BOLLARS AND SENSE TODAY WE wrap up our seven-part annual series of tax tips with a planning cherklist for 1994. “You still have time to take steps to cut your income tax bill for this year,” said Elio Luongo, parmer, KPMG Peat Marwick Thome, char- tered accountanis. “The sooner you move, the easier it is. ‘Just don’t wait until next | spring,” he added. “By the time you file your (994 tax return, your options for saving tax for this year will be severely limited. By then you should be starting your planning for 1995.” ‘’ Luongo and colleague Ed Militzer stress before you make any meres an to save on future taxes moves, get all the details to confirm the following ideas apply to your sit- uation and talk to a professional financial adviser. Rules and the way they are administered change with dismaying regularity, so also check for the latest facts and figures. * Unless you can confidently use another investment approach to pro- duce a more tax effective result, con- tribute to a registered retirement sav- ings plan. To get the tax break for 1994, make your contnbution by March 01, 1995, But to get the most from the tax-free compounding, at least start putting the money into an RRSP now, perhaps on an automatic monthly basis. The assessment notice you should have received recently, after fiting your 1993 tax return, shows your RRSP contribution limit. Or contact your local tax office. * If your spouse (common-law or married) will be in a lower tax brack- et than you when the funds are even- tually withdrawn, make your contri- bution (based on your limit) toa spousal RRSP. You don’t have to wait until retirement to benefit from shifting/splitting income this way. Just remember any funds withdrawn from a spousal plan will be attributed back to the contributor up to the amount of all spousal contributions made that year or in the preceding two years. So if you contribute to a spousal plan by Dec. 31 this year and make no further spousal contributions through Dec. 31, 1997, your spouse may withdraw the money (and be taxed in his or her lower bracket) as parly as Jan. (1, 1997, © Consider over-contributing up to $8,000 to. an RRSP. You get no tax break until you claim a deduction under your regular limits in future years. But the money wilt immedi- ately start to compound tax-free. However. if you don't “use up” the over-contribution, double taxation will occur when the money is with- drawn. * Pay all self-directed RRSP admin- istration fees separately rather than allowing them to be taken out of the RRSP. Then claim this expense as a carrying charge deduction. ¢ When your income is so low you don’t pay tax, file a tax retum any- way to build up your allowable RRSP contribution limits — which you can then use in future when you do pay tax. This particularly applies to youngsters and teens. And from age 19 on. filing a tax return may produce a GST refundable credit and possibly other benefits. © The simplest way to shift income to other family members in lower tax brackets is to have the person with the highest income pay all the bills. Then the Jower-income individuals can invest their savings. They will pay less tax on their investment income. Invest all child tax benefit pay- meats in the child's name. The invesunent income will then belong to the child for tax purposes. If you give money to a related child under 18, you must report all interest and dividends that money earns until the year the child tums 18. Hf you have substantial income, a family tust can often save tax and probate fees —- but you definitely need expert advice here. Other tax ups, discussed in more detail earlier in this series, include using the Home Buyers Plan to “bor- row" up to $20,000, tax-free, from your RRSP to buy a principal resi- dence, and on your 1994 tax retum choosing to declare gains on invest- ments you hold so you can claim any unused part of your $100,000 capital gains exemption. Mike Grenby is a North Shore- based columnist and independent financial adviser who works with individuals; he will answer your questions in this coliann as space aliows — write to him clo 24-44 Haywood Avenue, West Vancouver V7V IYI, . HTELP WANTED to get somewhere, try hopping om two wheeis instead of driving four. Go green This Week. 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