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Charitable Donations

Put your Money Where your Heart Is: Charitable Donation Tax Receipts

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We all love to give, and we want to give to a cause that touches our hearts. But what if I can show you a way that you can give and feel good about it, and also get a tax refund from that?

Pretty cool, right?

Hello, my name is Taayla Mark with Engrace Financial Solutions. I am so glad you’re here today because I love the topic we’re going to talk about, and I know that you will, too.

People are naturally geared toward giving. I honestly believe that. And how awesome is it

that we live in a country where we get rewarded for putting our money where our heart is?

And that is the side benefit of charitable giving (because the first benefit is in the giving)!

Charitable Donation Income Tax Receipts

Did you know, when you donate to your favourite registered charities, the Canada Revenue Agency supports your good deeds with a good deed in return?

The money you give away creates a tax credit against your personal income tax.

Although the term “tax break” may not be what springs to mind when you are moved to support a cause, you will be reaping that benefit anyways.

Of course, like all worthy, tax-related things, this benefit comes with some rules and regulations.

But don’t worry, they won’t hurt.

Here’s how it works:

First, to qualify for the tax credits, your charity of choice must be registered with the Canada Revenue Agency and must have a charitable registration number.

How to calculate what your CRA tax credit will be.

This is a little more involved, because you have to know the federal rate, which is the same for everyone in Canada, and the provincial rate, which is different for each province.

To keep it simple, I have provided a calculator in the video description below. It will do all the hard work and make sure that you qualify for the right amount, or you can use the CRA Charitable Donation Calculator

As to the extent of tax relief you can expect from your charitable donation, just know that if your total gift is $200 and under, you may be less thrilled by the tax credit you will get.

As an example, if you donate $200, you can expect anywhere from $40 to $60, depending on the province you live in.

However, for every dollar that goes over $200, your tax credit is closer to 40 to 50%, so that means that the $1000 you give away costs you $600, and if you live in British Columbia, you would receive a $400 tax credit. That’s actually a great incentive for you to give more.

You can combine CRA charitable donation tax receipts with your spouse or common law partner

If larger gifts are not available for you at this stage, don’t stop donating altogether, because there are other ways for you to take advantage of the bigger tax credits.

If both you and your spouse or common law partner give, then you can combine both amounts and apply to one person’s tax return to bring you over that $200 threshold.

Carrying over your CRA charitable donation tax receipts

Or, if you are single, you can hold off on claiming the donation this year and add it to next year’s total.

In fact, you can carry forward your cash donations for up to five years!

When it comes to giving to a worthy cause, it isn’t about the tax breaks that we get, although it is a helpful perk. It is about our connection to others and how our hearts break for their suffering, and our willingness to act.

If it wasn’t for your generosity in sharing your donations and time to help those in need, our world would be a much sadder place, so thank you to all the heroes out there.

I hope you are encouraged to give by what you learned in this video and I have so much more to say regarding financial planning around charitable giving. If you would like to form a plan around your charitable giving, please call me at (604) 428-8765 for a free consultation. 

Let me know your about your favourite charities and tell me why the cause or organization moves you in the comments below, because I want to create a community of givers!

RRSP

Is RRSP right for YOU?

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Are you thinking about your retirement and wondering if an RRSP is right for you? In the latest Street Smarts with Taayla video, we’ll dig deeper into this question and find a solution that works for you.

What is an RRSP?

If you’re unfamiliar with or new to RRSPs, you’re not alone! An RRSP, or Registered Retirement Savings Plan, is one of the most commonly misunderstood types of investment accounts.

My clients will ask me if an RRSP is right for them, and as much as I’d like to give a simple “yes” or “no,” I usually tell them it depends — because it does!

How to know if an RRSP is right for you

Before I can know if an RRSP is the right choice for you, I need to know five key things about you: your age, income, first home, education, and emergency funds.

When to take advantage of RRSP savings

An RRSP can be an excellent tax savings and a great way to save for retirement. However, if you’re under the age of 30, chances are you’re not at an income state where you can best take advantage of the RRSP savings.

Why?

Because when you make less money, you’re also paying little to no income taxes. If you wait until your earning increases before you contribute to your RRSP, then the potential to save on your taxes could be higher than they are now.

While I don’t usually recommended having an RRSP for incomes under $50,000, if you do decide to contribute to one, you don’t have to claim the plan on your taxes for the current year — you can carry it forward indefinitely.

For example, if your income is $20,000 today, and you believe your income will continue to increase over time, then start saving in your RRSP today. Just make sure to wait until you are at a higher marginal tax rate before you apply your RRSP against your income, whether that’s next year or somewhere down the road.

How to use an RRSP to reach your goals

In my previous video on RRSPs, I talk about how you could use your RRSP toward the down-payment of your first home, or toward the cost of a full-time education. While RRSPs are an investment account for your retirement, there are many benefits to utilizing your RRSP sooner rather than later.

If you’re looking to buy your first home, or want to pursue higher education, then go back and watch how RRSP can help you achieve these goals.

When to prioritize an RRSP

The last thing to consider when deciding if an RRSP is right for you, is the status of your emergency fund. If you have little to no emergency fund, then establishing a solid fund should be your first priority!

Fill your emergency fund before your RRSP, because an RRSP cannot protect you quite like an emergency fund can. While you can withdraw money from your RRSP, there are tax consequences for doing so.

I recommend to my clients to keep an emergency fund worth at least three months of their salary — ideally six months.

Let’s think about this scenario: you have accumulated $30,000 in your RRSP and now you have an emergency where you need cash quickly. You decide to take out the $30,000, but what you don’t realize is that when you do that, 30 percent is being withheld. Now you only have $21,000 you can use!

You would then have to include the $30,000 withdrawal from your RRSP in your income taxes for the year. So if your standard income for the year was, say, $50,000, and you added the $30,000 to that, your income tax return would then be based off $80,000 — a much higher marginal tax rate.

RRSPs are meant to be withdrawn from strategically, and in emergency, you don’t have time to plan for that.

Thank you for reading along in my latest post. I hope this dive into RRSPs has been helpful in allowing you to decide whether or not an RRSP is right for you.

Ask me questions in the comments section below, and let me know what other savings vehicle you are using for your retirement. I’d love to learn more!

Please like and share my videos, it let’s me know when I’m doing things right! If you have not subscribed to my channel, please do so now so I can get more segments and topics to you each month.

Critical Illness for Families with Children

Financial Planning: Critical Illness for Families with Children

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In the latest Street Smarts with Taayla video, I’m discussing the ways you can take preventative measures to protect your family in the instance that your child falls ill with a critical illness. Parents will do everything they can to protect their children from harm. But most times, that doesn’t include envisioning a future where their child falls critically ill. While this is an uncomfortable topic, it’s an important one, as the repercussions of a critical illness can significantly impact your family in many ways.  

The Impact of Critical Illness

It’s hard enough to imagine ourselves in this situation, so how can we even entertain the idea that it could happen to our children? When I talk to parents about critical illness insurance for their young ones, they don’t usually see the need for it. However, with over 900 new cases of children being diagnosed with cancer each year, I believe it is important to help families prepare for the worst case scenario.

Some of the challenges that can result in financial stress include:

  • Alternative medicines that can add up to hundreds of dollars each month.
  • The need to hire extra help to help around the home.
  • Loss of income revenue or the ability to work due to emotional or psychological distractions.
  • Having to take time of work to be with your child at home, or in the hospital.
  • Putting retirement or travel savings plans on hold to pay for medical expenses.

Consider Critical Illness Insurance for the Family

The emotional and financial strain for families with sick children can go beyond a few months into years of hardship. This is why I urge parents who have coverage for themselves to consider getting critical illness insurance for the rest of the family. Critical illness insurance for your children is valid for the rest of their lives, even as grown-ups. While it may not lessen the heartache of the situation, a critical illness insurance plan can help parents focus on what’s most important – the health of your child.

Thank you for trusting me to speak on this difficult subject and I hope that you are encouraged to make the best decision for your family; to cover all your bases and focus on living an excellent, secure life!

I’d love to hear your feedback, or if you have a similar story, please share with us in the comments below! I will do my best to help support you through it. Please like and share this video, and subscribe to our channel: Engrace Financial Solutions, financial success made simple.

 

Long Term Disability

Is Long Term Disability the Best Option for Me?

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Always protect your most valuable assets. These include our homes, our cars, and most importantly our Human Life Value – the ability to earn an income. A Long Term Disability plan establishes financial security and protects against losses in the instance of an injury or illness, that prohibit an individual from working.

Our most valuable asset: financial security

Picture this. You are currently 40 years old and are earning $100,000 annually. If we calculate your gross earnings for the next 15 years, the total sum would equate to $2.5 million. At the age of 65, your assets will have grown substantially. The are huge risks associated with this $2.5 million asset. What can you do to protect this?

Long Term Disability: is right for you?

Let’s use two different scenarios to explain the benefits of a Long Term Disability plan. Let’s say Job A and Job B are both the same, each earning $100,000 per year. However, Job A does not have a Long Term Disability plan. Let’s say this person got injured severely and are now unable to work. Since they did not have a Long Term Disability plan, their source of income would be reduced to nothing, while they were away from work.  

Let’s say Person B is on a Long Term Disability plan. Since they’re on the plan, their annual earnings would be reduced to $97,000. However, if this person were to be injured or succumbed to any illnesses, they would be protected by their plan. As a result, they would continue to receive a monthly income, around $5,000. Once that individual returned to work, they would receive 50% of the income that was set aside while they were gone.

While most people may choose a Long Term Disability plan, others might fancy the option of being self-insured.

A Long Term Disability insures your most valuable asset and is a smart and safe way to create financial security. Would you buy a house without home insurance? Or drive a car without auto insurance? Probably not! So why wouldn’t you do the same for your most important asset?

Need help making the right decision? Let us help!

Make smart decisions today! Talk to your Financial Advisor to discuss whether or not Long Term Disability is a probable choice for you. If you have any questions, get in touch with us! Contact Taayla today to learn about a Long Term Disability plan. Subscribe to our YouTube channel! We post new video content once a month, so don’t miss an episode and get my financial tips and tricks sent straight to your inbox.