Filing deadline for spli income Michael Grenby DOLLARS AND SENSE DON’T MISS the June 30 ' deadline for splitting income and saving tax if you have family members in beth high and low tax brackets, School is Pretty well out for the “summer. - But if you’re a student saving money, you know it's time to hit the books — well, this column anyway ~~ as the North Shore News against presents its popular summertime series of tax-saving tips, that will appear here over the next couple of monihs. These tips come from Elio. Luongo and Ed Militzer, of KPMG Peat Marwick Thorne, chartered accountants: “Just make sure you gef all the details to confirm they spply to your situation and talk to a profes sional financial udviser. Also, rules and the way they are administered change with dismaying regularity, so check for the latest facts and fig- ures.” Spiitting income allows you to shift income to somebody in 4 lower tax bracket. This works best in a family; single people can benefit usu- ally only if they have close extended family members or friends ivho are involved with their finances. When both spouses have income, the higher-income person si:ould pay ail the bills, including the lewer- income spouse’s quarterly and year- end tax payments. “This allows the lower-income spouse to do the family’s saving,” said Militzer. “He or she can then invest this money and have the income taxed at the lower rate.” Hf you receive child tax benefit payments, invest them in the child’s name or in your name in trust for the child. As with the former family allowance payments, the investment income eamed by this money will belong to the child for tax purposes and in most cases will be tax-free. However, if you (the high-income family member) simply give your tting nears money or lend it without interest to a lower income spouse or child under 18, the attribution rules generally force you to report the income earned by that money. (Exceptions: if the inoney is used by your spouse in a business or by the child to earn capi- tal gains, you don’t repoit the gains — or losses.) You can avoid the attribution rule if you charge interest set at no less than Revenue Canada’s prescribed rate at the time of the transfer or loan. This interest must be paid with- in 30 days after the end of each year, and you must report the interest on your tax return. Until June 30, this prescribed rate is only 4%. That stays in effect even if rates subsequently rise, and the rate will rise to 6% after June 30 for the following three months. If the rate falls, you can simply refinance at the lower rate. ~ This approach works with any amount but to keep the math simple, let’s say you have $100,000 earning 10% interest. You are in one of the highest tax brackets and pay 50% tax on the $10,000 interest. So you lend . the $100,000 to your spouse, who's in the lowest tax bracket, and take back a promissory note bearing inter- est at the current prescribed rate of 4%, . Your spouse pays you the accrued interest (which is due Dec. 31 but payable as late as Jan. 30 —- in which case you needn’t report it until you file your tax return the following year). You pay tax on this interest. Ina full year, your spouse deducts the $4,000 interest expense paid to you from the $10,000 interest received, and declares the remaining $6,000, paying (in the 27% bracket) $1,620 tax. , That saves the family $1,380 a year. You normaily would have paid $5,000 tax on the $10,000 interest. Instead, you pay $2,000 tax (on the $4,000 luan interest your spouse paid you) and your spouse pays $1,620, for a total of $3,620. “Always document the loan with at least a promissory note,” Luongo said. “Hf a large amount is involved, get other collateral. If the wansferred funds eam less than the prescribed rate, that limits your interest deduc- tion.” If you give money or investments to family members other than a spouse or child under 18, you don’t . have to report the income earned by those funds. But if you make a no- interest Joan to shift the income to save tax, then the attribution rules could apply. Mike Grenby is a North Shore- based columnist and independent financial adviser who works with individuals; he will answer your questions in this coltani as space allows -— write to him clo 2444 Haywood Aye., West Vancouver B.C.V7V1Y1, Helping youth get jobs LOOKING FOR an extra hand around the garden this summer? Or maybe you need to find a replace- ment for vacationing staff. Help is on the way with the North Shore Canada Employment Centre for Students (NSCECS). The NSCECS has placed over 300 students to date. Provincial grant brochures are also available to employers who are interested in wage subsidy pre- grams. If the NSCECS can’t answer your questions, then they'll direct you to someone who can. “Students helping students find work” is the ‘organization’s motto. Various promotional events are scheduled for throughout the sum- mer to remind employers to hire a student. Invest in the workforce of tomorrow and help a student get a head start in their future. Call the North Shore Canada Employment Centre for Students at 666-9192 for more information. re Gea | REGENCY ‘93 CHRYSLER LEBARON (CON VERTIBLE) © 15” aluminum wheels ¢ 3.0 litre V6 engine ¢ All power options © Premium leather © Anti-lock brakes ® Alarm © Aqua Pearl coat © 4 wheel disc brakes © Electronic instrument cluster © AM/FM cassette with equalizer MSRP 29,079 rebate 3,089 Sale 25,990" f Lease payment based on 48 month lease with $2,000 down plus first & last payment. T.P, 25,984 + tax, Price quote net of all factory rebates 4c dealer incentives. REGENCY PLYMOUTH CHRYSLER INC. 1177 Marine Drive, North Vancouver 980-8501 Auto GRovr | D7685 VANCIT~’S BOARD OF DIRECTORS 1994-95. PLEDGING SERVICE, INNOVATION AND COMMITMENT TO THE COMMUNITY. Shirley Chan, Chair of Vancouver City Savings Credit Union, is pleased to present your credit union’s Board of Directors for 1994-95. Chosen by our members, the directors will oversee the credit union’s operations to ensure VanCity remains a healthy, prosperous and progressive financial institution which not only serves its members, but also cares about the community. Because the Lower Mainland isn't just the place we do business. Since 1946, it's been the place we call home. —: Ginger Deol Dueetar Wendy Holm Director ae Paul Gill Franca Zumpano Director Vice-Chair Bob Williams Director 3 Tim Louis Director David Levi Director Corp Strandberg Director UN WE'RE VANCITY 87 7 7 oo90 28 Conimunity Branches throughout the Lower Mainland.