We were in Downtown Toronto last night for the screening of Protégé, a movie written and directed by a young emerging filmmaker, Kandice Smith. What a talented young lady she is and what a great first movie. It was such a pleasure to meet her and her team of talented crew. I encourage all of you to check out the movie on Amazon Prime to support her. We had such a great time and ended the night at PI Co. pizza spot where the kids crafted their own pizzas. In this issue I discuss various tax topics and I share an article on “Three Ways to Avoid the Mistake of Growing Your Expenses as Your Income Grows”. Enjoy this issue and please remember to share this with everyone in your network:
- Personal Tax Return Filing Deadline Is Approaching…Have You Filed?
In the recent survey I completed on personal income taxes, 47% of you said you will be filing your taxes yourself, while another 24% plan to use a friend to help file their taxes. As technology continues to improve, we believe that this trend will continue to grow in the coming years. The truth is that filing personal taxes is not the hard part. What may be challenging is getting the appropriate insights from your tax returns that will enable you plan better going forward. As you file your tax returns this year, here are some questions to consider:
- What’s the dollar amount I paid in taxes?
- What’s my average tax rate?
- What’s my marginal tax rate?
- Why did I get a refund? Why did I NOT get a refund?
And when you have answers to these questions following the filing of your tax returns, you want to consider your next action steps. For example, what steps can you take in 2023 to pay less taxes than you did in 2022? This is where insights come in handy. As I’ve said many times, when you don’t get insights, you end up paying more in taxes than you’re required to and a dollar lost in taxes today will not only cost you a dollar today, IT WILL COST YOU A MULTIPLE OF THAT DOLLAR OVER TIME!
If you’re looking for INSIGHTS to help you minimize taxes, then consider the Personal Tax Services we offer. With our services, we can help you minimize taxes, improve cash flow and get ahead financially. Get the details here.
- Three Ways to Avoid the Mistake of Growing Your Expenses as Your Income Grows
I clearly recall when I immigrated to Canada to join my wife. As new Canadians, we started with no income. As I recall at the time, our rent of a bachelor’s apartment was less than $500 per month. Then we started doing menial jobs, earning approximately $7 per hour working part-time. In a good week, we may get a combined 20 to 25 hours of work, enough to take care of the rent and some food. At the end of the month, we had no disposable income.
When we relocated to Toronto, there was more work at a higher rate of approximately $10 per hour. In a good week, I will get 20 to 40 hours of work. We upgraded and lived in a 3-bedroom apartment building that was shared with two other people. This was a wise move as it kept our rent at approximately $600 per month. At this point, we had more income. Rent was still relatively low but the cost of living was higher in a big city like Toronto. So at the end of the month, we still had no disposable income.
Our next move was to a 2 bedroom apartment that we also shared. Shortly after that, we moved to a spacious 1 bedroom basement unit. Rent was $1,000 but at this point, we both had full-time jobs with a combined income of approximately $75,000. We bought new furniture to fill the space in our new home. We had a car to maintain. Travel costs to and from work increased. We bought new clothes to match our new income level. We hosted house parties to impress friends. We had student debt to pay. At the end of the month, we had no disposable income.
Then we made the first big move a year later by buying our first home. We now had a fully detached 4-bedroom home on a combined income of approximately $100,000. Our expenses more than doubled with mortgage payment, property taxes, utilities, home maintenance, etc. Then came children and more expenses on childcare costs, food, children’s activities, travel, birthday parties, etc. At the end of the month, we had no disposable income. Nine years later, we upgraded to a slightly bigger 4-bedroom home in a better neighborhood. In general, expenses were higher, income continued to increase and we still had no disposable income at the end of the month.
This is a pattern that we are all familiar with. We regularly see our friends and colleagues upgrade their standards of living as they earn a higher income.
But, the more money you make, the same problems you have.
For me, it was constantly living from paycheck to paycheck.
It is called Lifestyle inflation.
Read the full article here and learn the three ways to combat this. Enjoy.
- A Tool for Combating Taxes
One of the tools I recommend in combating taxes is owning a business. Why? Because businesses in Canada pay one of the lowest tax rates, approximately 12% in Ontario compared to a marginal personal tax rate of over 50%. If you’re a full-time employee, you have very limited opportunities to reduce your taxes so starting a side business is a critical step in managing your overall tax exposure. In this video, I outline what it takes to start a business and also give you an opportunity to watch module 1 of this 10-module training I created to help you launch your profitable side business. To enroll, go here.
- How Tax-Efficient Are You?
One of the undesirable outcomes of earning a lot of income or making a ton of money is taxes. And no matter your position on taxes, one thing that is certain – taxes impact your wealth. The good news is that we all have the opportunity to minimize taxes and achieve financial freedom. This is why I wrote the book, Tax-Efficient Wealth, to provide you with an easy-to-implement blueprint that will enable you to build and grow your wealth in a tax-efficient manner. After reading this book:
- You will have a solid knowledge of the key wealth drivers to build wealth and uncover the money mindset required to win the money game.
- You will have a blueprint and a step-by-step plan to start your journey on building and growing your wealth tax-efficiently.
- You will save taxes, have more money, and have the confidence to shatter all your money worries for life.
You can grab a copy of the book here and start your journey to tax-efficient wealth.
- Are You Prepared For The New Underused Housing Tax?
If you own a residential rental property in Toronto, you may be aware of the new Toronto vacant property tax as you would have received a letter in the mail. This is an annual tax levied on vacant Toronto residences, payable beginning in 2023. What you may not be aware of if the newly introduced Federal Underused Housing Tax (UHT) which imposes a 1% annual tax on the value of residential real estate considered to be vacant or underused that is owned on December 31 of each year. While the government indicated that the tax would target property owned by non-Canadians, the scope of filing requirements extends to many Canadian corporations and individuals, including Canadian Controlled Private Corporations (CCPCs), trustees of a trust and partners of a partnership. The first filings and taxes are due by May 1, 2023. Penalties for failure to file the return (even where no tax is payable) start at $5,000 for individuals and $10,000 for corporations. In the coming weeks, I will share a short survey or checklist you can complete to help you determine if filing is applicable to you and if you have any tax liabilities owing on this. So, stay tuned.