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Managing Your Money
Education budget breaks could mean increased savings opportunities for you
It’s true that a post-secondary education is expensive – and getting more so each year. But it’s equally true that an education is one of the most valuable investments you can make for your children. In a comparison of graduate salaries conducted by Alberta Learning, on average post-secondary graduates earn more money over their lifetime, experience fewer and shorter periods of unemployment, and have improved health and overall life prospects compared to those with only a high school diploma.*
Fortunately, changes announced in the 2004 federal budget can provide additional financial help for parents who invest in an education for their children – especially when they take full advantage of the new contribution rules that apply to a Registered Education Savings Plan (RESP). Here’s a look at some of those changes:
RESP grants have been increased for middle- and low-income families. Now when you save for your children’s education through a RESP, you are eligible for more generous government grants.
Under the current Canada Education Grant Savings Program (CESG)**, the government matches 20 per cent of the first $2,000 deposited into a RESP on behalf of a child, up to a yearly maximum of $400 – and for families earning in excess of approximately $70,000, those contribution rules will continue to apply. However, beginning in 2005, for families earning $35,000 or less a year, the CESG program will match 40 per cent of the first $500 and 20 per cent on the next $1,500 saved in a child’s RESP each year – for an overall yearly increase of $100 for each child.
For families in the $35,000 - $70,000 annual income range, the CESG matching contribution rises to 30 per cent on the first $500, or an additional $50.
The new Canada Learning Bond will provide up to $2,000 for each child who was born after December 31, 2003 and is entitled to the National Child Benefit (NCB) supplement, generally available to families with annual net incomes of less than $35,000. Also eligible for the bond are foster children and other children in the care of those receiving the Children’s Special Allowance.
The Learning Bond starts with an initial $500 contribution to an eligible child, followed by $100 yearly installments until age 15. These contributions – if invested in investments earning a 3.5 per cent annual compound rate of return – will grow to $3,000 by the time the child is 18, so that the child can use these funds for post-secondary studies.
These new budget breaks can help many more Canadian families pay for the spiraling cost of a post-secondary education. And there are plenty of other tax-saving, investment-building strategies you can employ to help achieve all of your family’s life and financial goals. Call your financial advisor to take be sure you take full advantage of every tax break and financial strategy available to you.
*Alberta Government News Release, Post-secondary education pays off big – especially for Albertans, September 8, 2003.** Canada Education Savings Grant is provided by Human Resources Development Canada
This column, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
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Fair ways to tee up tax savings on the links
Golf can be fantastic or frustrating - often at the same time. But, whether you're a low handicap whiz or a weekend duffer, here are a few fair ways to tee up tax savings while you 'enjoy' your time on the links.
Stroke off business expenses. Some years ago, Revenue Canada (now called the Canada Revenue Agency, CRA) changed the policy on the deductibility of business meals and entertainment expenses to include food and beverages consumed in the 'non-recreational areas' of golf clubs. Since that time, you have been able to apply the 50% deduction for business-related expenses (subject to restrictions) to costs incurred in the dining rooms, banquet halls, conference rooms and lounges of golf clubs.
To receive this deduction, there must be a genuine business purpose to the use of the facilities and the expenses cannot be incurred in conjunction with a game of golf or other recreational activity at the golf club. In practical terms, this means the CRA still will not allow you to deduct greens fees or membership dues for access to a golf club, including any portion attributable to the golf club's recreational facilities.
To validate your deduction, be sure to clearly itemize all of the business- and entertainment-related meal and beverage expenses you incurred at the golf club.
Employ a promotional stance. As a general rule, when an employer pays or reimburses an employee for club dues or membership fees, the employee is required to report this as a taxable benefit. However, the CRA will allow an exception if the membership is principally for the employer's advantage - say to promote the company or build business. In this case, the employee is not considered to have received a taxable benefit and the dues or fees need not be included in the employee's income for tax purposes.
Give to receive. Charity events can also shave your taxes. When you purchase a ticket to a charity golf event, the charity is allowed to issue a tax receipt for the difference between the price of the admission ticket and the fair market value of the golf game plus any other entertainment and meals you receive as a participant. For example, if the cost of your ticket is $200, but the real cost to the charity (for your golf game, meal, prizes, etc.) is just $45 thanks to donations or reduced greens fees, the charity may establish that the 'fair market price' of your ticket is a more realistic $75 - which means that you would receive a tax receipt for $125, not $155.
You should also be aware that a major hole-in-one prize could cost you a tax deduction. That's because a charity is not allowed to issue any tax receipts when a fundraising golf tournament offers players the right to win prizes of more than a nominal amount. You'll also lose your deduction if your employer buys a block of tournament tickets and provides them as freebees to company employees. In that case, the charity issues a tax receipt to the business. However, in situations where an employer buys the tickets from the charity and the employees, in turn, buy the tickets from their employer, the business can give the charity a list of donors who will each receive a receipt in their name.
To hit the 'sweet spot' on all your tax deductions and sharpen your overall financial game, it pays to talk with your financial services 'pro'.
This column, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
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