Tax Tip: The More Obscure Medical Expenses

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

ìCompliance is taking a front seat -- both in firms and with clients. And clients have complained about unauthorized trading in their accounts, and in some cases, fees being in excessof what their commissions ever would have been,î said Lisa Langley, President, International Product & Service Group (IPSG). ìAnd, though client complaints need to be gauged carefully, there certainly are documented cases of bad advice, poor client management, and client portfolios which did not reflect material changes in their profile and investment objectives,î she added.   The number of complaints from unhappy investors is rising every day while regulators are increasing scrutiny and developing policies to address the gaps. This, together with the constant buzz of fraud and ponzi schemes in the press, is causing clients to ask questions they have never asked before. One of the goals of the recently enacted Registration Reform is to make the representations of advisors and their capacity to advise clearer to the investing public.   Ms. Langley offers insights about what your clients are thinking and how you should respond to their growing concerns. At the 6th annual Distinguished Advisor Conference, November 8 -11 at the Loews Ventana Canyon Resort in Tucson, Arizona, Ms. Langley will explain the current environment, upcoming regulatory changes, registration reform and what they mean to you.

By Alan Rowell , DFA, Tax Specialist and President, The Accounting Place     After eight months of waiting after the announcement of the Home Renovation Tax Credit (HRTC), the legislation is currently on the table in Parliament for passage. The proposed legislation will be a new section of the ITA, section 118.04 available by linking here.   Legalese Version 118.04(1) outlines the definitions applied to the new section: "Eligible Dwellingî is defined as a housing unit, including Ω hectare of land surrounding the unit and located in Canada that is; a) Owned by the individual whether jointly or otherwise for the sole purpose of habitation, including a co-operative housing unit. b) The housing unit is ordinarily inhabited at any time during the eligible period buy the individual, spouse or common-law partner (current or former), or by a child of the individual under the age of 18 anytime during the calendar year.. "Eligible Periodî is defined as the period beginning January 28, 2009 and ending January 31, 2010. "Qualifying Expenditureî is defined as an outlay or expense that is made or incurred and is directly attributable to a qualifying renovation by the individual, including permits and equipment rental. Not included as a "qualifying expenditure is; a) Goods that have been used, or acquired for use for any purpose prior to being acquired by the individual or a qualifying relation; b) Made or incurred prior under the terms of an agreement prior to January 28, 2009 c) To acquire property that can be used independently of the qualifying renovation; d) That is the cost of annual, recurring or routine maintenance or repairs; e) To acquire a household appliance excluding furnaces and other heating systems; f) To acquire an electronic home entertainment device; g) The cost of financing a qualifying renovation; h) Costs incurred for the purpose of gaining or producing income from a business or property; i) Goods and Services provided by a person not dealing at arms-length with the individual unless the person is registered for the purposes of GST/HST. "Qualifying Renovationî is defined as a renovation or alteration of an eligible dwelling and must be of an enduring nature and be an integral to the eligible dwelling. New section 118.04(2) covers the situation of a co-operative housing corporation and trusts where the eligible dwelling is owned by other than the "individualî. In these circumstances the individual's share of the costs incurred by corporation or trust are considered to be incurred by the individual. The corporation or trust must notify the individual in writing of the individual's share of the qualifying outlay or expense. s118.04(3) - The non-refundable tax credit is applied in the 2009 taxation year. The credit is determined as 15% of the qualifying expenditure in excess of $1,000 to a maximum of $10,000. s118.04(4) ñ The application of the HRTC to renovations or costs incurred that may also qualify for the Medical Expense Tax Credit under s118.2 will qualify for both credits, notwithstanding s.248(28)(b) s118.04(5) ñ Where more than one individual is entitled to the HRTC in respect of a qualifying expenditure, the total amounts claimed by all individuals cannot exceed the maximum amount allowable if one individual were claiming the HRTC.English Version If an individual, or a qualifying relation, own and live in the dwelling, you are entitled to claim the non-refundable Home Renovation Tax Credit. An individual that incurred the costs prior to January 28, 2009 you will not qualify for the credit regardless of when the actual work and payment occurred. Consequently, if the costs were incurred during the eligible period, you will be able to claim the costs, even if the work is not performed and completed until after the eligible period. Example: Mary entered into a contract to have her roof replaced on January 27, 2009 and provided a deposit to the contractor. The work was performed and completed on April 15, 2009, within the qualifying period. Mary is not eligible for the Home Renovation Tax Credit on this renovation. John entered into a contract on January 29, 2010 to have the windows replaced in his home and provided a deposit to the contractor. The work was completed on April 15, 2010, outside the qualifying period. John is eligible for the Home Renovation Tax Credit on this renovation. If the renovation or alteration is an integral part of the home and will last a long time, it will qualify for the Home Renovation Tax Credit. This includes a provision allowing for homes owned by a trust or co-operative housing corporation to "flow-throughî the portion of the costs incurred to the individual. The trust or corporation must provide in writing the portion of the expense attributable to the individual. If the renovation or alteration incurred also qualifies for the Medical Expense Credit under s.248(28)(b), both credits may be claimed on the 2009 tax return of the qualifying individual. The credit, if it is shared between individuals, cannot exceed the amount that would be available if claimed by one individual. It is important to note that, as of this writing, a Federal election call is looking less likely, the proposed legislation is not yet passed into law. If an election were called prior to passing the legislation through Parliament, the legislation would die on the table and require re-introduction and passage under the new Government to become applicable.   Alan Rowell, DFA, President and Tax Specialist of The Accounting Place, specializes in working with individuals and small to medium size businesses by providing accounting and taxation services that are unique to each client. Alan is a faculty member of The Knowledge Bureau, and presented on the Tax Consequences of Debt for their January 2009 workshop tour.

By Evelyn Jacks, President, The Knowledge Bureau     In advance of the September 24 Pittsburgh Summit, in which world leaders will gather again to discuss progress on the recovery of the global economy, it is appropriate to look at the numbers for the management of Canada's resources through the crisis. On the bad news side, federal and provincial government revenues fell further in the second quarter of 2009, down 4.7% and 1.7% respectively, and our short term anticipated budgetary deficits will be significant, particularly in 2010, to pay for the fiscal stimulus required to manage through the crisis. But it turns out that Canada has met a significant milestone through it all: our relatively strong fiscal position has reduced our dependence on foreign borrowing. As a result our net foreign debt (the difference between our liabilities to the rest of the world and the foreign assets we own) has gone down rather dramatically. In fact, Canada was in a net international asset position for the first time in 80 years in the fourth quarter of 2008. The bonus for us is that this phenomenon has lowered our exposure to global financial market shocks. Further, roughly half of the downward adjustments to the economic outlook of the private sector forecasters since the January 2009 federal budget has already been accounted for in budget-planning assumptions. A deficit of $3.9 billion is now projected for 2008ñ09 and a whopping $50.2 billion in 2009ñ10. Does that mean more taxes in the short term? Likely. According to the Department of Finance, more than half of the 2009ñ10 deficit is the result of temporary measures under Canada's Economic Action Plan, less taxes collected, higher EI benefits, and the decision to freeze EI premium rates. A prolonged recovery could require action; for example the ìunfreezingî of EI premium rates, which would increase costs to employers and employees at a time when increased purchasing power and savings rates are desired. The remaining deficit of $23.2 billion, or 1.5 percent of GDP, is primarily a reflection of the weak economy and is anticipated by government to be reversed as the economy recovers. [1] Will it recover fast enough to avoid tax hikes? No one is really quite sure yet. The bottom line for now is this: we're in pretty good shape all things considered. In fact, the International Monetary Fund (IMF) in its April 2009 publication World Economic Outlook has stated that it expects Canada to experience the smallest contraction of all G7 countries in 2009 and the strongest recovery going into 2010. See chart that follows. Looking ahead, most private sector forecasters have not changed their views since the January budget and continue to point to a sustained economic recovery beginning in the second half of 2009 and gaining momentum in 2010. See chart that follows. However, we are not entirely out of the woods. The reality is that as a trading economy, our recovery ìis highly dependent on a sustained recovery in the global economy, in particular in the United States. The global economic recovery, in turn, cannot fully materialize until dislocations in global financial markets are fully resolved and these markets are fully functioning.î[2] Therefore, it stands Canada in good stead to continue to work hard in the upcoming meetings together with the G20 Finance Ministers and their Central Bankers in their established process for managing the recovery of the global financial systems. Evelyn Jacks is President of The Knowledge Bureau and author of over 40 books on the subject of personal taxation, finance and Real Wealth Managementô. She has recently been appointed by Finance Minister Jim Flaherty to the Task Force on Financial Literacy.   For the latest economic numbers, tax updates and changes and the interpretation of those facts for you and your clients, be sure to participate in The Distinguished Advisor Conference. This year's theme: Leadership and Opportunity in Turbulent Times. The following chart updates the government's summary of new forecasts for 2009; stay tuned for new numbers as we head into year end 2009: Table 3.1 Average Private Sector Economic Forecast for 2009 January 2009 Private Sector Forecast May 2009 Private Sector Forecast (per cent) Real GDP growth -0.8 -2.5 GDP inflation -0.4 -1.9 Nominal GDP growth -1.2 -4.3 3-month treasury bill rate 0.8 0.3 10-year government bond rate 2.8 2.9 Unemployment rate 7.5 8.6 U.S. real GDP growth -1.8 -3.0 Source: Department of Finance Canada survey of private sector forecasters. All of that should be reason for Canadian investors to celebrate. Are you a Leader? If so you should be participating in The Distinguished Advisor Conference. This year's theme: Leadership and Opportunity in Turbulent Times. To Register: Link Here [1] Canada's Economic Action Plan A Second Report To Canadians June 2009, Department of Finance, Canada [2] Canada's Economic Action Plan A Second Report To Canadians June 2009, Department of Finance, Canada

The Distinguished Advisor Conference To Provide "The Best New Thinking"For Leading Financial Advisors and Accountants Explosive headlines about financial crisis, bank failures, fraud and theft have dominated the media recently, but with the release of the final curriculum for a leading strategic educational conference for top advisors in financial services, worried investors can rest assured that there are many professionals willing to invest in themselves to help their clients better manage and grow their wealth. The Knowledge Bureau, Canada's leading educator of financial professionals, will host the 6th Annual Distinguished Advisor Conference, November 8 to 11 in Tucson, Arizona. The theme of the conference is Leadership and Opportunity in Turbulent Times. More than 100 of Canada's top advisors in the accounting and financial services will meet in Arizona for four days with one objective in mind ó to better steward clients' wealth with technical readiness and proactive, empathetic leadership in unpredictable times. "In the last year and a half, our financial world has changed dramatically," says Evelyn Jacks, President of the Knowledge Bureau. "Today's top professional advisors know that now, more than ever, they need to invest in themselves by taking advantage of the most current thinking available on today's critical path to financial recovery, in order to advise their clients effectively. And, with our good financial fundamentals, it is entirely appropriate that a Canadian delegation should lead through an advanced educational solution." That's where the Distinguished Advisor Conference plays an important role. Delegates who attend will benefit from a superior strategic educational experience featuring 18 leading speakers on the timeliest topics - both technical and relational - over three days of sessions. They will have the opportunity to participate in vibrant discussions addressing all aspects of client service and be challenged to consider: innovative approaches to better understanding clients and their needs in today's economic climate critically important economic insights leading to new investment strategies the foreign real estate their retiring clients may be investing in, and the impact of currency and the recent crisis in the US real estate marketplace on those decisions how to grow and manage "family offices" to better serve affluent clients the role of tax efficient philanthropy in planning succession business transition and its effects on new and existing business owners and their families. In addition, sessions on how to be a more communicative and empathetic advisor will be presented alongside a special session dedicated to recent changes to regulation and compliance guidelines. Rounding out the conference will be new marketing and business development ideas for today's new team-based advisor and their busy clients. A complete list of dynamic topics and speakers can be found at knowledgebureau.com/dac, together with a registration package. "Financial advisors will be engaged and challenged to think about the future at the Distinguished Advisor Conference," says Jacks. "It's an intimate and fast-paced think tank for top performers to share their knowledge and insights, interact with cutting edge experts and take their service levels to new heights." Delegates interested in the Distinguished Advisor Conference, who have not yet registered may do so by contacting the Knowledge Bureau toll free at 1-866-953-4769. About The Knowledge Bureau As Canada's leading financial educational institution and publisher, The Knowledge Bureau takes a proactive approach to training the 21st century advisor practicing in the tax and financial services. By providing continuing professional development from the perspective of Real Wealth Management!" , The Knowledge Bureau is pioneering a new approach to the decisions advisors and their clients make about managing their money. For more information, please visit knowledgebureau.com. To arrange to speak with Evelyn Jacks, arrange for a media pass or for further information, please contact Kerry Breeze at 416-829-1727 or by email at kbreeze@mediastrategy.ca.

Significantly, commission for mutual fund and brokerage services have grown By Evelyn Jacks, President, The Knowledge Bureau Exactly how is Canada doing in relation to the global financial recovery? Quite well it appears, according to end of August numbers from Statistics Canada,the end of second quarter reports from Finance Canada and the Department of Finance's September 10th new release. It appears that even investors felt better going into the summer hiatus. Overall, consumer spending on goods and services increased in the second quarter of 2009 and, to the relief of investment advisors, there was a noted increase in spending on mutual funds and on stock and bond commissions, which has contributed to Canada's overall positive growth in services. Following are details of some of the economic outputs and forecasts on the table for the rest of 2009 and 2010, as a result of those statistics. The message is strong: we're on the road to recovery, but with a caveat: as a trading nation, we need to continue to work with the G20 economies to strengthen our collective position in the global economy; and for us, particularly important is the ability for the US, our largest trading partner, to recover. THE PRIVATE SECTOR HAD SOME POSITIVES Canadian corporations earned $50.2 billion in operating profits in the second quarter of 2009, down 6.4% from the previous quarter. But this compared quite favorably against declines of 14.1% in the first quarter of 2009 and 19.2% in the fourth quarter of 2008.[1] But, what's even more exciting is that Canada's real gross domestic product (GDP) increased 0.1% in June. This is the first monthly increase since July 2008. For the second quarter as a whole, real GDP decreased 0.9%, which represents a smaller decline than the 1.6% drop in the previous quarter. Also, final domestic demand increased slightly--0.1%--in the second quarter. [2] How will all of this affect your clients who want to accumulate, growth, preserve and transition more wealth? There are some challenges, as you will see in next week's report; however, it also takes leadership and an understanding of the decision-making role between advisors and clients. Do you have those leadership and technical skills? Would you like to improve them? If so you should be participating in The Distinguished Advisor Conference. This year's theme: Leadership and Opportunity in Turbulent Times. Click here To Register today. CONSUMERS STILL KINGSóBUT FACE THE LOSS OF PURCHASING POWER How did individuals fare? Well, we relied more heavily on credit, but it wasn't necessarily all ìbadî debt. In the second quarter of 2009, we borrowed to buy consumer goods and invest in mortgages, but while we did that, interest rates were reduced from 7.8% to 7.7% to cushion the blow. Specifically, consumer credit increased by 19% while net new mortgage borrowings were up in excess of 30%. According to Stats Canada, both figures are well off the pace of borrowing set prior to the economic downturn. Second, the substantial increase in mortgage borrowing was related to increased activity in the resale housing markets, which was vibrant in the context of historically low borrowing costs. Investment housing has increased 1.7% in the second quarter, and this trend reversed five consecutive quarterly declines. Ownership transfer costs related to housing resale activity rebounded by 40%. While we saw a decline in the value of new housing construction, renovation activity was also up (+2.2%) after weakening throughout most of 2008. It appears the federal government's introduction of the Home Renovation Tax Credit may be having some effect after all. Want to Learn More? Link here to the Knowledge Bureau's newly updated tax courses or check out Breaking Tax and Investment News Archives.   And, as stated in The Wealth of Canadians: An Overview of the Survey of Financial Security 2005 by Pensions and Wealth Surveys Section of Statistics Canada, the single most important asset for Canadians is the principal residence, contributing significantly to overall personal net worth. It will be interesting to see how significantly these activities will contribute to personal net worth over the long run. So while the Canadian housing market remains sound, what's important is that this is fundamentally different to what is happening in the United States. Canada's housing market growth was not created by the aggressive marketing of high-risk, sub-prime mortgage products which led the US growth, price increases and subsequent consumer credit crash. Even though in Canada overall we saw pre-summer declines in housing starts and modest declines in average house prices for resale homes, this happened primarily in Western Canada, where prices had increased sharply, and perhaps unsustainably in recent years. The result? The net worth of Canadian households has fallen by far less than in the U.S., which will help support consumer activity and therefore our economic recovery going forward. [3]   Further, it appears the consumer credit upswing reflected sizeable increases in car sales, very good for the manufacturing sector which has suffered significantly in the financial crisis. Buyers apparently were enticed by favourable dealer incentives to buy new cars. Other emerging indicators from the end of second quarter [4] are more disturbing, however. RED FLAGS FOR SAVERS Unfortunately, the national saving rate was 4.4%, its lowest rate since 1994. Both personal and corporate saving rose slightly in the second quarter. However, purchasing power declined as the real gross domestic income (GDI), a measure of Canada's purchasing power, fell 0.5% in the second quarter. Real GDI was down 8.2% from the second quarter of 2008. Further, the price of goods and services produced in Canada increased 0.3%, after declines in the two previous quarters. Therefore, while consumer spending is helping us out of our current fiscal crisis, savings rates need to increase to hedge against anticipated decreases in purchasing power from price increases and potentially increased taxes in the future, needed to cover budget deficits and the costs of serving an aging demographic. The introduction of the Tax Free Savings Account in January 2009, should go a long way for average Canadians to start making up some of that anticipated shortfall. Therefore it appears that recent federal budget announcements have hit the mark in stimulating the savings rates. So what comes next for Canadian taxpayers? Next time: THE ROLE OF GOVERNMENTS AND BUDGETS Evelyn Jacks is President of The Knowledge Bureau and author of over 40 books on the subject of personal taxation, finance and Real Wealth Managementô. She has recently been appointed by Finance Minister Jim Flaherty to the Task Force on Financial Literacy.   Give us your opinion: Participate in the Breaking Tax and Investment News Poll [1] The Daily, Statistics Canada, Quarterly Financial Statistics for Enterprises, August 26, 2009 [2] The Daily, Statistics Canada, Canadian Economic Accounts, August 31, 2009 [3] Canada's Economic Action Plan A Second Report To Canadians June 2009, Department of Finance, Canada [4] Canadian Economic Accounts, August 31, 2009, Stats Canada

The Canada Revenue Agency announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from October 1, 2009, to December 31, 2009 and are unchanged from the last two quarters. Income tax The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance Premiums will be 5%. The interest rate paid on overpayments will be 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%. Other taxes The interest rate on overdue and overpaid remittances for the following taxes will be: Tax and Duty Overdue remittances Overpaid remittances GST 5% 3% HST 5% 3% Air Travellers Security Charge 5% 3% Excise Tax (non GST) 5% 3% Excise Duty (except Brewer Licensees) 5% 3% Excise Duty (Brewer Licensees) 3% N/A Softwood Lumber Products Export Charge 5% 3%   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />  Educational Resource: For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.