The New York S&P TSX Composite index has had a strong run over the last 2 weeks. It has posted daily gains in nine of the last 10 trading sessions and has risen 6.5% over that time and is up 5.89% year-to-date. The TSX closed Friday at an all-time high of 18,460.21.

The Nasdaq closed above 14,000 for the first time on Tuesday and hit an intra-day all-time high of 14,102.04 on Friday before closing at 14,095.47. Year-to-date the Nasdaq is up 9.37%, continuing its torrid pace.

The S&P 500 is up 4.77% year-to-date and continues its march toward the 4,000 mark. Friday saw the S&P 500 hit an all-time intra-day high of 3,937.23 before closing at 3,934.83.

Most major European and Asian markets – even London’s FTSE 100 – posted weekly gains and are all positive for 2021 year-to-date.

Working from home: calculating your workspace deduction percentage

We have had several clients reach out with questions around tax deductions for employment expenses incurred while working from home throughout COVID, and specifically, how to calculate the appropriate workspace percentage.

As a reminder, there are two options for claiming home expenses: the temporary flat rate method ($2 per day worked at home, up to $400 maximum) or the usual detailed method. You can read a more thorough breakdown of these options here.

When calculating your workspace at home, you must prorate your workspace versus total home space, but you must also prorate your work time spent in your workspace within the context of a full week’s worth of hours.

For example: Jim worked from home from March until December 2020. His home is 1,300 square feet and his workspace is his living room/dining room, which is 300 square feet in size.

The first step in calculating the percentage of home expenses is to prorate the workspace by the total home space. In this case, 300 / 1300 = ~23%.

Next, Jim must consider that he is only using that workspace for 40 hours per week (his normal work week). There are 168 hours in a week (7 days, 24 hours per day). The second calculation is to divide Jim’s 40 hours by 168, giving him 24%.

So for work, Jim uses 23% of his home, 24% of the time. Multiplying these two amounts, Jim’s deductible percentage of home expenses is ~5.5%.

Using the detailed method of calculating home expenses is not worthwhile unless Jim ends up with a tax saving greater than the $400 flat rate method. In order to deduct more than $400 using the detailed method, Jim would need to have eligible home expenses of ($400 / 5.5%) ~$7,300.

A reminder to contact us if you have questions about your home use percentage or what constitutes and eligible expense. We can work with you to determine if the flat rate method or detailed method is the most applicable to your situation.

Weekly Update – By The Numbers

Sources: Yahoo! Finance, CNBC.com

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Please click here to view the full CRA details on employment expenses.

Many people, especially renters, will be better off using the detailed method.  For example, if your rent is $2,000 a month, you worked from home for 10 months, and your home-office percentage is 10%, that’s already a $2,000 deduction.

The “Flat-Rate” Method

The Canada Revenue Agency (CRA) has introduced a temporary “flat-rate” method to calculate your home office expenses for 2020 for employees who worked from home in 2020 due to COVID-19 and paid home office expenses for which they were not reimbursed. If you use this method, your employer is not required to complete form T2200 or T2200S.

The “flat-rate” option will allow you to deduct $2 per day you worked from home, to a maximum $400.  If you worked from home since March and work five days a week, you’ll be able to claim the full $400.

The Detailed Method

The detailed method is the standard method for claiming employment expenses. To use the detailed method, you need your employer to complete Form T2200 or the simplified T2200S. You must also itemize your various expenses.

Eligible expenses:

• rent paid for a house or apartment where you live
• electricity, heat, water or the utilities portion of your condominium fees
• home internet access fees
• maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
• supplies (stationery items, pens, folders, sticky notes, postage, toner, ink cartridge, etc.)
• employment use of a basic cell phone service plan
• long distance calls for employment purposes

If you are a commission employee, you can also claim expenses that reasonably relate to earning commission income for the following:

• property taxes
• home insurance
• lease of a cell phone, computer, laptop, tablet, fax machine, etc.

Non-eligible expenses.  You cannot claim any of the following:

• capital cost allowance
• mortgage interest
• principal mortgage payments
• home internet connection fees or the portion of fees related to the lease of a modem/router
• capital expenses (replacing windows, flooring, furnace, etc.)
• office equipment (printer, fax machine, briefcase, laptop case, or bag, calculator, etc.)
• monthly basic rate for a landline telephone
• cell phone connection, or license fees
• purchase of a cell phone, computer, laptop, tablet, fax machine, etc.
• computer accessories, (monitor, mouse, keyboard headset, microphone, speakers, webcam, router, etc.)
• other electronics (television, smart speaker, voice assistant, etc.)
• furniture (desk, chair, etc.)

Remember that whether you are salaried or commissioned, there is always the possibility that the CRA will request verification of your expense claims, so you will need to keep your receipts for 7 years, just in case. Failure to verify a claim could mean tax owing and interest charges.

Conclusion

Again, please note that we will have a specific tax checklist you’ll be able to complete for work-from-home expenses at tax time.

If you are unsure which work-from-home option is best for you, talk to us. We can help you determine how best to proceed.

Source: Canada Revenue Agency

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The Federal Government proposed a “Simplified T2200” during their Fall Economic Statement. Under this proposal, the simplified T2200 option would allow you to make a claim to deduct up to $400 in expenses in cases where you were forced to work from home due to the COVID-19 outbreak.

With the simplified T2200, you would not need to include an itemized expenses list and you would not be required to have your employer complete a standard T2200.

While not finalized, here is what a proposed Simplified T2200 might look like. At this point, the simplified T2200 is appears to be applicable only to the 2020 tax filing year.

Of course, you will still have the option of using the detailed T2200 method, should you choose. As many of you will no doubt be aware, the standard T2200 requires a greater level of detail and work on the taxpayer’s part.

Claiming home expense deductions requires keeping track of eligible home expenses like heat, work supplies, utilities, home office repair/maintenance, and providing workspace square footage and total home square footage. You are also required to have your employer complete the T2200 tax form on your behalf.

If you had to work from home more than usual due to COVID-19 but are unsure if the simplified or standard T2200 would be best for you, please contact us. We can help you determine which claim route would be best for you.

Weekly Update: By The Numbers

Sources: Advisor.ca, Yahoo! Canada Finance, CNBC.com

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

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Penalties and interest will not be charged if returns are filed and payments are made by this date. This includes the late-filing penalty.

Source: Canada.ca

The post Pay your taxes: The CRA interest-free deferral of your 2019 tax balance and 2020 instalments ends on September 30th appeared first on Smof Investment Manager, LLC.

BC Provincial Budget Announced

This week, the BC NDP government presented its 2020 Budget. Overall, the Budget calls for surpluses in 2019/20 ($203 Million), 2020/21 ($227 Million), 2021/22 ($179 Million) and 2022/23 ($374 Million).

Below are the highlights from the Budget announcement:

New Highest Provincial Tax Bracket

The province is adding a new highest tax bracket. The new bracket starts at $220,000 and will increase from 16.8% up to 20.5%. The province says BC will have the third-lowest rate for those earning $475,000 per year.

Electric Vehicles

With the province ahead of its target to get electric vehicle sales to 10% of all vehicle sales by 2025 (currently at 9%), the Budget allows for a continuation of the $3,000 credit for new EV purchases with an additional $20 Million of funding.

Another $5 Million in funding will be allocated to build more charging stations both at homes and at workplaces.

Sugar Tax

The province will no longer exempt sweetened carbonated drinks from PST. The province estimates $27 Million in revenue from this tax in 2020 and ~$37 Million in revenue in 2021.

BC Child Opportunity Benefit

Starting in October, the BC Child Opportunity Benefit will make families with one child eligible to receive up to $1,600 per year, and families with two children eligible for up to $2,600 per year.

BC Access Grant

Low- and middle-income post-secondary students will now be eligible for “needs-based” grants. Students in programs up to 2 years in length may be eligible for up to $4,000 a year, while students in programs greater than 2 years may be eligible for up to $1,000 a year.

Reducing Surgery Wait Times

Health care is the highest-funded program once again, and special attention is being paid to reducing wait times for some surgeries.

The Budget allows for $50 Million to help address wait times, though the specific surgeries to be focused on has not been finalized.

Education Funding

The province will provide $339 Million in funding over the next three years, with the intention to hire ~4,200 more teachers. However, the allotment does not provide for wage increases for existing teachers above the mandated 2% per year.

Modular Housing

The Budget calls for $56 Million in additional funding to build 200 more temporary modular housing units, aimed at getting homeless people and people at risk of becoming homeless off the street.

Wildfire Funding

After states of emergency were declared in 2017 and 2018, the 2019 “fire season” was not as severe. Still, the Budget calls for an increase of $35 Million in funding to fight wildfires, with overall funding rising to $136 Million.

Forestry Sector Assistance

The forestry sector has been hard-hit, with projections of $867 Million in revenues for 2020/2021, down from the $1.14 Billion projections from a year ago. The Budget allows for $13 Million to help support the struggling industry.

Money Laundering Public Inquiry Funding

The province is allocating $11 Million to fund inquiries into money laundering in casinos, real estate and luxury car markets.

Illegal Pot Crackdown

The Budget allows for $12 Million to enforce compliance & enforcement on illegal marijuana sales.

Weekly Update – By The Numbers

Sources: Gov.BC.ca, Global News, Yahoo! Finance, CNBC.com

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

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Net invested: The amount you contributed (minus any money redeemed)
Book Value: The amount you contributed plus distributions received
Market Value: What the investment is worth today.

Example: You invest $100,000 in a mutual fund on January 1st. The investment increases 10% throughout the year and makes a $3,000 distribution at the end of the year. Therefore:

• Your net invested is $100,000
• Your book value is $103,000
• Your market value is $110,000

Clients often compare book value with market value to gauge their performance. This is not a fair way to assess performance as the book value will also include any distributions received. The best way to measure performance over time is to compare market value with net invested.

So, what is the purpose of book value? Book value is largely used in connection with capital gain or loss calculations for tax reporting. Using the example above, the capital gain for tax purposes is $7,000.

For a more detailed read on this topic, kindly refer to the attached PIMCO piece here.

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

The post Net Invested vs. Book Value vs. Market Value appeared first on Smof Investment Manager, LLC.

Wedding Announcement!

After a 30-year courting period, we are proud to announce that Odette Morin and Terry Broaders tied the knot in a private ceremony at Stanley Park on Friday, July 26th.

Staying true to their financial planning core, the decision to wed was motivated in part for tax reasons. Since retiring, the beautiful couple have spent their winters in Spain, where the common-law status does not offer the same rights and could have eventually created a costly tax burden.

We wish Odette & Terry a lifetime of love and happiness! 

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

The post Wedding Announcement! appeared first on Smof Investment Manager, LLC.

Tax Filing Deadline Next Week

As a final reminder, the tax filing deadline is next Tuesday, April 30th. If you have self-employment income, the deadline is June 15th.

Again, regardless of when your deadline is, if you owe money, then the payment deadline is April 30th. See our below explainer on how the different deadlines affect those who owe.

CRA Tax Deadlines Explained

The CRA filing deadline is April 30th, or June 15th if you have self-employment income. You are only subject to a late-filing penalty if you have a balance owing with CRA. If you know you will receive a refund, you will not be penalized for filing after your deadline.

CRA has two types of penalties: late-filing, and late-payment. Late-filing is by far the most punitive. The penalty is 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

Example: If you owe $5,000 to CRA and you file one week late, you will be assessed a late-filing penalty of $5,000 x 5% = $250.

The “penalty” for late-payment is simply an accrual of interest of 6% a year.

Example: You owe $5,000 to CRA and you pay your balance one month after the deadline. You will be assessed late-payment interest of $5,000 x (1/12th of 6%) = $25.

Conclusion: If you have a balance owing with CRA, filing a few days after your deadline can be expensive.  Paying a few days after the deadline will have more minor consequences.

Be Aware: CRA Scams Abound

As we enter the full swing of tax season, it is important to remember that scammers posing as CRA agents are also getting into full swing. The CRA has put together a helpful list of things they MAY and things they WILL NEVER do, depending on the type of communication (phone contact, email contact, mail contact).

The CRA website page on the subject is here. One thing CRA will never, ever do is threaten you with arrest or prison, or demand immediate payment by e-transfer, bitcoin / other e-coins, prepaid credit cards or retail gift cards (iTunes, Amazon, etc). They will NEVER do this.

As always, if you are contacted by the CRA or by someone you think might be a scammer, feel free to contact us and let us know. If we prepare your taxes, we can contact the CRA on your behalf to determine whether the contact you received is legitimate or not.

Weekly Update – By The Numbers

North America

• The TSX closed at 16,614, up 1 points or 0.01% over the past week. YTD the TSX is up 16.00%.
• The DOW closed at 26,543, down -17 points or -0.06% over the past week. YTD the DOW is up 13.78%.
• The S&P closed at 2,940, up 35 points or 1.20% over the past week. YTD the S&P is up 17.27%.
• The NASDAQ closed at 8,146, up 148 points or 1.85% over the past week. YTD the NASDAQ is up 22.77%.
• Gold closed at 1,288, up -17.00 points or 0.86% over the past week. YTD gold is up 0.23%.
• Oil closed at 62.87, down -1.13 points or -1.77% over the past week. YTD oil is up 37.18%.
• The USD/CAD closed at 0.7427, down -0.0041 points or -0.55% over the past week. YTD the USD/CAD is up 1.35%.

 Europe/Asia

• The MSCI closed at 2,154, down -6 points or -0.28% over the past week. YTD the MSCI is up 14.27%.
• The Euro Stoxx 50 closed at 3,500, up 1 point or 0.03% over the past week. YTD the Euro Stoxx 50 is up 16.63%.
• The FTSE closed at 7,428, down -32 points or -0.43% over the past week. YTD the FTSE is up 10.40%.
• The CAC closed at 5,569, down -11 points or -0.20% over the past week. YTD the CAC is up 17.71%.
• DAX closed at 12,315, up 93.00 points or 0.76% over the past week. YTD DAX is up 16.63%.
• Nikkei closed at 22,259, up 58.00 points or 0.26% over the past week. YTD Nikkei is up 11.21%.
• The Shanghai closed at 3,086, down -185.0000 points or -5.66% over the past week. YTD the Shanghai is up 23.74%.

Fixed Income

• The 10-Yr Bond Yield closed at 2.51, down -0.0500 points or -1.95% over the past week. YTD the 10-Yr Bond Yield is down -6.69%.

Sources: Dynamic, Canada Revenue Agency

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

The post Weekly Update – April 26, 2019 appeared first on Smof Investment Manager, LLC.

TSX Reaches All-Time High

The New York Stock Exchange’s S&P/TSX Composite Index closed up 68.57 points, or 0.41%, to finish at 16,612.81, passing the previous high of 16,567.40 reached on July 12, 2018. The main index has increased for the fourth straight week.

CRA Tax Deadlines Explained

The CRA filing deadline is April 30th, or June 15th if you have self-employment income. You are only subject to a late-filing penalty if you have a balance owing with CRA. If you know you will receive a refund, you will not be penalized for filing after your deadline.

CRA has two types of penalties: late-filing, and late-payment. Late-filing is by far the most punitive. The penalty is 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

Example: If you owe $5,000 to CRA and you file one week late, you will be assessed a late-filing penalty of $5,000 x 5% = $250.

The “penalty” for late-payment is simply an accrual of interest of 6% a year.

Example: You owe $5,000 to CRA and you pay your balance one month after the deadline. You will be assessed late-payment interest of $5,000 x (1/12th of 6%) = $25.

Conclusion: If you have a balance owing with CRA, filing a few days after your deadline can be expensive.  Paying a few days after the deadline will have more minor consequences.

Be Aware: CRA Scams Abound

As we enter the full swing of tax season, it is important to remember that scammers posing as CRA agents are also getting into full swing. The CRA has put together a helpful list of things they MAY and things they WILL NEVER do, depending on the type of communication (phone contact, email contact, mail contact).

The CRA website page on the subject is here. One thing CRA will never, ever do is threaten you with arrest or prison, or demand immediate payment by e-transfer, bitcoin / other e-coins, prepaid credit cards or retail gift cards (iTunes, Amazon, etc). They will NEVER do this.

As always, if you are contacted by the CRA or by someone you think might be a scammer, feel free to contact us and let us know. If we prepare your taxes, we can contact the CRA on your behalf to determine whether the contact you received is legitimate or not.

Office Closure

The Smof Investment office will be closed on Friday, April 19th for Good Friday.  It will re-open Monday, April 22nd.

On behalf of the entire Smof Investment Team, Happy Easter!

Sources: Canada.ca, CI Investments

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

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2018 Tax Deadline

We generally quote a two-week turnaround for completion of tax files. Given the volume of tax files we’ve received to-date, we would like to remind you that it the April 30th deadline is only 18 days away.

It will be impossible to guarantee the completion of your file if we receive it after April 16th.

With that said, if you would like us to prepare your return(s), please send us your paperwork as soon as possible.

Regardless of when your taxes are due, if you owe money on your return, it is due on April 30, 2019.

Let us know if you have any questions about your tax return.

Our tax checklists are available here.

Q1 2019 – Market Recap

Global capital markets reversed course after a notably difficult end to 2018, rebounding strongly to post mainly positive results for the first quarter of 2019. Equity markets appeared to be lifted by the prospect of easier monetary policy, while bond markets benefited from economic data showing slowing global growth.

The MSCI World Index, which reflects equity market results for 23 developed market economies, climbed 10.3% in Canadian dollar terms, with broad-based gains across markets in North America, Europe and Asia.

In the U.S., the S&P 500 Index finished the quarter with a gain of 11.3% (also in Canadian currency), led by strong results for the information technology, energy and industrials sectors. Emerging markets equities also made gains during the quarter.

The Canadian benchmark S&P/TSX Composite Index posted a robust quarterly gain of 13.3%. Although most sectors added value, Canada’s resource-heavy market was particularly buoyed by higher oil prices, while the industrials, information technology and health care sectors also performed well.

The equity rebound came despite economic data indicating growing slack in the global economy, and central banks responded by striking a more dovish (conservative) tone in the first quarter. After moving to raise interest rates several times in 2018, the U.S. Federal Reserve left rates unchanged and put further increases for 2019 on hold. The Bank of Canada also left rates unchanged, and 10-year Canadian government bond yields declined as investors discounted the probability of further rate cuts in the near term.

The FTSE Canada Universe Bond Index, a broad measure of Canadian government and corporate bonds, returned 3.9% for the quarter.

Since the bull market in North American equities began more than 10 years ago, investors have drawn confidence from the gradual expansion of the global economy, particularly in the U.S. where corporate earnings have been healthy and employment, housing and consumer spending data have been strong. However, late in the economic cycle, corporate earnings are slowing, along with global economic growth. While interest rates remain low and help to support business investment and equity prices in the near term, the market volatility we have seen over the past few quarters may become a more common occurrence as the cycle matures. The fourth quarter’s steep decline and the dramatic reversal in the first quarter of this year is a timely reminder of how quickly markets can turn, and underscores the importance of staying invested for the longer term.

Given this backdrop, we continue to believe investors are best served by a diversified approach to investing – one that provides exposure to a broad range of actively managed investments from equities to bonds, depending on your personal objectives.

If you have any questions or concerns about your portfolio, please do not hesitate to contact our office.

Be Aware: CRA Scams Abound

As we enter the full swing of tax season, it is important to remember that scammers posing as CRA agents are also getting into full swing. The CRA has put together a helpful list of things they MAY and things they WILL NEVER do, depending on the type of communication (phone contact, email contact, mail contact).

The CRA website page on the subject is here. One thing CRA will never, ever do is threaten you with arrest or prison, or demand immediate payment by e-transfer, bitcoin / other e-coins, prepaid credit cards or retail gift cards (iTunes, Amazon, etc). They will NEVER do this.

As always, if you are contacted by the CRA or by someone you think might be a scammer, feel free to contact us and let us know. If we prepare your taxes, we can contact the CRA on your behalf to determine whether the contact you received is legitimate or not.

Sources: Canada.ca, CI Investments

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

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