Canadian MoneySaver magazine has provided Canadians with balanced insight into personal-finance issues since 1981. Through an exclusive arrangement
with The Costco Connection, Canadian MoneySaver’s experts provide Costco members with answers to their questions about financial issues.
More money in your pocket
WITH TAX TIME looming, we are tempo- CDSG, the government matches contribu-
rarily abandoning our usual Q&A format to tions to an RDSP on a 100, 200, or 300 per
focus on tax-return tips. Below we cover some cent basis, up to a lifetime maximum of
changes in this year’s forms and offer useful $70,000. The matching percentage depends
reminders for preparing your 2007 tax return— on the family’s income.
including ideas on how to keep more money in
your pocket by planning ahead. RRSP age limit now 71
By Brian Quinlan
Taxpayers now have two more years of
Tax rates and tax credits tax-deferred growth available on funds in
Tax brackets for 2007 are higher than for their Registered Retirement Savings Plan
2006, so more of your income is taxed at a (RRSP) as the maximum age limit to con-lower rate. Also, the federal tax rate on the vert RRSP funds to a Registered Retirement
first tax bracket (zero to $37,178 of taxable Income Fund (RRIF) or an annuity is now
income) has been reduced from 15. 5 per cent 71, up from 69.
to 15 per cent. If you have already converted to an RRIF
The basic tax credit amount has been you can convert back to a Registered
increased to $9,600. This means the first Retirement Savings Plan(RRSP)and“recon-
$9,600 of your income is free of federal tax. vert” to an RRIF before the end of the calen-The same amount also applies if you are dar year in which you become 71.
claiming a tax credit for your spouse. Converting to an RRSP makes sense if
you still have RRSP contribution room and/
Parents and children or can generate room by, say, working.
With the Children’s Fitness Tax Credit, the If you have no RRSP room you can sim-money you paid as a parent in 2007 for an eli- ply waive your RRIF withdrawals until the
gible program of physical activity qualifies for year after you turn 71. C
a maximum of $500 per child under 16.
With the new child tax credit, if you have Brian Quinlan is a chartered accountant with
children under the age of 18 you can claim Additional considerations for Campbell Lawless Professional Corporation.
$2,000 per child no matter what your—or 2008 include: He is co-author of Tax Tips for Canadians for
your child’s—income is. Saving for education Dummies and one of several contributors to
The annual Registered Education Savings Canadian MoneySaver.
Seniors Plan (RESP) contribution limit of $4,000 has
Up to 50 per cent of certain pension in- been eliminated and the lifetime contribu-come can be split (or shifted) from a spouse in tion limit has been increased from $42,000
a higher income-tax bracket to a spouse in a to $50,000. Personal finance
lower income-tax bracket, resulting in the cou- The maximum annual Canadian ple paying less tax! Education Savings Grant is now $500, up from Regardless of who received the pension or $400. You can now contribute more to an questions?
whose name is on the T4A slip, all you need to RESP and have the federal government kick in Send to: Canadian MoneySaver,
do is to complete a few new lines on the 2007 a little more as well. The Costco Connection Q&A, Box
tax returns of both spouses and fill in tax form 370, Bath, ON K0H 1G0. Or e-mail
T1032 Joint Election to Split Pension Income. Registered disability savings to: questions@canadianmoneysaver.
A portion of the tax withheld on the pen- plans (RDSPs) ca (please include “The Costco
sion can also be shifted to the tax return of the New this year, these plans are similar to Connection Q&A” in the subject line).
spouse in the lower tax bracket. RESPs. RDSPs allow parents to save funds in a Canadian MoneySaver will
Seniors may also be entitled to the $2,000 tax-efficient manner to provide for a disabled answer selected questions in this
pension income-tax credit that they previ- child. Contributions to an RDSP can be made bimonthly column. Unpublished
ously did not claim. up to a lifetime maximum of $200,000. These questions may be answered on the
contributions are not tax deductible. The Canadian MoneySaver Web site at
Investors and business people investment income earned in an RDSP is not www.canadianmoneysaver.ca. Click
Did you sell your business? Sales of subject to tax while the funds remain in the on “Ask the Experts Q&A.” Free
qualified small-business corporation shares plan. Once the investment income is with- on-line current issues of Canadian
and qualified farm and fishing property are drawn, it is taxed in the hands of the RDSP MoneySaver are available at their
eligible for a lifetime capital gains exemption beneficiary (i.e., the disabled child). Web site. The opinions of the experts
of $750,000. The limit was previously The government has also created Canada may not apply to Quebec residents.
$500,000. Disability Savings Grants (CDSGs). With a