federal Budget Highlights

March 19, 2007

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Finance Minister Jim Flaherty presented the Tory government’s second budget in the House of Commons today. Here are the highlights from a personal finance perspective from reading the budget document found on the Department of Finance website (be warned that it is 478 pages long):

  1. If you purchase a fuel-efficient vehicle such as a Toyota Prius or Honda Civic Hybrid on or after March 20, 2007, you will qualify for a rebate of $2,000. Even high-mileage cars such as a Toyota Corolla will be eligible for a $1,000 rebate. (See pages 67-68).
  2. At the same time, gas-guzzling cars, minivans, SUVs, trucks and other passenger vehicles will attract a new “Green Levy” of $1,000 – $4,000 depending on the mileage. (See page 69).
  3. A Working Income Tax Benefit of $500 to $1,000 will be provided as a refundable tax credit to help low-income Canadians get over the “welfare wall”. (Pages 78-83).
  4. A new Registered Disability Savings Plan (RDSP) to help parents save for the future of a child with severe disabilities. The RDSP is modelled on the RESP program and is available to individuals who are eligible for the disability tax credit. (Pages 83-86).
  5. Donations of publicly listed securities to private foundations will not attract a capital-gains tax effective today. (Page 87).
  6. The net personal income tax threshold has been increased from $2,000 to $3,000 at or below which individual taxpayers do not have to pay instalments. This is part of a series of measures to reduce the paperwork burden of small business. (Pages 183-185).
  7. The budget is proposing some changes to RESPs by eliminating the $4,000 annual contribution limit, increasing the lifetime contribution limit to $50,000 from the current $42,000 and increasing the maximum annual CESG amount to $500 from $400 (and to $1,000 from $800 if unused grant room is available). The key though is that the amount of CESG that a child is eligible to receive stays at $7,200. (Pages 210-211).
  8. A new child tax credit of $2,000 for each child under age 18 is being introduced effective January 1, 2007. The child tax credit will reduce your income tax by $310 for each eligible child in your household. (Pages 226-227).
  9. Single income families will benefit from an increase in the spousal amount, which will now be equal to the basic personal amount in the current and future years. The increase will be worth $209 in additional tax relief in 2007. (Pages 227-229).
  10. The lifetime capital gains exemption available to small business owners, farmers and fishermen will increase from $500,000 to $750,000 effective today.
  11. RRSPs should now be converted to RRIFs by the end of the year in which an individual turns 69. The age limit is now increased to 71.
  12. Canadian residents travelling abroad can now bring back $400 (up from $200) worth of goods without having to pay duties or taxes after a 48-hour absence effective March 20, 2007.

Keep Your Spouse in the Loop

March 18, 2007

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My wife and I have been married for almost six years now and just like in other marriages, we each play our own designated roles. For instance, she mostly does the cooking and cleaning and I do the grocery shopping and taking out the garbage. We never actually talked about what we would each contribute but somehow we settled into doing our “assigned” tasks.

It turns out that I run the family’s financial department. I pay the bills, move money between accounts, manage our investments and file our income taxes. The downside to this arrangement, of course, is if I were to be run over by a truck, my wife would be clueless about our finances. I am fairly certain that she would say “huh?” if I were to say that I purchased an ETF for our account. I am not implying that she is not smart, because she is, after all, an engineer too. She just isn’t very interested in financial topics and would much rather read literature than pick up a book on personal finance.

One idea I’ve picked up from Free Money Finance is to create a PowerPoint presentation with information about our assets and liabilities, our income and spending and our portfolio holdings that I would update and share with my wife periodically. I bounced the idea off my wife and she is very enthusiastic about it, so I’ll start working on my slides pretty soon. I am hoping that in a few years time, she will have enough understanding of our finances and would be capable of managing things on her own.

PS: I would like to thank frequent commenter Mike for suggesting this post topic. I would also like to take this chance to ask you, dear reader, what financial topics you would like to see discussed in future posts. Feel free to post a comment here or you are also welcome to contact me via email.

PPS: Finance Minister Jim Flaherty will table the Federal Budget in Parliament tomorrow. The budget is rumoured to contain a reduction to the capital gains tax and a grab bag of other tax cuts. Tomorrow’s post will deal with how the budget will affect our pocket books.

This and That

March 15, 2007

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  1. The Canada Revenue Agency says that it has fixed the software glitch and has started accepting personal income tax returns. I don’t have an excuse anymore to put off working on our tax returns.
  2. If you are hoping for an early retirement, Money magazine offers a guide to achieving financial freedom long before 65. Of course, the biggest piece of the early retirement puzzle is accumulating a large enough nest egg and this article shows how.
  3. Conrad Black’s trial got underway in Chicago this week and irrespective of the results of the trial, there is a group of losers already: investors in Lord Black’s former media company.
  4. Rob Carrick says that ABM fees can be avoided with some effort on our part. For good measure, he suggests that we can profit from the greedy banks too.
  5. The Star’s Ellen Roseman answers reader questions on wills.
  6. Million Dollar Journey posted a primer on saving taxes using flow-through shares.
  7. Investing Intelligently debunks Smoke and Mirrors author David Trahair’s Myth # 1.