Waters & Meredith

Serving Niagara..

Year-end Tax Planning - 2000

CONTENTS

  • Medical
  • Charitable Donations
  • Registered Retirement Savings Plan (RRSP)
  • Registered Retirement Income Fund (RRIF)
  • Salaries/Bonusees - Family Members
  • Registered Education Savings Plan (RESP)
  • Capital Gains and Losses
  • Loans To Spouses And Minor Children
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    MEDICAL

    1. To claim medical expenses for 2000, the payment must be made by December 31, 2000.


    2. Medical expenses include: dental, eyeglasses and payments to private plans such as Blue Cross.


    3. You must have receipts. Cancelled cheques are not adequate.


    4. Medical expenses can be claimed for any twelve-month period ending in the current year.


    5. Nursing home costs may qualify as medical costs.


    6. If you participate in a group insurance plan, you cannot claim expenses that were reimbursed through the group plan, however, you can claim the unpaid portion. The cheque stub or statement showing the amount submitted to the insurance company, the amount reimbursed and the balance to be paid by the claimant is sufficient receipt for this claim.

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    CHARITABLE DONATIONS

    1. To claim donations to registered charities, the receipts must be dated December 31, 2000 or earlier.


    2. Where both spouses have donations, it is generally beneficial to claim the total on one spouse’s return.


    3. The tax savings is approximately 25% on the first $ 200 in charitable donations and 49% on total donations which exceed $ 200.


    4. The donation of public-company shares to a charity may be more beneficial than a cash donation, where the shares have appreciated in value.

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    REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

    1. Contributions paid up to March 1, 2001 may be deducted on the taxpayer’s 2000 tax return.


    2. One should consider whether a spousal RRSP is advantageous.


    3. Where a taxpayer is over 69 years of age, he/she may still make a spousal RRSP contribution based on the age of a younger spouse.


    4. If you will be 69 by the end of 2000, you should consider a 2000 RRSP contribution, to deduct in 2001. This contribution must be made by December 31st of the year in which you turn 69.


    5. The contribution limit for 2000 is 18% of your earned income to a maximum of $ 13,500, unless you have prior undercontributions.


    6. For taxpayers with company pension plans, the “pension adjustment” must be considered.


    7. The contribution limit is shown on the assessment the taxpayer received for his/her 1999 return.


    8. Interest, on funds borrowed to contribute to a RRSP, is not a deductible expense.


    9. Administrative fees on self-administered RRSP’s are not a deductible expense.


    10. Taxpayers are allowed to have a total overcontribution of $ 2,000 without penalties.

    REGISTERED RETIREMENT INCOME FUND (RRIF)

    1. RRSP’s must be converted to RRIF’s by the end of the calendar year in which a taxpayer turns 69 years of age.


    2. If the RRSP is not converted to a RRIF, the RRSP becomes taxable.

    SALARIES/BONUSES - FAMILY MEMBERS

    1. Where a family member has performed services for a business, reasonable compensation may be paid and claimed as an expense by the payor.


    2. Consideration should be given to payments to spouses and children to achieve income-splitting where it can be justified.


    3. It is important to prove payment, so a cheque should be issued.

    REGISTERED EDUCATION SAVINGS PLAN (RESP)

    1. There is no tax savings on contributions to a RESP.


    2. Contributions to a RESP should be made by December 31, 2000.


    3. The Federal government will contribute up to $ 400 annually to your child’s RESP, based on 20% of your contribution, up to your first $ 2,000 contribution.


    4. The maximum contribution to a RESP is $ 4,000 annually.

    CAPITAL GAINS AND LOSSES

    1. Capital losses are only deductible against capital gains.


    2. As capital losses may be carried back up to three (3) years, consideration should be given to taking losses in 2000 if you had prior capital gains.


    3. If you have reported mutual fund distributions as capital gains in the past, check whether you may have capital losses to claim.


    4. If you have suffered capital losses, consider whether you have any assets with unrealized capital gains that could be sold to trigger a capital gain to apply against capital losses.


    5. The final trading day on Canadian Stock Exchanges to achieve settlement in 2000 is expected to be December 22, 2000.


    6. There are three (3) different inclusion rates for capital gains or losses in 2000, depending on the date of the sale transaction.

    LOANS TO SPOUSES AND MINOR CHILDREN

    1. Capital losses are only deductible against capital gains.

    Waters & Meredith
    Chartered Accountants
    Telephone: 905-356-4324
    Fax: 905-356-0964
    E-mail: wm@watersmeredith.com

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