Tax master

Titles like MASTER Your Taxes -- How to maximize your after-tax returns and Guide to Cottage Succession Planning certainly won't appeal to everyone -- even if they apply to anyone who pays taxes.

But many Canadians do find saving money or paying less tax fascinating, so much so that her latest edition of Essential Tax Facts (2010 edition) sold out about the same time her public relations team started pushing it to the media.

But Jacks is an author second and an educator first. She founded the Winnipeg-based Knowledge Bureau six years ago and it has built a national reputation for providing professional development for tax and investment advisers.

But the Knowledge Bureau's mandate also includes bringing the concept of real wealth management to the masses, helping individuals understand how tax, investment, insurance and estate planning are interconnected and need to be considered together when making major personal finance decisions.

Jacks' work hasn't gone unrecognized. She has received numerous accolades from Canada's top personal finance gurus, including Financial Post writer Jonathan Chevreau. Federal Finance Minister Jim Flaherty recently appointed Jacks to the Task Force on Financial Literacy. And she will open the TSX on Jan. 28 in Toronto, recognizing a deal that will incorporate her tax-advice books into educational programs for Canada's stock exchange.

If you haven't already guessed it, she's a busy woman, but the Free Press managed to track her down while she was travelling in a limo from Saskatoon on her way to lead a seminar for tax advisers in North Battleford, Sask., part of a cross-country tax-planning info tour.

Jacks took some time out to offer a few tax tips for your 2009 return. (Yes, it's only January, but Jacks says the sooner you get organized, the greater your chance of taking advantage of tax-saving opportunities for a larger tax return come spring.)

Home renovation tax credit (Line 368 on your T1)

Canadians still have time to include expenses on this non-refundable tax credit. It's likely a one-time deal from the federal government, so if you haven't already taken advantage of the program, you only have up to Jan. 31 to do so.

"People who want to get renos done still have some time, but if the work is not completed before Feb. 1, the expenditure for the labour will no longer qualify," Jacks says, adding materials purchased before February still qualify, even if the renovation project hasn't been completed.

Most taxpayers should already be familiar with the associated tax savings. Expenditures on home renovations more than $1,000, to a maximum of $10,000, qualify for a 15 per cent federal tax credit. The maximum tax savings are $1,350.

But many Canadians likely don't know they have to fill out an expense list -- a new Schedule 12 on the T1 -- for the expenses to qualify.

"Is it unusual for a separate schedule with an itemization? Yes," Jacks says. "Canadians have seen this before in past returns when itemizing medical expenses was necessary, but the important thing is that the government wants receipts for expenditures only if it checks afterwards, so you don't have to send them in with the return."

And what qualifies as an expense is not as clear as you'd think. Costs associated with renovating, improving or adding to the useful condition of your home qualify, but other expenses don't.

"For example, regular repairs do not qualify, nor does the cost of financing, tools or construction equipment, but if you are doing renovations of a lasting consequence -- such as adding drapes to the house that will not be removed, new carpeting, windows, a furnace or a pool -- those do qualify," Jacks says. "But if you are cleaning the rug or fixing the furnace, those will not."

First-time home buyers' tax credit (Line 369 on T1)

This non-refundable tax credit provides up to $5,000 in non-refundable tax credits, amounting to a maximum of $750 in tax savings for first-time buyers.

But other buyers may also qualify.

"It's also available to someone who has not owned a home during the current year or any of the preceding four calendar years," Jacks says. "You can be a new homebuyer again, for example, if you meet that criterion, because you've been renting over the past few years."

In addition, the credit also applies to people with disabilities who qualify for the disability tax credit and need to move to a new, more disability-friendly home. "That's important for seniors or boomers who acquire such a home for the benefit of their aging and disabled parents."

In these instances, the four-year waiting requirement to become a first-time homebuyer does not apply.

Disability tax credit (Line 316 on the T1)

Of all the non-refundable tax credits available, the disability tax credit is one of the best non-refundable credits in terms of tax savings, yet it's often one of the most overlooked and underutilized, Jacks says.

Taxpayers who qualify can claim a credit of $7,196 for 2009. That amounts to $1,079.40 in federal tax savings. In addition, the provinces recognize these credits, offering savings on provincial tax.

But many people may not even realize they qualify for the credit.

"People often miss this claim when there's illness in the family, like cancer or Alzheimer's, and the condition progresses from people really functioning quite well to being markedly incapacitated or bedridden," Jacks says.

"In those situations, tax advisers should be alerted to changes in the person's condition, because that should mean that a disability tax credit is available."

If you think you might qualify -- or a spouse, parent or child in your care qualifies -- you should consult your doctor.

"Any claim has to be supported by form T2201 disability tax credit certificate, which has to be filled out by your doctor," Jacks says, adding claims can go back as far as 10 years if you missed them in the past.

The claim is neither income- nor expenditure-tested. In addition, disabled children may receive an additional tax credit of up to $4,198, for tax savings to a maximum of $629.70.

"But that supplement will be reduced by child-care expenses you might be claiming elsewhere on the return if those child-care expenses are over $2,450."

Jacks says Manitoba also has tax credits to acknowledge the cost of caring for people living with disabilities, which also require forms to be filled out. Look for form MB 428 to claim these amounts and, in particular, for the new family tax benefit, as well as credit on form MB 479.

"The disability amount is tricky, to say the least," she says. "Qualifying families should get some advice to help them with available credits, especially here in Manitoba, where they are particularly complicated, but lucrative if you qualify."

RRSP contributions

A lot of Manitobans have been laid off and are collecting severance or Employment Insurance over the last year. Jacks says they should not overlook the advantages of contributing to the RRSP before the March 1 deadline -- particularly now that the contribution limit has increased to $21,000 or 18 per cent of your gross income.

"Making the maximum RRSP deduction can help you reduce your net income to avoid clawbacks of your EI and also reduce the taxes that you might have to pay on the severance package."

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Check those facts and figures... then check them again

When it comes to taxes, the devil is in the details. Even we trustworthy personal finance columnists can make missteps about tax information (GASP!). Chartered accountant Bob Walker, with Winnipeg-based PKBW Group, pointed out some erroneous information from a Dec. 10 column 'Tis season to think about TAXES.

So to set the record straight, here's a list of points touched on in that column that needed to be retouched, courtesy of Walker.

1) The RRSP deadline is technically 60 days after year end, so the deadline is normally March 1, not the end of February (except in a leap year).

2) The article mentions that most deductible expenses that can result in tax savings must be realized in the calendar year and then goes on to discuss the TFSA, implying contributions to the TFSA are deductible on the tax return, which they are not.

3) Tuition payments are actually deductible on a calendar-year basis. If payment for the spring 2010 term is made in December 2009, it cannot be deducted on the 2009 return.

4) The eligible period for the home renovation tax credit is for expenses after Jan. 27, 2009 and before Feb. 1, 2010 -- not Feb. 10, 2010.

5) The paragraph on the calculation of the donation credits ignores the provincial credit. The combined federal and Manitoba credit is actually 25.8 per cent up to $200 of donations and 46.4 per cent over $200.

6) Unused donations can be carried forward for five years, not three years.

7) The calculation of the net capital gains when the $700 capital loss is deducted is incorrect. Only half the capital loss would be deductible from the taxable capital gains of $4,450, meaning the net taxable capital gains would be $4,100.

8) The penalty related to the charitable donation schemes is incorrect. There is a penalty of five per cent, plus one per cent per month, to a maximum of 12 months of the tax owing on late-filed returns, but that would not apply in this case, unless the original return was late-filed and there was tax owing. If CRA were to levy a penalty related to the reassessment, it would be a negligence penalty, which is calculated differently.

9) The strategy of selling a stock at a loss with the idea of repurchasing the stock and then applying the loss against gains on that same stock in the future seems not worth the commissions. If you were instead able to apply the loss to other capital gains, then there may be some benefit to this strategy.

Republished from the Winnipeg Free Press print edition January 23, 2010 B10