Women's Wealth Canada
Women's Wealth Canada
S1 E16: Top Tax Tips that Save You Money - With Bonnie Wallis
Hosted by Glory Gray of Glory Gray Wealth Solutions
In this episode, we'll cover some top tax tips to get you ready for year end.
- Top ways retirees can save on taxes
- Little known tax credits you can take advantage of
- Avoiding OAS clawback
- Important tips especially for women
Hosted by Glory Gray
Take Action:
Watch the webinar: 📽 The Real Questions to Ask Before You Retire
Download our free guide:
🔻12 Smart Questions to Ask When Interviewing a Wealth Advisor
Contact us for a 👉 Free Wealth Consultation
Join our community! Fill out our 🍏 Client Application Form
More ways to contact us:
Website: GloryGray.com
Facebook: @GloryGrayWealthSolutions
LinkedIn: Glory Gray
Instagram: Glory Gray
If she didn't have the legal capacity to sign her name, then she couldn't sign for a Power of Attorney. So I just very quietly said to the husband, "Do you have a power of attorney?" he said, "No." I said, "Go see a lawyer and get one. NOW."
Glory Gray:You're listening to the Women's Wealth Canada podcast with glory gray. Be sure to download and subscribe using your favorite podcast app and like us on Facebook. Hello, everyone. I'm glory gray. Welcome to the Women's Wealth Canada podcast. My husband Squatch and I were doing some hiking the other day on one of our beautiful Gulf Islands here in British Columbia. We were heading back to the car and he said, "Oh bummer.""What?""Well, we've been driving on all these gravel roads, these rough gravel roads," he said, "and it's caused some of the lug nuts on our tires to back out, to reverse themselves." Now, here's what was going through my head. One: who looks at their tires that closely as they're heading back to their car, and Two: if he hadn't noticed those lug nuts were loose, we might very well have lost a tire while driving on the highway heading back home. Anyone who knows Squatch knows he can fix anything, build anything,and it all comes to him naturally. I absolutely depend on him for that. I don't have that skill. On the other hand, when it comes to technology. I'm the geek in the house. If anyone has a problem with their computer or their phone, I'm the one he calls because he doesn't understand it and he gets frustrated. We've been together for 30 years and now we've come to a time where we realize one of us is going to be gone at some point and the other one is going to be completely lost trying to tackle the job that the other spouse did. And so we've started to be more cognizant of showing each other how to do things rather than just taking care of it ourselves. I hope you and your partner can take that lesson away with you today. We all want to be heroes to the ones we love, right? We like to keep that special power to ourselves so we are wanted and needed. If you're the only one who knows how to handle the finances in your household, it's time to share that knowledge because if you don't teach your family how to survive when you're gone, they will be lost, believe me, because I'm the one they come to saying I have no idea what investments we have or even how to pay the power bill. You can continue doing that job because maybe you DO do it better, but teach them enough so they'll be able to stand on their own two feet if you're the one to go first. Speaking of heroes, today we have CPA Bonnie Wallis on our show. I've known Bonnie for several years. I've known her for both her professional practice and for all the volunteer work she does in our community. We both have been involved in fostering dogs in the past. Bonnie has a private practice and works primarily with corporate clients these days but she's graciously agreed to come on the show and share her wisdom with us. So come on over and listen as Bonnie gives us some top tax tips that save you money. So Bonnie, many of our listeners are retirees.What are some of the ways that retired couples can save on taxes?
Bonnie Wallis:Retired couples in particular can save on taxes by using the pension split. This pension split is a very useful tool for couples who have RIF income or superannuation pension income. The income from CPP and Old Age Security are not considered eligible for for splitting but the the superannuation, like, if you've got a pension income from from being Canada Post employee or if you've got RIF income for you know, from your RRSPs where you've been saving for a number of years. Those types of income are eligible to split. And so if you've got one spouse that has a larger pool of income or superannuation income, and the secondary spouse has a smaller amount of income overall, they can take that income and for example, if you've got RIF income of $10,000 you can take 5000 of it and slide it over to your spouse so that you're both paying tax at a lower marginal rate. But it works like a hot damn.
Glory Gray:Can you explain the difference between that which is splitting the actual pension income and the pension income tax credit?
Bonnie Wallis:So the pension income tax credit is something that everyone's entitled to if they have pension income, and it's a maximum of $2,000. The qualification is that client be over the age of 65, Have life annuity payments from superannuation or pension plans, such as Life income funds or locked in retirement income funds, and that's just a flat$2,000 It's not a huge savings because that $2,000 is actually watered down by the 15% federal income tax rate. So it's about$300, but it is per person. So if both members of the family have pension income, they would both qualify for the pension
Glory Gray:So kind of thinking about that also and this is a credit. question I get a lot, and I'm sure you do too. And it kind of relates to that pension splitting that we talked about earlier. Avoiding OAS clawback. Now OAS is Old Age Security pension here in Canada and at a certain level of income if you're receiving income from other sources. That nice OAS income you receiving might be reduced. So can you tell us a little bit about ways that you work with financial advisors to help clients reduce that clawback?
Bonnie Wallis:Absolutely. So usually, the client and the investment advisor will provide me with relevant information and their estimates of what the pension income is going to be from CPP Old Age Security. And the investment advisor will let me know how much income to expect from from other sources, you know, dividends or capital gains. And I put together a tax plan and I do this for a few people put together a tax plan so that we know Okay, at this point, your CPP OAS and investments are going to earn you X amount of dollars. And this is how much we can plan on pulling from a RIF. In order to an end we're going to get up to the maximum that we can take out from a RRIF before we have to worry about clawing back any of the Old Age Security and the Old Age Security limit for 2021 is$79,845. So if my client comes to me and says, Well, they've got income from various other sources in the amount of$60,000. Then we're going to look at taking a RRIF out only for 19,845 so that we don't get we don't get caught up in this old age security clawback.
Glory Gray:Now, we're, we're coming to the end of that tax year. 2021. Hard to believe. But so what are your top tax tips for preparing for the end of the of the 2021 tax year, at least as we see, I mean, I know we just had an election so things may change but at least as they are right now, what you're seeing is kind of top tips?
Bonnie Wallis:Definitely get in and talk to your investment advisor if you haven't, you know maxed out your RRIFs for the year. Get in and get that taken care of before the end of the year. Wanting to make sure that you stay, you know, within a comfortable marginal tax rate you want to be able to have the money that you need to get through to the end of the year without tipping over and having a huge tax burden, like an old age security clawback. In terms of getting ready, are you talking about getting ready to come and see me?
Glory Gray:That's right, how should they help make your job easier when you're preparing their taxes next year?
Bonnie Wallis:Yeah, keeping your papers all together and, and in, you know, in some semblance of order. One of the things that can be a challenge is people get their year end investment package and the end, if they hand it over to me intact, I know I've got everything that I need. But if you know curiosity gets the best of you and you want to start poking through you've got to make sure that all of those papers get put back all of the slips get put back in the package, so that I know that I've got a comprehensive package to work with. The other thing that I have people asking questions about are medical expenses. We have an elderly population and there are more medical expenses than younger folks often have. So if you collect up all of your medical expenses and let me know if you did have to do any travel. You know if you have to travel to Victoria or to the mainland, let me know where you have to go and when you have to go there and I can figure out what's your travel medical expenses, because you can claim travel expenses for your medical and you can claim meals for your medical depending on the distance that you've had to travel. So that kind of information is is really, really helpful. And ask questions. If you're not sure about something, then that's what I'm there for. I can give you a yes or no. People just don't know what they don't know.
Glory Gray:For the medical travel, do they have to know exactly how many kilometers they've traveled?
Bonnie Wallis:They do. And I mean, they don't have to give me that information. They just have to tell me where to go because I can use Google Map. Google Map is is is my best friend when it comes to medical travel. It's just whether whether or not it's within the what the regulations will allow. Like they don't allow meals to be deducted for travel medical under 40 kilometers.
Glory Gray:Okay but they so they don't have to give you a picture of their odometer for example,
Bonnie Wallis:No. A lot of people do they're very conscientious about that kind of thing. But yeah, I just Google Map it. And I Google Map it because one of the one of CRA is favorite things to audit is medical. So I always use Google Maps, and I do a screenshot of the Google Map and I keep it in the file so that when an if the auditor comes along, I've got this piece of paper that says I claimed these number of kilometers because Google Map told me that that was the distance and that has passed the sniff test with with CRA in the past so I know it's something that's a useful tool for me.
Glory Gray:Speaking of things that are maybe little known... There are all kinds of little known tax credits that I'm discovering as we go along. That we can take advantage of. Some of them are BC some are federal. For example, the home renovation tax credit for seniors and persons with disabilities. What are some of those little known tax credits that people might want to look out for?
Bonnie Wallis:The Disability Tax Credit is one that I Keep an eye on people to see if in my opinion, I think they would they would qualify and the disability tax credit is something... it's a fairly robust tax credit. And it's transferable between spouses. So if anyone has a medical condition that really compromises their ability to enjoy the good things in life...movement, if it takes an inordinate amount of time for you to get dressed, or to move about or if you have hearing loss or or vision, vision problems. It's usually a good idea to talk about the disability tax credit at the end of the day. It's your doctor who's going to advise CRA whether or not the eligibility is there. But it doesn't hurt to ask the question. And the thing with a disability tax credit too is if your doctor identifies that you've had this, that you've had this ailment for a number of years, CRA will go back and adjust your tax return for the number of years so if your doctor designates that you've had this ailment since 2015, CRA will go back and adjust your tax returns back to 2015. So it's worth looking into.
Glory Gray:So help me understand. You said it was transferable between spouses. What do you mean by that?
Bonnie Wallis:So if one spouse's income is low enough that they can't make use of it if ifall of their income is covered by their basic personal exemption and the one person qualifies for the disability tax credit because of a physical or whatever kind of an ailment at but can't make use of the whole disability tax credit because their income is too low. They can transfer it over to their spouse who possibly has higher income and it can reduce the taxable income for their spouse.
Glory Gray:Even though the spouse who has the higher income was able bodied.
Bonnie Wallis:Exactly.
Glory Gray:Oh, Isn't that interesting? And just so we're clear for our listeners, the tax credit that Bonnie's talking about them is that's a federal tax credit, right? That's Disability Tax Credit?
Bonnie Wallis:Disability Tax Credit. Yeah.
Glory Gray:And then the one I mentioned earlier, that was a BC One. That's just if you need some help getting about you're at home and you want to renovate you want to put in, for example, a shower bar that helps you get in and out of the tub. That's the one I was talking about. Just to clarify, I didn't want to confuse anybody out there. It's so easy for us to be confused about what is a tax credit and preparing our taxes in general, because often, especially during election time, There are promises made that don't necessarily become law or part of the tax code. So I can understand all of us being confused at any time. And that's why we need a professional like Bonnie on our side. So now I know you have a lot of experience in working with women. I think I've mentioned with you that 95% of my clients are women. And there's some important tips that you have for the women in our audience about planning for their taxes.
Bonnie Wallis:Yeah, one of the things that I I've had a lot of concern about and I've been encountered more than once is women who come to me after losing their loved one, their spouse, and they come to me with with very, very little knowledge about what they have to do next for getting their taxes done even taking care of their own finances, even paying their hydro bill because their spouse took care of all of it. And they actually come to me and they give me these deer in the headlights looks like I don't know what I'm supposed to do next. So one of the things that I talk to people about is familiarizing yourself with how to pay the hydro bill. If you have to do that. And you've never experienced it, knowing where all the bank accounts are because many, many people have money in different financial institutions and even though you might on a regular basis go to the TD Bank for for withdrawals or or any kind of any kind of other banking transactions. You might actually find that there is a bank account at CIBC that you didn't even know about. So familiarize yourself while your spouse is still with you and is still cognizant, familiarize yourself with all of these things and and write them down. Safety deposit boxes. I've known people who found out a few years after after they passed away oh yeah, my spouse had a safety deposit box. The money was just being taken out of the bank account and they didn't even notice an auto-withdrawal for this and didn't know that it was there. Those kinds of things are very important. Also getting powers of attorney. There was one instance where I had a couple in my office and in order for the wife to sign her tax return, the husband actually had to sign her name and show her how to sign her name. And I I just very quietly said to the husband "Do you have a power of attorney because if she was having difficulties, knowing how to sign her name, at some point in time, if she didn't have the legal capacity to sign her name, then she couldn't sign for a power of attorney. So I just very quietly said to the husband"do you have a power of attorney?" He said "No." I said go see a lawyer and get one now while she still can sign her name. Even being prompted and propped up for it. So those things are really important to have because if your name isn't on a bank account, and your and your spouse passes away or if your spouse becomes incapacitated, you need those legal documents of power of attorney and you need to be the executor in order to access the money to continue on with with your life in the absence of your spouse. So it's really important to me.
Glory Gray:And be sure and talk with a lawyer about the different types of power of attorneys and which one is the most appropriate for your situation. Anything else that you'd like to share?
Bonnie Wallis:Those are the ones that come to mind because I because I've been exposed to them and what you mentioned about having a power of attorney for medical decisions. I just recently had a client come to me and fortunately had taken the steps to get that power of attorney in place because her husband suffered with Alzheimer's and it just happened at the onset was very rapid and the decline was very rapid. And and you just don't know how quickly these things are going to affect your life. So you make some advanced preparation for them so that you don't have an interruption to your cash flow. While the actually the best thing to do is in the absence of the power of attorney or even before you get one, get some joint bank accounts. If you've got joint bank accounts then you can both you know you both have the right to get into these accounts with or without a power of attorney.
Glory Gray:I hope that we can have you on again Bonnie for more tips.
Bonnie Wallis:Sure. Yeah.I'm happy to help. That's what I'm here for.
Glory Gray:That's all for today. If this podcast helped you. Please subscribe and please let others know about it so we can help them too. And you could follow glory gray wealth solutions on Facebook. Are you going through a life transition and need to find a financial advisor to manage your investments? You don't have to feel intimidated wondering how to find the right one. Grab my free guide "12 smart questions to ask when interviewing financial advisor." This guide gives you all the questions and why you should ask them. Just go to glorygray.com pop in your email address and we'll send it right to your inbox. You can also schedule a free 30 minute phone call with me where you can ask your specific financial questions. Just pop over to my website glory gray.com and contact us. Until next time, this is glory Gray, your personal trainer for financial fitness telling you to take charge of your finances, plan for the future. But most of all, go enjoy today. Bye for now.
Announcer:This podcast is for informational purposes only and should not be construed as investment, tax or legal advice. It is not an offer To sell or buy on endorsement, recommendation or sponsorship of any entity or security cited. Mutual funds offered through Portfolio strategies Corporation. Other products and services provided through glory gray wealth solutions.
