Ending The Rat Race

As 2009 is quickly passing us by, The Rat figured it would be a good time to write a three-part mini-series over the course of the next few weeks discussing Tax Tips and ways in many of us can potentially save some money as the year concludes.

Over the past few weeks, my wife and I decided that we desperately needed to renovate our upstairs bathroom in the next few months. But when would be the optimal time do so given our schedules and cash flow situation? During our weekend tradition of discussing plans over a nice meal and a couple glasses of red wine, the ultimate decision that transpired was to go ahead with the project ASAP.

From that point onward, I was curious about the possibility of saving money with some of the expenses. After flipping through the November/December 2009 Canadian MoneySaver magazine, I quickly noticed Bruce Ball's article, "Some Yearend Tax Planning Ideas". In it, Ball asks readers whether or not if you have made full use of the home renovation credit.

Essentially, Ball states "you need to consider whether you have taken full advantage of it before it disappears on February 1, 2010." Personally, I had heard of the renovation credit on numerous occasions over the past year; however, I had no idea that the credit was going to disappear in 2010.

The article also mentions how expenditures for renovations/alterations to one's home "that are of an enduring nature" can qualify.  Crucially, Ball also states, "the key will be to get planned work don (or goods purchased) by January 31, 2010.

The immediate response to this entailed me asking, "would my bathroom renovation qualify for this credit?"

The next logical step in the process to find out the truth to the matter was to simply read up on information provided by the Canada Revenue Agency (CRA).

After checking out the CRA website, it is spelled out that this credit is indeed only available for the 2009 tax year. In addition, the "HRTC applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 − $1,000) × 15%]."

Fortunately, I was able to find out if our bathroom project would qualify for the credit. The following is a list of examples of eligible expenses as per CRA:

• Renovating a kitchen, bathroom, or basement
• Windows and doors
• New flooring - carpet, linoleum, hardwood, floating laminate, etc.
• New furnace, woodstove, boiler, fireplace, water softener, water heater, or oil tank
• Permanent home ventilation systems  
• Central air conditioner
• Permanent reverse osmosis systems
• Septic systems
• Wells
• Electrical wiring in the home (e.g., changing from 100 amp to 200 amp service)
• Home security system (monthly fees do not qualify)
• Solar panels and solar panel trackers
• Painting the interior or exterior of a house
• Building an addition, garage, deck, garden/storage shed, or fence
• Re-shingling a roof
• A new driveway or resurfacing a driveway
• Exterior shutters and awnings
• Permanent swimming pools (in ground and above ground)
• Permanent hot tub and installation costs
• Pool liners
• Solar heaters and heat pumps for pools (does not include solar blankets)
• Landscaping: new sod, perennial shrubs and flowers, trees, large rocks, permanent garden lighting, permanent water fountain, permanent ponds, large permanent garden ornaments
• Retaining wall
• Associated costs such as installation, building plans, permits, professional services, equipment rentals, and incidental expenses
• Fixtures - blinds, shades, shutters, lights, ceiling fans, etc.

One important aspect of the credit to be aware of is whether or not you hire a contractor or do the work yourself. Be sure to check out the details surrounding this on the CRA website.

At any rate, I was certainly pleased to see that our project would be eligible for the tax credit. As soon as that component was confirmed, I then proceeded to call our carpenter we will be hiring for the job and asked him if was still feasible to finish the job prior to February 1, 2010. He indicated that this would not be a problem.

As a result, we will be able to save a few hundred dollars of our hard earned money on the project. Do you have any renovations that you are considering to have done in the near future? If so, it may be advantageous for you to have them done in the weeks to come in order to take advantage of the credit.

Cheers,

The Rat

On November 12, 2009 I published the first of a two-part mini-series thread covering the topic of finding great GIC rates.

In it I mentioned some of the more lucrative rates presently being offered in Canada by Ally and ResMore Trust Company, a CDIC Member. Using a 5-year term GIC as an example, Ally was offering 3.60% while ResMore Trust Company was offering 3.35%.

The point of contention in the post was whether or not Ally's GIC would be protected by CDIC. True, their recent ads, which have been noticeable in many newspapers and leading personal finance magazines, claim good rates, but mention the following: "Ally, a product of ResMore Trust Company. Member CDIC." Does this mean that an Ally GIC would be protected up to $100,000?

Well, finding the answer to that crucial question has not been an easy one for me. After sending off e-mails, calling, and leaving messages, it was getting to the point where I thought I would not be able to get a hold of anybody to get the answer to this question.

Finally, I received a call. The Ally representative informed me that the Ally GIC would be protected indirectly through ResMore Trust Company despite the fact that it would be an Ally GIC. Take that as you like, but at least I was satisfied in a sense that I received an official response.

At any rate, since the first post, things have changed regarding the ResMore rates. As of my last verification, ResMore is now offering a 5-year term rate of 3.00% - down by almost a full half of a percentage point.

Not being satisfied with the above-mentioned, I decided to refer back to one of my key 'GIC books' in my personal finance collection titled, "Enough Bull" by David Trahair. I actually published a book review on Enough Bull in October, and recently bumped up the rating I gave it from a B+ to an A simply because I find myself referring back to it on a regular basis. The new rating gave it the justice it deserved (in my view).

After browsing through the book once again, I noticed an interesting section discussing secrets on finding the best rates out there, and Trahair mentions quite clearly, "when purchasing GICs and other guaranteed investments through a deposit broker, you don't pay fees or commissions to your broker." That's because deposit brokers get paid by receiving a "finder's fee directly from the institutions that they purchase GICs from." This is definitely a stark contrast in comparison to the process of purchasing mutual funds, isn't it?

Ironically enough, the November 2009 edition of Money Sense magazine has an article titled, "Boost Your GIC Returns", and Dan Bortolotti highlights an interesting site (www.GICBroker.com) where you can enlist the assistance of a broker to find some of the best rates in the country. Taking a quick look, there are some 5-year terms presently offering 3.35%. This could be a worthy avenue of pursuit for you to look into a bit further if you're looking for good rates. Keep in mind, a simple 1% increase in rate can make a big different in the interest you earn!

One thing Trahair mentions and is important to remember is that not all deposit brokers are registered members of the Registered Deposit Brokers Association (RDBA). If this is happens to be the case with a potential broker, you must realize that "not all deposit brokers are registered members of the RDBA and bound by its policies and procedures and code of ethics."

An interesting site you may want to visit, which is also recommended by Trahair, is the Fiscal Agents Financial Services Group. They are registered with the RDBA and are an official deposit broker.  What's great about this group is that the company prepares a summary chart for their respective clients listing financial institutions' rates and whether they are insured by CDIC. This could be a great site to check out if you are looking for some of the best rates in the country.

This concludes Part II of the Great GIC Rates mini-series; I hope you enjoyed it!

The Rat