We all had to adapt to a new reality this year. We came together to face these difficult times both personally and professionally. We did everything in our power to maintain our service model and optimize your finances during a challenging market environment. We thank you for your patience, cooperation, and ongoing support.

With good news on the horizon thanks to a new vaccine, we are looking forward to 2021 being a year of renewal and opportunity.

In our final blog entry of 2020, we provide you with an “everything update”, a list of recent headlines in the areas of financial aid, investments, and taxation.

Please note that due to the holidays, our office will be closed on December 25 and January 1. Our team will have reduced service between December 21 and January 3, processing only urgent requests (contributions, withdrawals) during this time. We will be back to full service on Monday, January 4 to begin the new year together.

Anthony, Sandrine, Frank, & JoAnne

Financial Aid

Online application for the BC Recovery Benefit begins on December 18

Investments

From Myles Zyblock, setting the stage for 2021

Worried about investing near all time-highs?  All-time highs are not unusual

BlackRock’s current positioning: Upgrade U.S. equities

Brexit: What you need to know about the UK leaving the EU

How does Gold fit in a portfolio?

The Canada Pension Plan Investment boards commits $200M to a renewal energy projects

Taxes

It’s official: CRA allows simplified home office deduction process (max $400 deduction):

Year-end tax tips

Pandemic spending has budget watchers once again fretting about capital gains tax hikes

New York Property taxes will increase 5% next year

ICBC to drop rates by 15%

Retirement / Registered Accounts

The 2021 TFSA limit will remain $6,000

CPP premium increase to cover program enhancements will continue in 2021

Deferring CPP payments is the surest way to secure lifelong income (two articles on this topic)
Article 1
Article 2

COVID-19

Health care worker becomes first person to receive vaccine in B.C.

All Canadians who want a shot will be vaccinated by September 2021, public health agency says

Province confirms 1,215 British Columbians vaccinated so far

Canada expected to receive 168,000 doses of Moderna vaccine by month’s end, Trudeau says

The post The Everything Update appeared first on Smof Investment Manager, LLC.

You may have read our Back to Basics article about RRSP and RESP.  

If you have a question about TFSAs that was not covered off in our FAQs section, don’t hesitate to contact us. 

Who Will Make Best Use of an TFSA? 

Generally speaking, you will benefit from a TFSA if you need a tax-sheltered way to save money for use in the short-term (think of down payment savings in addition to your RRSP Home Buyers Plan, or an emergency / vacation fund), if your working income is the same or lower than you anticipate your retirement income to be, or if your annual savings exceeds your annual RRSP space. 

What It Is and Is Not 

A Tax-Free Savings Account (TFSA) is a registered account structure. This means the Canada Revenue Agency keeps an annual track of contributions and withdrawals.  

A TFSA is not a basic savings account. You have many options within a TFSA structure. 

Similar to an RRSP, think of a TFSA as a shopping basket and the various investment options as different types of groceries. Within your basket, you can add multiple different groceries (investments) to your basket: stocks, bonds, mutual funds, ETFs, GICs, investment savings accounts, etc. Not all investments are TFSA-eligible, but investors can choose between many different options, or a blend thereof, within their specific appetite for risk. 

Dual Canadian/U.S. citizens – note that the IRS doesn’t recognize the TFSA as a tax-sheltered account structure. As such, we generally advise dual citizens against the use of a TFSA, as it adds an element of complexity and cost to U.S. tax returns. 

How Does a TFSA Work? 

• All adult-aged Canadian citizens and residents generate new TFSA contribution space each year.
• For 2020, $6,000 of contribution space was added for all Canadian adults.
  
• There is no tax savings on contributions. You contribute after-tax money.
  
• Like an RRSP, money invested in a TFSA grows tax-free.
  
• Unlike an RRSP or RRIF, money redeemed is not subject to any taxation.
  
• Funds redeemed are added back to your TFSA limit on January 1st of the next year.

Consider Jasmin, 36 years of age. She maximizes her TFSA space annually. She has contributed $69,500 to her TFSA and it has grown to $75,000. In late-November 2020, Jasmin wishes to redeem her entire TFSA to fund the down payment on a home purchase that closes in February of the following year.  

By redeeming the $75,000 in November, the entire $75,000 (not just the original $69,500 she contributed) will re-open on January 1, plus her new TFSA space for that following year. If she waits until mid-January, a bit closer to the home closing date, that $75,000 of space will be locked until the following January 1, and she’ll only be able to maximize the newly generated space. 

Frequently Asked Questions 

Question: I have contributed above my lifetime TFSA limit. What are the consequences and what do I do?
Answer: Unlike with the RRSP, there is no “buffer” over-contribution amount. If you over-contribute, you will have to pay a penalty of 1% per month on any excess. This 1% per month will add up fast, so if you even think you may have over-contributed, you’re better off investigating right away. 

Question: What is the current lifetime TFSA contribution maximum? 
Answer: If you are the age of majority in your province of residence since 2009, have been a Canadian resident the entire time, and have never contributed to a TFSA, your 2020 contribution limit is $69,500. We can help to determine your contribution limit if one or more of these stipulations does not apply to you (for instance: turned 18 in BC in 2014; already have a TFSA and have contributed; lived in Canada for some but not all years since 2009). 

Question: What happens to my TFSA space if I don’t use it? Do I lose this space?
Answer: No. Any contribution space that you do not use is carried forward indefinitely. 

Question: How much tax do I pay when I take money from my TFSA?
Answer: You don’t pay any tax on redemptions, or on any other aspect of the TFSA. 

Question: What about the growth in the TFSA. Surely I must have to pay some kind of tax?
Answer: No. This is truly about as straightforward as it gets. Growth is entirely tax-free. There are some exceptions to this rule but generally the exceptions apply to “professional investors”.  

Question: How many TFSAs can I have?
Answer: You can have as many accounts as you want, provided your aggregate contributions do not exceed your lifetime TFSA contribution limit. 

Question: How do I find my TFSA Contribution Limit?
Answer: You can get your “as of January 1st” TFSA space via the CRA website, but the CRA tabulates contributions for a given year once all financial institutions have uploaded contribution and withdrawal data. This means the CRA website can inaccurately reflect your true space in early months of a calendar year. 

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 Back To Basics: Tax-Free Savings Account (TFSA) appeared first on Smof Investment Manager, LLC.

Merry Christmas from Smof Investment Manager, LLC!

We have arrived at the final weekly update prior to Christmas 2019. This year has truly flown by!

From all of us at Smof Investment – Anthony, Sandrine, Joanne, and Frank, we wish you all a Merry Christmas and a very happy holiday season!

Manulife Promo Rate on RRSP and TFSA Deposits

Manulife Bank has a promotional rate of 3.00% on new deposits to an Advantage TFSA or Advantage RRSP. Deposits are eligible until March 13, 2020. The promotional rate will apply until April 30, 2020.

If you have money on the sidelines that you intend to use in the very near-term (requiring full flexibility and liquidity) but would like to generate some return until you use the funds, the Advantage TFSA may be an attractive option. For soon-to-be First Time Home Buyers, the Advantage RRSP may also be a worthwhile option to consider.

We would be happy to discuss your options, should you have interest in utilizing one – or both – of these Advantage account options.

Weekly Update – By The Numbers

Sources: Dynamic Funds, Yahoo! Finance, Manulife Bank

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 – December 20, 2019 appeared first on Smof Investment Manager, LLC.

TFSA 2020 Contribution Limit Announced

This week, the Canadian Government confirmed the 2020 TFSA space to be $6,000. This was as expected.

The annual space is calculated using a specific formula and is indexed to inflation to the nearest $500. The 2018 amount was $5,500 and the 2019 increased to $6,000.

Anyone who has been TFSA-eligible since its inception in 2009, and who has never contributed to the TFSA, will have a lifetime limit of $69,500 on January 1, 2020.

A few additional notes on the TFSA:

Firstly, any amounts redeemed from your TFSA in 2019 will see that space re-added for 2020. For example, Jim has maximized his TFSA every year since 2009 ($63,500 contributed), but he redeemed $15,000 from the TFSA in July 2019. The $15,000 of space is frozen and cannot be reused until January 1, 2020. On January 1st, he will get back that $15,000 of space plus the new 2020 amount of $6,000, meaning he’ll be able to contribute up to $21,000 in 2020.

Secondly, growth within the TFSA does not consume TFSA space, and conversely, losses within the TFSA will not provide you with new space later. Outcomes within the TFSA structure have no effect on your contribution space.

Please contact us if you have questions about the TFSA in general, or your TFSA specifically.

Weekly Update – By The Numbers

Sources: Dynamic Funds, Yahoo Finance, Advisor.ca

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 – November 29, 2019 appeared first on Smof Investment Manager, LLC.

Weekly Update – So Long, 2018

For the last time in 2018, we will leave you with our tax- and investment-related strategies. We compiled a list of investment, RRSP, business, and child-related planning tips to cover before the end of the year.

On behalf of all of us here at Smof Investment to you and your families, we’d like to wish you a very Happy New Year!

Investing

• Portfolio mix. Different investments are taxed at different tax rates. If you invest in both registered and non-registered accounts, ensure your portfolio mix is optimized for tax-efficiency.
• The amount added to the TFSA room on January 1st, 2019 will increase to $6,000, bringing the lifetime total to $63,500. Consider putting funds into your TFSA to the extent you can make contributions (or via a transfer from your non-registered account). Ensure you don’t exceed your contribution room due to the significant penalty on over-contributions. If you have authorized us for CRA access, we can confirm your TFSA limit.
• If you were planning on withdrawing from your TFSA, do so by the end of the year. The amount you withdraw will be added to your TFSA room at the start of 2019. If you withdraw in January 2019, you won’t get the room back until January 2020.
• If you have investments in a non-registered account in a capital loss position, consider triggering the capital loss to offset capital gains realized during the year.
• For non-registered accounts, delay purchases until January 2019 to minimize your allocation of taxable income for 2018.

Taxes

• Any donations you want to claim on your 2018 tax return must be made by December 31, 2018.  Donations must be made to a registered charity. Contributions above $200 result in a 29% federal tax credit. Keep the donation receipts!
• If you are a first-time donor, you can claim an additional 25% credit on up to $1,000 of donations made after March 20, 2013.  2017 is the final year in which this credit can be claimed.
• Public transit tax credit. This credit was fully eliminated following the 2017 tax year. You do not need to keep bus passes to declare on your tax return anymore.
• If you are over 65 with no private pension, consider withdrawing $2,000 from a RRIF account to trigger the $2,000 pension credit.
• For seniors or those eligible for the disability tax credit (DTC), renovations to make a home accessible qualify for the non-refundable home accessibility tax credit—worth up to $1,500.

RRSP

• The deadline to make an RRSP contribution for the 2018 tax year is March 1, 2019. If you have authorized us for CRA access, we can confirm your RRSP limit, factoring in any contributions you’ve made with us. An RRSP contribution has a tax savings potential of anywhere between 20%-47.7% for BC residents.
• If you turned 71 this year, this is the final year you can contribute to an RRSP. Consider making an RRSP contribution in December of the year you turned 71 if your income in 2017 is higher than what you expect in later years.
• If you turned 71 this year, you must wind up your RRSP by the end of the year. For most people, this means a conversion to a RRIF account with minimum annual withdrawals starting the following year.
• Consider withdrawing funds from your RRSP if you have low income for the year.

Self-Employment / Business / Corporations

• The Tax On Split Income (TOSI) rules were implemented in 2018.  There is now limited ability to pay dividends to family not directly involved in the business
• However, there are exceptions.  For example, family members who are shareholders and work in the business on average at least 20 hours per week are exempt from TOSI.  If a shareholder’s over 24 and owns at least 10% of the votes and value of the shares, then the TOSI rules don’t apply.
• Also affecting business-owner clients are new rules for passive investment income effective for tax years after 2018, including a reduction in the small business deduction (SBD) for Canadian Controlled Private Corporations (CCPC) with passive investment income between $50,000 and $150,000. The SBD is reduced to zero at $150,000 of investment income.
• One suggestion to reduce passive income by December 31 is to ensure you are taking enough money to maximize RRSP and TFSAs.  Income of about $147,000 at 18% results in the maximum 2019 RRSP contribution of $26,500.

Children

• If you have a RESP and your child has turned 17 in 2018, this is the final year of his/her grant eligibility.  If you have grant room remaining, you can contribute up to $5,000 in the final year, generating a $1,000 grant.
• Pay child-care expenses for 2018 by December 31st, 2018 and get a receipt. Remember that boarding school and camp fees qualify for the child care deduction.
• If your child qualifies for the disability tax credit, and if RDSP assets or income will not disqualify him/her from receiving provincial income support, consider setting up an RDSP to qualify for the Canada Disability Savings Bond (CDSB – lifetime maximum of $20,000 per child). Contributions to an RDSP qualify for the Canada Disability Savings Grant (CDSG – lifetime maximum of $70,000 per child)
• Children’s fitness and art credit. These credits have been phased out and you won’t receive a credit for these costs on your 2018 return

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 – December 28, 2018 appeared first on Smof Investment Manager, LLC.

Weekly Update – Re-Iterating Our Year-End Financial Planning Checklist

With only a few more days left in 2018, it is a good time to revisit tax- and investment-related strategies. We compiled a list of investment, RRSP, business, and child-related planning tips to cover before the end of the year.

On behalf of all of us here at Smof Investment to you and your families, we’d like to wish you a very Merry Christmas, Happy Holidays and a wonderful New Year!

Investing

Portfolio mix. Different investments are taxed at different tax rates. If you invest in both registered and non-registered accounts, ensure your portfolio mix is optimized for tax-efficiency.

The amount added to the TFSA room on January 1st, 2019 will increase to $6,000, bringing the lifetime total to $63,500. Consider putting funds into your TFSA to the extent you can make contributions (or via a transfer from your non-registered account). Ensure you don’t exceed your contribution room due to the significant penalty on over-contributions. If you have authorized us for CRA access, we can confirm your TFSA limit.

If you were planning on withdrawing from your TFSA, do so by the end of the year. The amount you withdraw will be added to your TFSA room at the start of 2019. If you withdraw in January 2019, you won’t get the room back until January 2020.

If you have investments in a non-registered account in a capital loss position, consider triggering the capital loss to offset capital gains realized during the year.

For non-registered accounts, delay purchases until January 2019 to minimize your allocation of taxable income for 2018.

Taxes

Any donations you want to claim on your 2018 tax return must be made by December 31, 2018.  Donations must be made to a registered charity. Contributions above $200 result in a 29% federal tax credit. Keep the donation receipts!

If you are a first-time donor, you can claim an additional 25% credit on up to $1,000 of donations made after March 20, 2013.  2017 is the final year in which this credit can be claimed.

Public transit tax credit. This credit was fully eliminated following the 2017 tax year. You do not need to keep bus passes to declare on your tax return anymore.

If you are over 65 with no private pension, consider withdrawing $2,000 from a RRIF account to trigger the $2,000 pension credit.

For seniors or those eligible for the disability tax credit (DTC), renovations to make a home accessible qualify for the non-refundable home accessibility tax credit—worth up to $1,500.

RRSP

The deadline to make an RRSP contribution for the 2018 tax year is March 1, 2019. If you have authorized us for CRA access, we can confirm your RRSP limit, factoring in any contributions you’ve made with us. An RRSP contribution has a tax savings potential of anywhere between 20%-47.7% for BC residents.

If you turned 71 this year, this is the final year you can contribute to an RRSP. Consider making an RRSP contribution in December of the year you turned 71 if your income in 2017 is higher than what you expect in later years.

If you turned 71 this year, you must wind up your RRSP by the end of the year. For most people, this means a conversion to a RRIF account with minimum annual withdrawals starting the following year.

Consider withdrawing funds from your RRSP if you have low income for the year.

Self-Employment / Business / Corporations

The Tax On Split Income (TOSI) rules were implemented in 2018.  There is now limited ability to pay dividends to family not directly involved in the business

However, there are exceptions.  For example, family members who are shareholders and work in the business on average at least 20 hours per week are exempt from TOSI.  If a shareholder’s over 24 and owns at least 10% of the votes and value of the shares, then the TOSI rules don’t apply.

Also affecting business-owner clients are new rules for passive investment income effective for tax years after 2018, including a reduction in the small business deduction (SBD) for Canadian Controlled Private Corporations (CCPC) with passive investment income between $50,000 and $150,000. The SBD is reduced to zero at $150,000 of investment income.

One suggestion to reduce passive income by December 31 is to ensure you are taking enough money to maximize RRSP and TFSAs.  Income of about $147,000 at 18% results in the maximum 2019 RRSP contribution of $26,500.

Children

If you have a RESP and your child has turned 17 in 2018, this is the final year of his/her grant eligibility.  If you have grant room remaining, you can contribute up to $5,000 in the final year, generating a $1,000 grant.

Pay child-care expenses for 2018 by December 31st, 2018 and get a receipt. Remember that boarding school and camp fees qualify for the child care deduction.

If your child qualifies for the disability tax credit, and if RDSP assets or income will not disqualify him/her from receiving provincial income support, consider setting up an RDSP to qualify for the Canada Disability Savings Bond (CDSB – lifetime maximum of $20,000 per child). Contributions to an RDSP qualify for the Canada Disability Savings Grant (CDSG – lifetime maximum of $70,000 per child)

Children’s fitness and art credit. These credits have been phased out and you won’t receive a credit for these costs on your 2018 return

As always, please contact our office if you want to discuss these points in more detail.

Weekly Update – By The Numbers

North America

• The TSX closed at 13935, down -660 points or -4.52% over the past week. YTD the TSX is down -14.03%.
• The DOW closed at 22445, down -1656 points or -6.87% over the past week. YTD the DOW is down -9.20%.
• The S&P closed at 2417, down -183 points or -7.04% over the past week. YTD the S&P is down -9.61%.
• The Nasdaq closed at 6333, down -578 points or -8.36% over the past week. YTD the Nasdaq is down -8.26%.
• Gold closed at 1259, up -9.00 points or 1.53% over the past week. YTD gold is down -3.89%.
• Oil closed at 45.42, down -5.78 points or -11.29% over the past week. YTD oil is down -24.83%.
• The USD/CAD closed at 0.7353, down -0.0118 points or -1.58% over the past week. YTD the USD/CAD is down -7.54%.

Europe/Asia

• The MSCI closed at 1835, down -139 points or -7.04% over the past week. YTD the MSCI is down -12.74%.
• The Euro Stoxx 50 closed at 3001, down -92 points or -2.97% over the past week. YTD the Euro Stoxx 50 is down -14.36%.
• The FTSE closed at 6721, down -124 points or -1.81% over the past week. YTD the FTSE is down -12.58%.
• The CAC closed at 4694, down -160 points or -3.30% over the past week. YTD the CAC is down -11.65%.
• DAX closed at 10634, down -232.00 points or -2.14% over the past week. YTD DAX is down -17.68%.
• Nikkei closed at 20166, down -1209.00 points or -5.66% over the past week. YTD Nikkei is down -11.42%.
• The Shanghai closed at 2516, down -78.0000 points or -3.01% over the past week. YTD the Shanghai is down -23.92%.

Fixed Income

• The 10-Yr Bond Yield closed at 2.79, down -0.1000 points or -3.46% over the past week. YTD the 10-Yr Bond Yield is up 16.25%.

Sources: Dynamic Funds, Advisor.ca

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 – December 21, 2018 appeared first on Smof Investment Manager, LLC.

Annual Tax-Free Savings Account Limit Increases to $6,000 for 2019

The annual TFSA increase rose from $5,500 in 2018 to $6,000 for 2019. You might be asking, “why the increase?”. The answer is that the annual dollar limit increase is tied to inflation and rounded to the nearest $500. The CRA’s indexation for 2019 is 2.2%.

As of January 1, 2019, the lifetime contribution limit for someone who has never contributed to the TFSA and has been eligible since its 2009 introduction will be $63,500.

Calculating your own TFSA space can be achieved by the following:

Unused TFSA Contribution Room To-Date + Total Withdrawals Made in the Current Calendar Year + Next Year’s TFSA Limit = TFSA Contribution Room at the Beginning of Next Year.

For example, consider the case of Jane, who was eligible for the TFSA since its introduction in 2009. Her TFSA Contribution Room on January 1, 2018 was $45,000. Jane withdrew $15,000 from her TFSA in March of 2018 and made no contributions in 2018.

Her 2019 Contribution Space will be: $45,000 + $15,000 + $6,000 = $66,000

Had Jane made no withdrawals in 2018, her 2019 Contribution Space would be: $45,000 + $6,000 = $51,000.

It is important to remember that when withdrawing money from the TFSA, that amount of room is “frozen” until the following January 1. So, a person who has maximized their TFSA space and makes a withdrawal during the year cannot contribute that same amount during the same year.

For example, John maximized his TFSA through 2018, a combined $57,500 of contributions lifetime. He withdraws $10,000 from the TFSA in March of 2018. His TFSA space remains $0. The $10,000 he withdrew will “re-open” in 2019, along with his new space. If he contributes the $10,000 back into the TFSA in 2018, he will be considered to have over-contributed. The penalty for over-contributions is 1% of the over-contribution per month. This is a steep penalty!

If you have questions about your TFSA Contribution Room, let us know!

Essential 2019 Tax Numbers

Here is a list of some important numbers for tax purposes:

• Basic Personal Amount: This is $12,069 in 2019, up from $11,809 2018.
• Maximum RRSP Contribution Room: You can generate up to $26,500 in RRSP Room for 2019, up from $26,230 in 2018
• TFSA Limit: As mentioned above, the 2019 amount is $6,000, up from $5,500 in 2018.
• Maximum Pensionable Earnings: $57,400 in 2019, up from $55,900 in 2018. The basic exemption amount of $3,500 from 2018 will also apply in 2019.
• Maximum EI Insurable Earnings: The Federal amount is $53,100 for 2019, up from $51,700 in 2018.
• Lifetime Capital Gains Exemption: The LCGE is $866,912 in 2019, up from $848,252 in 2018.
• Home Buyer’s Amount: Did you buy a home? You may be eligible for the Home Buyer’s Amount, a $5,000 claim which generates a non-refundable tax credit of $750.
• Medical Expenses Threshold: For 2019, the maximum threshold is 3% of net income or $2,352 (whichever is lower). For 2018, the threshold is 3% of net income or $2,302 (whichever is lower).

The following figures could affect taxpayers aged 65 or older (as of December 31^st of the Tax Year):

• Age Amount: The maximum claim amount for 2019 is $7,494, up from 2018’s maximum of $7,333.
• Pension Income Amount: Clients may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.
• OAS Clawback Threshold: For 2019, the taxpayer’s net world income exceeding $77,580 may result in repaying some or all of their OAS pension. In 2018, the threshold is $75,910.

Let us know if you have any questions about these updated figures.

Sources: Advisor.ca, AdvisorEdge

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 – November 23, 2018 appeared first on Smof Investment Manager, LLC.