What are considered taxable income from the following list?
- Employment Income = TAXABLE INCOME
- Worker’s compensation = NOT TAXABLE INCOME
- Child support Payments = NOT TAXABLE INCOME
- Royalties = TAXABLE INCOME
What is Tenancy In Common?
-an arrangement where an asset is owned by two or more individuals together, but without the right of survivorship. What this means is that the entire asset does not automatically pass over to the surviving owner
- If one owner dies the other owner has no tax implications on their half, only will be taxed when they dispose of their half of the asset
- asset will not pass to the other when one dies, instead the dead persons 50% will be included in his estate assets on death
- dead persons share will be in their estate, NOT passed on to tenant in common (unlike joint tenancy)
- it is possible for dead person estate to apply for principal residence exemption to shelter some capital gain from cottage property (asset in joint tenancy)
- TIC has NO right of survivorship like JT does…
What are three sets of indicators in a business cycle?
- Leading Indicators
-Orders of durable goods like cars
-Housing starts
-Commodity Prices
-Stock market returns
-Manufacture orders - Concurrent Indicators
-Personal Income
-Retail Sales
-Production
-Trade and sales volume
-GDP - Lagging Indicators
-Unemployment
-Inventory levels
-Exchange Rate
How is inflation measured?
- by comparing last years Consumer Price INdex (CPI) with the current years CPI
What is CPI?
- Basket of 600 goods and services that households would regularly purchase - the price of this basket is referred to as the General Price Level
What is Monetary Policy?
- Involves measures taken by central banks to control the amount of money and securities in circulation
*Manipulation of interest rates - gets the most attention (changes in the overnight rate). Increase IR to slow down rapid growth and inflation. Decreasing happens when economy is slow to encourage spending and borrowing. Prime rate is set by the consumer banks (CIBC) and higher than their bank rate. Prime lending rate is a lagging indicator. - Increase or Decrease money supply (less used)
What is Fiscal Policy?
-While the Bank of Canada implements Monetary Policy our elected officials implement fiscal policy
- taxes
-gov’t spending
-regulation
What is rule of 72?
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years
Cautionary words in MC questions
“Will” “Certainly” and “Always” are yellow flags - you should be 100% sure if you choose an answer with these words
Interest rate insights
- Interest rates do respond to economic activity, which is cyclical, there is no certainty that rates will go up in response to market cycles. Housing costs do not always exceed inflation. If there is high inflation, public sector employees, are likely to respond to inflation with higher wages. Private sector employees can face employment pressures in a recession (job security risk aka).
CPP / OAS - stuff to memorize
- EARLY CPP is you minus .6% per month or 7.2% per year (max: 36%)
- a person’s max benefit is $1,200/month at 65, they want to take it at 63 instead. So .6 x 24 months = 14.4% reduction… so 1200x.114 = $172.8 less per month. New benefit = 1200-172.8 = 1027.2/mo - LATER CPP you add .7% per month (or 8.4%/year) (max: 42%)
- things to consider with CPP; longevity, taxes, lifestyle, access to other sources of income (doesn’t make sense to drain RRSP to delay CPP for a couple hundred dollars more a month)
Other CPP benefits
a) CPP Post Retirement Benefit - if you work and contribute to CPP while receiving CPP you will get a PRB (bump up in monthly amount) - you can request to stop by age 65 and have to stop at age 70
b) CPP Disability Pension - you can’t receive CPP and CPP DP at the same time. One or other.. it will auto convert at 65 IF you are on CPP DP to just CPP
c) CPP Post-Retirement Disability Benefit - if you are receiving CPP you can maybe have this added until you turn 65 as a top up (severe/long disability) ($558.74/mo)
d) Children’s (dependent) Benefit - children under age 18 or 18-25 full time student given to children of deceased or disabled CPP contributor ($281.72/mo)
e) CPP Survivors Pension - if survivor is 65 and older you get 60% of deceased (if not receiving other CPP benefits) - its a calculation. If you and under 65 37.5% if not receiving other CPP benefits
f) CPP Death benefit: $2,500 single payment to dead persons estate
OAS clawback / delay start
2023: $86,912 - you repay 15% of excess over this amount to the max total of OAS received
Age: 65-74 ($86K - $142K)
Age: 75 + ($147K and up)
Example:
The threshold for 2022 is $81,761.
If your income in 2022 was $96,000, then your repayment would be 15% of the difference between $96,000 and $81,761:
$96,000 - $81,761 = $14,239
$14,239 x 0.15 = $2,136
WHAT IS YOU DELAY? You get 0.6% more per month up to 36%
OAS
Who gets it?
-Resident for 10 years (40 years for max), reduced at 2.5% per year under 40, monthly max in 2021 $635.26
EG: Only resident 30 years: (40 years for max - 30 years resident) = 10
= 10 x 2.5% = 25%
= 635.26 - 25% = $476.45 lowered monthly payment
Min age to start is 65, must apply, can delay until 70
Indexed quarterly to CPI
Taxable income benefit
GIS
Cut off roughly around $21K in 2023
What reduces GIS?
- RRSP/RRIF income
-dividend income
-NET rental income
-CPP
-workplace pension
-foreign pension
-OAS DOES NOT REDUCE GIS (exclude it)
- First $5,000 of income is excluded
EI Benefits Quick Facts
- EI is taxable income
- Withholding amount is applied to EI benefits (10% typically) so the amount your quoted will actually be less with the WHing
- Not possible to accept EI while absent from Canada
- one-week waiting period for payment
- THere is no upper limit on who qualifies but there will be a clawback, assuming income stays at a high level… it will not take affect until the tax return is filed for the year in question
REGULAR: lost job through no fault of their own
MATERNITY: 600 insurable hours in the last 52 weeks
PARENTAL: up to 35 weeks, same with the 600 hours - extended available too
SICKNESS: 15 weeks
COMPASSIONATE Care: up to 26 weeks, family member gravely ill (likely to die within 26 weeks) “broad family member definition”
CAREGIVER: up to 15 weeks , care for an adult family member
PARENTS TO ILL CHILDREN: 35 weeks, must be a minor
OAS KNOW THIS:
Once 10 years of residency are accumulated after age 18, OAS can begin.
IF YOU HAVE NOT ACCUMULATED 10 YEARS YOU WILL NOT GET OAS… you can have two “right answers” for a CPP question mathematically but the correct answer will be minimum of 10 years
CPP Disability taxation
ALL disability benefits, even those extended to dependent children, are taxed in the disabled persons hands
What are some tax advantages of incorporating a business?
- IPP or RCA
- Incorporating gives limited personal liability for owners
- There is a lifetime capital gains exemption of over $971K in 2023 - this can be claimed against taxable capital gains, there are several tests to be met to meet these qualifications
- Proper corporate structure could allow for dividends to be paid to spouses or adult children allowing for some income splitting opportunities
- Small Business Deduction enjoys a lower corporate tax rate and increased cash flow for business
- Incorporating could allow for the use of an Estate Freeze, which would provide more efficient tax transfer of ownership for future generations
How to qualify for CMHC Homeowner Mortgage Loan Insurance?
- house must be in Canada
- max house price of $1M
- Minimum down payment is 5% and must come from buyers own sources, 5% on first $500K, 10% on $5001K-1M
What 4 Unities are required in Joint Tenancy?
- Unity of Interest - each tenant has equal ownership
- Unity of Title - Each has same quality of title
- Unity of Possession - each has equal right to the entire property
- Unity of Time - created for each at the same time
What happens if someone dies in Joint Tenancy
- if one person dies the other automatically becomes the owner of the whole property, wills do not apply
What happens with Tenants in Common when someone dies?
- Each owner keeps their interest in the property, when one dies that person’s share goes to his or her heirs in Will.
What are the 6 steps in the financial planning process?
- Determine current financial situation
- Develop financial goals
- Identify alternative courses of actions
- Evaluate alternatives
- Creating and implementing a financial action plan
- Monitor and review
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Fundamentals of Financial Planning23
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Investment Planning119
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Retirement Planning140
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Insurance Planning34
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Estate Planning34
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Tax Planning80
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Ethics15
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Random INFO67
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Time Value of Money - Calculator Section10
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Law Stuff11
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Corporate Taxes9
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Behavioural Finance37
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Practice Exam Points40
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Estate Planning25
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Corporate Things9
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CPP1
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AMT3
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Bonds quick tips11
