Tax-free savings account

There are only three sure things in life. First, there is death. Second, there are taxes. Finally, there is the fact that Dolly Parton sleeps on her back. Even though taxes are a sure thing, you should be aware of any new measures the government introduces to help you save some money. Recently, the government has introduced a savings plan that will at least reduce some of your potential taxes. It's called a TFSA or tax free savings account.

How does it work?

Each year, you are given an allowance of $5,000 to contribute to a TFSA. This amount is cumulative on an annual basis, so if in one particular year you cannot contribute to the maximum, you can carryforward the balance on your account. TFSA can be self-directed or they can be managed by a financial institution. For most people, they would likely manage their TFSA's similarly to their RRSP's, so that would be by a financial institution. The benefit of a TFSA is that any money that you earn with this investment is not taxed. This can lead to substantial savings for the investor over time. This is an excellent way to save money.

Which is better? RRSP's or TFSA's?

Well, both programs are designed to save you money, so you should take into account which form of tax savings work best for you. Each person has different needs with respect to cash flow needs and financial goals. It is probably best if you talk to an accountant. Sadly, that is the best advice that I can give, but there are many considerations that need to be made as to whether you should throw excess cash towards an RRSP or a TFSA.

Home renovation tax credit

This year, and this year only, there is a special credit available to people that are planning to perform some home renovations. Now, since we are at a point in time where you probably haven't got everything together for your 2008 return, I thought it would be a good opportunity to start planning for the 2009 tax year. I feel that this is a good time to maybe suggest what you do with your 2008 refund (if you get one), since you probably haven't received it yet.

There is a temporary credit available for eligible expenditures on home renovation projects. These projects must fall in the period of January 27, 2009 and February 1, 2010. Now is the time to start planning some painting, kitchen re-modelling, etc. There are numerous items that you may be thinking of, so you should take advantage now. This can lead to many benefits. First, you save on your taxes in 2009. Secondly, if you are thinking of selling your home in the near future, this should increase the value of your home. You may wish to discuss with your real estate agent what renovation projects will be most beneficial (or you can ask me).

The government has introduced this piece in the last budget as a stimulus item that will help our economy. It is up to you to take advantage of it. The credit is a one time deal, so be sure that you find out what information you need before proceeding. You may wish to find out which expenses are eligible, and which expenses are not.

More information can be found here.

Deadlines! Deadlines! Deadlines!

Today is the last day to contribute to your RRSP for the 2008 tax year. RRSP contributions are a great way to save money because it reduces the amount of income that you have to pay tax on. You should review your notice of assessment from last year to see how much unused room you have left. You should be trying to use up this room for 2009.

April 30th is the last day on which any taxes owing are due to the government. This means that everyone needs to pay up. You may have a filing date of June 15th, if you are self-employed, but the taxes are still due April 30th. You should do your taxes ASAP in order to properly plan out any amounts owing to the government, plus you avoid any late fees.

Tax season

It's official. We're in tax season. It's time to start thinking about doing your taxes. If you usually get a refund, it's a good idea to get started early. That way, the Canada Revenue Agency will be able to get your refund back to you that much quicker. Money in the pocket is never a bad idea.

This year, I would like people to post some of their tax questions online. You can remain annonymous to protect your financial privacy, but I would like to offer advice so that everyone can save a little bit of money this year. If I save you enough money, you could always treat me to a nice dinner :P

I think I will post some tax tips occasionally because my real estate ventures are currently at a standstill. I'm too busy with accounting at this point to be worrying about completing the last course of the real estate program. I will be back to the real estate thing after April 30th, the tax deadline day.

Home insurance

Today's lesson is in home insurance. I received a notice the other day from my previous insurance carrier that my bill for my home was going to be over $2400. I thought this was ludicrous. I almost would prefer to not own a home. I asked my broker to look into things further, especially given the fact that I was now occupying the home. My broker was not able to negotiate any new rates. I thought I would begin to shop.

In all fairness to my broker, they likely only had a few companies that they deal with. My circumstance is somewhat unusual and perhaps high-risk for some carriers. My broker may not have been able to offer me a better deal.

I called around and did some online quotes. I got a pretty good idea of what I should expect from my insurance. I found a place that offered me a much better rate; and, since I bundled it with my car insurance, I am able to save on both. On both my car insurance and my home, I am about to save about $2300/ year. It looks like a pretty productive lunch.

The lesson is this. Shop around! There are some insurance companies that are very respectable that can offer good rates. It might just depend on the type of insurance you are getting. In my case, I have 3 roommates which is a bit unusual for some carriers and not for others. The trick is to find a carrier or a broker that deals in those types of deals. I didn't skimp out on any sort of coverage, I actually increased my protection (except on the car, it's worthless anyways), but I was able to save a lot of money.

I won't disclose which companies I have used because I don't want to get hit with any sort of defamation lawsuit. I won't disclose which company I have decided to go with either... just in case I find a better insurance carrier, and I want to rip up this carrier in the future. :P

Possible changes of plans

This is likely to be a useless post, but in order to keep everyone "up-to-date" I'm going to say that I am looking at going in a different direction with my Arlington home. I need to get more information before this is settled; but, if I can do what I want to do, I'll be quite happy. Unfortunately, I do not want to disclose what this option is at the moment, hence the uselessness of the post. Sorry for wasting your time?!?!?!