Tax Tip: The More Obscure Medical Expenses

Are you claiming all the medical expenses you or your clients might be entitled to? 

MASTER Your Philanthropy Author: Nicola ElkinsHow to maximize your strategic giving   Is charitable giving important to you? Do you want to give time, money, future assets? Do you want to make a bequest in your will?   If you answered yes to these three questions, it's time to make a great decision. Learn how to MASTER YOUR PHILANTHROPY!   It really doesn't matter how much you have to give, either. If you have a cause that's really important to you, you can plan today to give substantial sums through insurance or other financial structures. But one this thing is for sure: when it comes to charitable giving, donors are becoming far more demanding about ways to maximize the impact of their donations.   If this describes you, this book will put you in the driver's seat. It is a must-read for anyone who is thinking about developing a strategic plan for their charitable giving and for the financial advisors who can support these individuals. Learn how to: Develop your charitable giving strategies and select your chosen cause  Decide how much you want to give and what role you want to play  Plan and implement the partnership with the charity of your choice Decide whether you want to give directly, start your own charity, give through an endowment, use donor-advised funds, etc. Determine what financial tools and techniques are appropriate for you  TARGET AUDIENCE: Anyone who wants to break free of financial stress relating to the future of their money and achieve peace of mind. By better understanding the components of Real Wealth Managementô, you can arrange your affairs to accumulate, growth and preserve wealth even in difficult markets and then focus on living your dreams.   ABOUT THE AUTHOR Nicola Elkins is the CEO and Founder of Benefaction Foundation. She has broad experience in developing and driving key business strategies and product initiatives within the financial services sector. She has held a number of senior roles in marketing, product development and strategic planning with Fidelity Investments (UK and Canada), First Asset Advisory Services, and BMO Nesbitt Burns. She holds a Master of Science degree in economics from the London School of Economics and a bachelor's degree from McGill University. She is also a graduate of the Canadian Gift Planning Course offered by the Canadian Association of Gift Planners. Price: $24.95 Buy Now THE KNOWLEDGE BUREAU is dedicated to publishing Newsbooks which provide financial education for decision-makers of all ages. The MASTER YOUR ... series is written for everyday Canadians looking for sound answersóand the right questions to askóconcerning today's volatile marketplace. Strategy. Process. Plan. Masterful Execution. Powerful Results.

As discussed in last week's Breaking Tax and Investment News, it is the time of year that we should begin thinking about Year End Tax Planning, and one area that is often given little thought is the planning for charitable donations. Nnow is a good time to review what tax deductible gifts are and special rules regarding gifts of capital property:   Gifts can be made to:   ¸ A registered charity ¸ Registered Canadian amateur athletic association ¸ Tax exempt housing corporation providing low-cost housing for seniors ¸ Government of Canada, province or territory, municipality ¸ The United Nation and its related agencies ¸ Prescribed university outside Canada ¸ Charitable organization outside Canada to which our government has made a donation in the tax year or previous tax year ¸ Gifts to US charities if you have US income Note: Gifts to Canada include monetary gifts made directly to the federal Debt Servicing and Reduction Account, sent to the Receiver General requesting this. A tax deductible receipt will be issued. Special Rules: Gifts of capital property: ¸ FMV at time of gift can trigger capital gains consequences ¸ Gifts of publicly traded shares should be initiated before December 21 and can be transferred on a tax free rollover basis to registered charities and private foundations (after March 19, 2007). ¸ Zero inclusion rates for purposes of capital gains and losses apply if you donate: Shares, debt obligations or rights listed on a designated stock exchange Shares of a mutual fund corporation Units of a mutual fund trust Interests in related segregated fund trusts Prescribed debt obligations Ecologically sensitive land ¸ Gifts can be made to a registered charity or after March 18, 2007 to certain private foundations. ¸ Gifts of depreciable property can trigger recapture or terminal loss ¸ Gifts of significant movable cultural property to Canadian heritage institutions or public authorities must be certified under the Canadian Cultural Property Export Review Board, which determines its FMV and provides you with a certificate for tax credit purposes (Form T871). In this case no capital gain is required to be recorded. ¸ Artists: to qualified donee, the gift is a disposition from ìinventoryî rather than capital property. The value is calculated as the cost amount or an amount not greater than the FMV and not less than the cost and any advantage received. ¸ Art or Antique dealers: objects donated are considered to be a disposition of inventory, not capital property and must be based on FMV at the time of donation. Non-qualifying gifts: ¸ Shares you control ¸ Obligation or securities issued by yourself So start planning now to meet your charitable donation goals and the receiving the best tax deduction based on your charitable giving. Attend the Knowledge Bureau's November workshop presentation in cities across Canada for more tax planning ideas and information on recent changes to the tax laws.

By Evelyn Jacks, President, The Knowledge Bureau On October 16, 2009, the Department of Finance moved to close several loopholes for TFSA investors including the prohibition of swap transactions between various investment accounts and the earning of income from prohibited and non-qualifying investments. The new rules, which will come into effect after October 16, 2009, contain four main components: Shifts in Value in Swap Transactions. Asset transfer or "swapî transactions between registered or non-registered accounts and Tax Free Savings Accounts, will no longer be possible after this date. That is, transfers between accounts of the same taxpayer or that of the taxpayer and an individual with whom the taxpayer does not deal at arm's length will be prohibited. This will squash any shift value from, for example, an RRSP to a TFSA without paying tax, first. Income from Intentional Overcontribution. Income earned within a TFSA due to an intentional overcontribution will be subject to a tax of 100%. Should a taxpayer have made an overcontribution in error, prompt rectification is required to avoid the penalty; such actions will be seen positively by the Minister, who will have the discretion to waive interest and penalties in those cases. Income from Investment in Non-qualifying and Prohibited Investments. In addition, should the taxpayer invest in non-qualifying investments (land and general partnership units, for example) or prohibited investments ( such as shares of the capital stock of a corporation in which the holder has a significant (10% or greater) interest and investments in entities with which the holder does not deal at arm's length), any income reasonably attributable to those prohibited investments will be considered an "advantage" and taxed at 100%. No New TFSA Room. The proposed amendments will also include rules to ensure that the withdrawal of amounts in respect of deliberate overcontributions, prohibited investments, non-qualified investments, asset transfer transactions and income related to those amounts do not constitute distributions for TFSA purposes and therefore will not create additional TFSA contribution room. A brief review of TFSA Planning Rules: 1. What is a TFSA? Available January 1, 2009, the new Tax-Free Savings Account (TFSA) is a registered account in which investment earning, including capital gains accumulate tax free. Contributions up to an annual maximum of $5000 can be made by/for those who have attained 18 years of age and are residents of Canada. There is no maximum age limit. This amount will be indexed after 2009, with rounding to the nearest $500.   2. Can unused contribution room be carried forward to future years? Unused contribution room can be carried forward on an indefinite carry forward basis. You can take money out, in other words, spend it on whatever you want, and then put it back in when you can because the TFSA contribution room has been preserved. 3. What happens when I make an overcontribution? Taxpayers cannot contribute more than their available TFSA contribution room in a given year, even if they make withdrawals from the account during the year. If they do, a penalty tax of 1% of the highest excess amount in the month, for each month you are in an overcontribution position is charged. Discrepancies in contribution room limit or excess contributions, must be reported to the TFSA issuer. In addition, after October 16, any income earned resulting from an overcontribution, or a contribution to a prohibited or non-qualifying investment will be taxed at 100%. 4. What income sources should be earned from the TFSA account? That largely depends on age and sources of other income. Those sources of income subject to the marginal highest tax rates (such as interest) or dividends, which artificially inflate net income, thereby decreasing social benefits payments, should perhaps be earned within a TFSA. But if you are looking for real growth, the TFSA should contain a diversified set of investments, including equities. Note that losses from investments earned within a TFSA are not deductible from capital gains held outside the account. 5. What are eligible investments for a TFSA? The same eligible investments as allowed within an RRSP apply to the TFSA. A special rule will prohibit a TFSA from making an investment in any entity with which the account holder does not deal at arm's length. Unlike the RRSP, contributions to a TSFA do not result in an income tax deduction and withdrawals from a TFSA are not reported as income nor included in income for any income-tested benefits, such as the Canada Child Tax Benefit or Goods and Services Tax Credit. 6. Do the Attribution Rules affect investments within the TFSA? There is no attribution rule attached to the new TFSA, allowing adults, including parents and grandparents to transfer $5000 per year to each adult child in the familyófor the rest of their lives. In addition, one spouse may transfer property to the TFSA of the other spouse without incurring attribution. 7. Can the TFSA be used for retirement planning? Yes. A 40 year old taxpayer who invests $5,000 each year for 25 years in a TFSA (total capital of $125,000) at a 3% rate of return, would accumulate $185,000 in the account, an increase of $60,000 or 48%. This would be approximately $15,000 more than if the same investment was made outside the TFSA in a taxable account.   Educational Resources:  Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future, which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources available from The Knowledge Bureau: <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" /> Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business

The Department of Finance has once again released the Fiscal Monitor, this time for the four months ending July 2009,announcing a deficit of $18.3 billion for the first quarter of the 2009-10 fiscal year, compared to a surplus of $2.9 billion for the same period a year ago. However, this deficit is on target with updated projections reflecting a weaker fiscal outlook than forecast in the January 2009 Budget. The projected combined deficit spending for the period 2008 ñ 2012 has gone from an estimated balance of $84.9 billion in January 2009 to a staggering $153.8 billion as an estimated deficit in the Update of Economic and Fiscal Projections released in September 2009. The summary of changes table from the report is reproduced below: Department of FinanceSummary of Changes in the Fiscal Outlook Since the January 2009 Budget 2008ñ2009 2009ñ2010 2010ñ2011 2011ñ2012 2012ñ2013 2013ñ2014 2014ñ15 (billions of dollars) January 2009 Budgetary Balance -1.1 -33.7 -29.8 -13.0 -7.3 0.7 n/a Impact of Economic and Fiscal Developments Budgetary revenues -3.3 -8.3 -6.8 -8.5 -7.8 -9.6 Program expenses1 Employment Insurance -0.7 -3.2 -3.1 -2.5 -1.6 -0.6 Policy Measures 0.0 -9.4 -4.4 -2.0 0.0 0.0 Lapse 0.0 0.0 0.0 0.0 0.0 1.5 Economic and other Changes -0.4 -0.2 -0.7 -0.9 -0.7 -0.7 Total program expenses -1.1 -12.8 -8.2 -5.4 -2.3 0.2 Public debt charges -0.3 -1.2 -0.4 -0.5 -2.0 -2.5 Total Economic and Fiscal Developments -4.7 -22.2 -15.4 -14.4 -12.1 -11.9 Revised Budgetary Balance -5.8 -55.9 -45.3 -27.4 -19.4 -11.2 -5.2 1A positive number implies a decrease in spending and an improvement in the budgetary balance. A negative number implies an increase in spending and a deterioration in the budgetary balance.Note: Totals may not add due to rounding. In addition to the increased deficit by the end of the 2012 fiscal year, the projected deficit spending is expected to continue and a surplus balanced budget by 2014 is no longer in the forecast. The continuing budget deficits are in the wake of eleven consecutive years of balanced budgets. The month of July 2009 alone produced a deficit of $5.8 billion, a result of the weakened economy and the tax measures brought in under the Economic Action Plan. $5.1 billion was spent on program expenses due to an increase in Employment Insurance (EI) payments and monetary support for those suffering in the motor vehicle manufacturing areas. What does this mean to the average Canadian? These deficits will require taxpayers to ask hard questions, not only about the financial state of the nation, but about their own ability to fund retirement income and health care costs, if governments are stretched by new financing costs. By the year 2011, the first boomers will reach age 65. According to Infrastructure Canada, those age 65 and over are the most intensive users of the health care system, a financing burden yet to come for Canadian governments. Will today's deficitsócreate by the financial stimulus world leaders have created to avoid further financial disaster--become the taxes of tomorrow?  Likely.   In Canada, where baby boomers make up approximately one-third of our population and just under 50% of the tax filers, these circumstances are serious and require careful planning.  The questions for tax and financial advisors and their clients to ponder are:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" /> 1.  To what extent will increased taxationóand the potential for inflation--erode future purchasing power of retirement savings? 2.   How can current tax and investment strategies anticipate and plan for these obstacles? Other questions to consider by those planning to retire shortly are: 1.    What effects will deficit spending today have on public pensions and the health care system? 2.    How will deficit spending affect the taxation of wealth transition in the future? 3.    How will incomes of boomer offspring fare in their stewardship of the boomerís wealth on an after-tax basis? Educational Resources:  Now is therefore a good time to revisit retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future, which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources: Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business   Your thoughts on the future outcomes of deficit spending and financial stimulus packages for Canadian taxpayers?

ìToday's leading advisors must understand the interlocking relationship between both risk and return in the 21st Century,î said Robert Ironside, faculty member of The Knowledge Bureau. ìThey must learn to evaluate how this relationship impacts both individual investments as well as the overall portfolio and, importantly, they must communicate this information to the client in a simple fashion.î     At the Distinguished Advisor Conference to be held November 8-11 at the Loews Ventana Canyon Resort in Tucson, Arizona, Mr. Ironside will discuss the three things that every investor wants to know today. These include: whether a clients portfolio will produce the short, and long term returns needed to achieve their objectives and make up for the market meltdown; the level of risk the client will need to take on to achieve the necessary returns; and the alternatives available to the client so they can make the best decisions to grow their wealth. Mr. Ironside will outline how to build efficient portfolios in turbulent times to maximize new opportunities.

Financial advisors have been under a great deal of pressure since the markets imploded in 2008 ñ and investors began losing millions. ìIn many cases, the troubled markets have put the advisor-client relationship in jeopardy,î says Jim Gray, Principal of Media Strategy Inc. ìAdvisors don't help their cause when they carelessly or unknowingly alienate clients and put further pressure on relationships that already run the risk of blowing up.î Mr. Gray, a media and presentation skills coach who works extensively in the financial services industry, will reveal the 10 biggest communication mistakes that advisors make when conversing with prospects and clients at the 6th annual Distinguished Advisor Conference to be held November 8 -11 at the Loews Ventana Canyon Resort in Tucson, Arizona. Gray will demonstrate how advisors can, with more preparation and focus, initiate positive, productive conversations that lead to solid, enduring relationships.