Tax Bracket Changes - As of January 1, 2009, the two lowest income tax brackets will be raised 7.5% above 2008 limits to $40,726 and $81,452 respectively. The basic personal amount will also be increased to $10,320 in 2009, up from $9,600 in 2008. 

RRSP Home Purchase and Renovation - To encourage home ownership and home construction, the finance minister proposes to increase the amount first time homebuyers can withdraw from their RRSPs to purchase or build a home—from $20,000 to $25,000. It also proposes to establish a first time homebuyer’s tax credit which could amount to $750 worth of savings on closing costs for anyone purchasing a new home.

The second “limited time offer” being offered up in this budget is a temporary home renovation tax credit. Until January 31, 2010, this proposed measure will provide tax relief for home renovation costs of up to $1,350 for each family.

E.I. -Reduce Employment Insurance premium rates to $1.73 per $100 of insurable earnings, their lowest level since 1982.

Extend maximum EI benefits by five weeks, bringing it up to a maximum of 50 weeks. The measure would be in effect for the next two years, at a cost of $1.15 billion.

Business Owners - An increase in the amount of small business income eligible for the reduced federal tax rate of 11% - changes announced raise the current limit of $400,000 to $500,000 as of January 1. 

Create a temporary 100% capital cost allowance rate for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011.

Infrastructure - The government says it would provide $12 billion in infrastructure funding over the next two years. 

Environment - Clean Energy Fund to support clean energy research development and demonstration projects, including carbon capture and storage. 

Deficits - Large deficits of $34-billion in the 2009-10 fiscal year and $30-billion in the 2010-11 fiscal year will quickly be reduced and then eliminated to show a small surplus of $700-million in 2013-14.

Here is a link to the accounting firm of BDO Dunwoody for a more comprehensive Budget overview:

http://www.bdo.ca/library/publications/tax/budgets/2009/federal.cfm

It sure looks like the worst is behind us but really, there is no way to guarantee that.  If turbulent times like these make you nervous and you are just not ready to make an investment yet, here are a few options to consider:

· Park your RRSP: You could the “park” the funds in a no risk money market fund.  This way you will have the tax savings on your 2008 tax return and can decide to invest the funds later when you feel more confident.

· Dollar cost average your purchase: You could make a contribution to a money market fund and elect to have the purchase of the investment made over several weeks or months effectively spreading your risk.

· Invest in a principal guaranteed product:  We have several options for you this year.  You could select a Segregated fund account or Linked Note where your principal is guaranteed typically over 5 or 10 years.  If the market goes up, you get the upside and if the markets go down, you don’t have any of the risks.  Some products will even guarantee 5% income annually. 

· Save in a GICs: we do the market weekly survey to get you the best available rate.

What is important is to make that contribution on time , by March 2nd 2009, to get your tax deduction.  The investment can be made now or later in any product that fits your needs and wishes.  Just call us to discuss each option further.

Unlike the US, Canada’s resale real estate market should see only modest price corrections throughout 2009, predicts Royal LePage. The real estate company’s 2009 Market Survey forecasts that average house prices will dip by 3% from last year while transactions are projected to fall -3.5 % unit sales in 2009.

According to the survey, most consumers are not aware that nationally, Canadian housing market activity peaked in 2007 and has been trending lower since. “We are well into this inevitable cyclical correction.”

“Emotional reaction to recent economic and political instability did much to dampen consumer confidence during the latter part of 2008, causing a marked slowdown in house sales activity. However, as a more rational understanding of the issues gains ground, together with a wide range of announced corrective measures, consumer confidence is anticipated to recover, prompting real estate activity to pick up once again in the latter half of 2009,” he said.

The most significant price decreases are forecast for Canada’s most expensive city, Vancouver, which has experienced above-average price increases for most of the decade. By contrast, real estate in Montreal and Ottawa is poised to remain stable, while both Calgary and Edmonton’s housing markets are anticipated to grow.

While most homeowners would be relieved by the survey’s buoyant tone, Garth Turner, author of Greater Fool: The Troubled Future of Real Estate , says he’s disturbed by it. “The downturn only started for Canada two quarters ago, and Soper predicts it will be over in three quarters. How’s that possible when the U.S. will see a fifth dismal year before it hits bottom?” he questioned. “Canada is following an identical trajectory to the U.S., just with a two-year lag. It will collapse, though more gently than the States.”

Royal LePage has been off the mark with past predictions, however. In 2007, the firm predicted momentum would carry over into 2008 and position Canada’s real estate market for steady, yet moderate growth.

Tsur Somerville, associate professor at the University of British Columbia’s Sauder School of Business, and director of UBC’s Centre for Urban Economics and Real Estate, takes a stand somewhere between that of Soper and Turner. He agrees with Soper that it’s unlikely Canada will go the same route as the U.S.

“Conditions here are not the same. There isn’t nearly as much sub-prime lending, or as much speculative building here,” he says.  Tsur says there still remain a lot of risk factors for Canadian real estate. For example, condominiums under construction with presales could face problems. “If buyers made 5% down payments and prices fell 20%, I’m not sure they will come through on the contract.”

Further, investor-buyers who find themselves in a have-to-sell situation might not be able to refinance as lenders tighten their purse strings. Tsur also anticipates problems for commercial real estate buyers who might also struggle with refinancing their property.

If you are looking at buying a property soon, make sure you do your homework.  You may want to wait it out a few months or ensure that it is going to be a long-term investment.

Don’t delay making plans now. 

click here to view our RRSP TFSA campaign ad

There is a lot written in the newspaper about TFSA.  It is true that they are a great investment vehicle, one everyone should have, but in a financial planning perspective, they need to be used appropriately.  Let me qualify my statement with a few points:

.  TFSA versus savings account: If you currently have a savings account earning interest like an ING account for emergency purpose for example, a TFSA is ok for this purpose but you have to be aware that money withdrawn can NOT be put back in until the following calendar year.  Therefore, TFSA are not appropriate for savings account you use and draw from on an ongoing basis.

· TFSA versus Mortgage: if you have a Home Equity Line of Credit (HELOC), it may be best for you to use funds you have to reduce that mortgage rather than putting it in a TFSA.  This is especially true if your HELOC rate is greater than the TFSA rate.  Money saved on a HELOC will likely be at about 4.5% compared to 3% in an ING TFSA for example.  Both are tax free.  So, clearly, reducing your HELOC mortgage is best in this case.

· TFSA versus closed mortgage: If you have a closed mortgage, you can’t borrow the funds as easily again when an emergency occurs, therefore, in this case, I would say to save in a TFSA for an emergency purposes.

· TFSA versus open investments: If you already have an investment portfolio, you should transfer $5000 annually from that account to your TFSA to shelter the earnings.  Therefore, you don’t necessarily need new funds to make your TFSA contribution.

· If you have little RRSP room and need to save for your retirement: TFSA are the best place to invest for long term accumulation.  You should invest these funds as part of your long-term investment strategy. 

· Wealth accumulation: TFSA are good for your emergency savings but they are really great for accumulation .  The tax saved on interest, gains or dividends is minor on $5000 but over several years, if you contribute $5000 per year and if you don’t make any withdrawals, the tax saved on the large accumulation will be significant.  This is especially when TFSA gets really exciting!

As you can see, TFSA pitfalls and misuse can easily occur if you don’t take your circumstances in consideration. It is best to review these options with us so, we can help you figure out what is the best given your own personal situation.

Call us anytime!

Have you ever thought about incorporating factors such as the environment, human rights and transparent corporate practices into your investments? If so, then responsible investing may be the perfect opportunity to use your money to achieve your financial goals while contributing to a more sustainable world.

Socially responsible investing has evolved over the years and has recently become more mainstream with adoption by major financial institutions, including the Canada Pension Plan. Below you’ll find some answers to commonly asked questions.

What is responsible investing?
Responsible investing provides a framework for achieving better long-term investment returns and more sustainable markets by considering both an investor’s financial needs and an investment’s impact on society.
Is responsible investing a new investment strategy?
No. It has been used for many years, but it continues to evolve and gain acceptance. Today, environmental sustainability, social responsibility and good corporate governance (ESG) are widely recognized to have a profound impact on company’s long-term financial performance.

Do you sacrifice performance by investing responsibly?
No. Numerous studies show that responsible investing generates returns comparable to the overall market. The Jantzi Social Index (JSI) tracks companies that pass a set of broadly-based environmental, social and governance criteria. The JSI is mapped against the S&P/TSX Composite Index and tracks with equal or better performance, as seen in the chart below.

What is shareholder engagement?
Traditionally, responsible investing meant screening out companies based on social and environmental concerns. Today, investors partner with companies and suggest ways for them to become better using shareholder engagement. Common engagement topics are diversity, human rights, climate change, business practices, health and safety and toxic material management. The goal is to promote further positive action and to increase long-term shareholder value. Essentially, encouraging progressive companies to be their best.

What are the benefits to my portfolio?
Investors benefit from an investment process designed to produce superior investment returns over the long-term. In addition, analysis of environmental, social and governance factors provides an extra layer of risk management. Responsible investing also ensures that your money is invested in companies that follow progressive practices. That helps you contribute to the development of a more sustainable world.

Whatch this short video on the subject

A recent Supreme court ruling finally confirms that rearranging your debt to benefit from interest deductibility of investment loans is allowed by Canada Revenue.

This is a popular tax planning technique by which those who own non-registered investments are advised to liquidate these investments and use the proceeds to pay off their mortgage. The investor would then obtain an investment loan secured by the newly replenished equity in their home, and use the loan for earning investment income, thus making the interest on the loan fully tax-deductible.

Based on the Lipson ruling, it appears that this strategy is still valid and would not invoke the GAAR, (Generally Anti-Avoidance Rules). To make a long story short, CRA were not able to established that the first transaction i.e. doing the debt-swap explained above, had been misused and abused. Mrs. Lipson financed the purchase of income-producing property with debt, whereas Mr. Lipson financed the purchase of the residence with equity. To this point, the transactions were unimpeachable. They became problematic when the parties took further steps in their series of transactions.

This was echoed by Mr. Justice Rothstein in his minority dissent, saying: “There is no reason why taxpayers may not arrange their affairs so as to finance personal assets out of equity and income earning assets out of debt.”

Bottom line? Plain-vanilla debt-swap refinancing seems to be alive and well in Canada. We are celebrating this ruling!

Here is the full story:

click here for a Globe & Mail article on the subject

We are having a special info session and you are invited!

We don’t have events very often.  You will not want to miss this one on January 28th at 7pm the Terminal City Club.  By popular demand, our first speaker will be on Socially Responsible Investing or commonly called Ethical & Green investing. 

Dermot Foley is the Vice-President of Strategic Analysis of Inhance Investment Management Inc. With his depth of knowledge in labour relations, energy stocks and climate change impact and solutions, Dermot takes a lead role in the ESG analysis of our investment process. Dermot brings over 15 years of experience in social and environmental advocacy, research and policy analysis.  His role is to assess business practices, management systems and treatment of non-financial risk.  Dermot is also responsible for determining the strategy for shareholder engagement with companies held in Inhance portfolios. Prior to joining Inhance, Dermot was the Senior Policy Analyst with the David Suzuki Foundation Climate Change Program for 6 years. Widely esteemed within the environmental community as a strategist, analyst, and spokesperson, Dermot has participated in developing and implementing provincial environmental and energy policy.

It will be followed by a talk on the new Guaranteed Investment & income funds. Do market volatility make you nervous?  Are you concerned about losing some of your capital invested? Do you want an investment that can offer predictable, sustainable and potentially increasing income for life?  Vincent Nijjar, VP CI Investments will talk about this new product whichprotects your capital and pay a 5% annual income guarantee with upside potential if and when the markets do recover.

Last but not least will be Isabelle St-Jean, author of Living Forward, Giving Back, a Guide to Fulfillment in Midlife and Beyond. Her presentation is called; What is next? Success factors for a purposeful reengagement in midlife and beyond.  This informative, uplifting, energizing & inspiring talk will explore some of the non-financial success factors of retirement such as the renewal of one’s purpose and personal identity and how we can be fulfilled by making a difference in our community.

Mark your calendar today and RSVP with Victoria at