Top tax tips for clients: Golombek

Tax expert Jamie Golombek offered tips for both average-income and wealthy clients at last week’s CIBC Renaissance Roadshow.

Advisor.ca live-tweeted the event and shared his tips.

Here’s a selection of our best tweets:

• The dividend and charity tax credit are both most used by wealthy Canadian taxpayers.

• In fact, few rich families use registered plans since they’re limited by contribution limits. They also haven’t taken advantage of TFSAs, though, and that’s a mistake.

• Wealthy clients should also contribute more aggressively to RESPs and RDSPS. For more, read: Maximize benefits of RESPs and RDSPs

• Also help these clients manage their non-eligible dividend payments due to Budget 2013 changes. They need to take advantage of first-time donor’s super credit as well. Make sure they don’t blow it on low donations, though, cause only get one time. Read: Donate for big tax savings and Don’t be afraid of new dividend tax rules

• When dealing with typical, lower income families, however, advisors have to figure out how much they can invest.

• Technically, a dual-income household that earns $80,000 could: contribute $18,000 to RRSP/year, and would only cost about $12,000 due to tax advantage. Then, they could put $11K & $5K in TFSA and RESP per year, respectively.

• That’s too much, however, since they have other expenses. Clients need help to plan more efficiently and cover other expenses like mortgage and living costs, so help them plan out registered contributions. Read: 3 tips to reduce debt

• In fact, average-income clients should focus first on their mortgages. But if they’re comfortable with long-term investments and earning lower rates of return, they can pay it off slower.

• For example, if clients only invest in GICs and RRSPs, they may only get 2%, while mortgage is 5% interest.

• But that gap can change, so you need to monitor when they should start focusing on investing as well. Also factor in their ages and the potential tax savings of using registered plans. Read: Must-reads on retirement planning

• In Canada, the top 1% are earning more than $200,000. Median income is $429,000. They pay about $143,000 in taxes on average, and median tax rate is 33%. It’s low because of tax credits.

• Top 10% of earners in Canada are paying more than half (55%) of taxes in Canada.

Read:

Getting to know wealthy clients: HNW conference

14 ways to reel in clients

Help your clients save on tax

CRA answers taxpayer questions: STEP