Investors, families with children take note
Paul Delean
Province
GST cut on Jan. 1 may be a consideration to consumers this Boxing Day. Photograph by : Jon Murray, The Province
MONTREAL –For those who haven’t been paying attention, a lot has changed in the Canadian tax system in the past year, with more changes afoot for 2008.
For starters, the federal goods and services tax (currently six per cent) will drop by one per cent, effective Jan. 1. Remember that as you ponder big Boxing Week buys.
The rules for charitable donations in effect since March 19 make it much more attractive to donate stock and mutual funds to registered charities, since they’ll be spared any capital-gains tax on the appreciation and still get a charitable tax credit on the market value of the holdings donated.
But it has to be a direct transfer of investments, not a sale and subsequent donation of the proceeds.
Donations must be made before Dec. 31, however, to count for the 2007 tax year. The same applies for medical expenses, for those who want to claim the deductions for 2007, and business expenses for the self-employed.
Stock owners who want to trigger capital gains or losses for the current year have until Dec. 24 to make Canadian trades and Dec. 26 to complete U.S. transactions.
Registered Education Savings Plans to help finance children’s post-secondary studies were enhanced by both the federal and provincial governments this past year, but Dec. 31 remains a pivotal date, since the amount of government assistance available is limited by calendar year.
Although there’s no longer an annual limit on the amount that can be put into an RESP, the optimal contribution, for those who haven’t fully accessed the grants they were entitled to for each child since 1998, is $5,000. Ottawa limits its annual grant contribution to $500. (The maximum is $1,000 for those with unused room from previous years).
Also new is the federal tax credit for activities promoting fitness for children 16 and under. (It also applies to children who turned 16 during the year). Up to $500 a year in enrolment fees, per child, is eligible for the credit. The key is when it’s paid, not the period it covers. So if you’re already at the limit for 2007, you might want to date the next cheque for 2008 to maximize next year’s deduction.
On the other hand, if you’re below the limit for 2007, you could prepay an activity beginning next year and be eligible for the credit in 2007.
© The Vancouver Province 2007
