MONTREAL, Feb. 15 /CNW Telbec/ - At Laurentian Bank, financial planners are able to offer specialized
expertise in analyzing all aspects of long-term planning, including
from a tax standpoint where certain rules can prove quite advantageous
under specific circumstances. This is the case, for example, with
respect to new government measures implemented over the past few years
like the TFSA and income splitting among spouses, which have created
new ways to reduce the burden of taxpayers.
Tax planning can be very beneficial not only for high-income earners,
but also for middle class taxpayers and even for those with modest
revenues. In order to take advantage of the measures allowing for tax
savings, it is important to be familiar with them and to know how to
assess their impacts.
RRSPs and TFSAs: Invaluable Tax Saving Vehicles
Since its introduction in 1957, the Registered Retirement Savings Plan
(RRSP) has constituted a prime retirement savings vehicle while
offering significant tax benefits. Contributions to RRSPs open the way
to substantial tax savings by reducing an individual's taxable revenue.
They also provide greater access to a number of tax credits and
government payments. As such, they significantly decrease the actual
cost of RRSP investment in terms of net payout.
"Because of their inherent flexibility," explains Stéphane Girard,
Manager of Financial Planning at Laurentian Bank, "RRSPs offer
additional tax benefits as well, including for those wanting to return
to full-time studies, or in conjunction with the Home Buyers Plan
(HBP). When purchasing a first home, the buyer is eligible to make
tax-free withdrawals from their RRSP of up to $25,000, which allows
them to considerably reduce the size of their mortgage loan."
For its part, the TFSA (Tax-Free Savings Account) allows Canadian
taxpayers aged 18 and over to make contributions of up to $5,000 that
are non-taxable both federally and provincially. In addition, unused
contributions can be carried over to subsequent years indefinitely,
thereby making this an exceptional personal savings mechanism. The TFSA
is also highly flexible, and while the tax savings may appear modest
from a short-term perspective, the long-term results can be
substantial, particularly if the selected formula's return is
"RRSPs and TFSAs have very different characteristics, but both represent
additional savings vehicles, and it would be quite advantageous for
taxpayers to combine them," underlines Stéphane Girard. "Those with
sufficient saving capacity to make full use of the two vehicles each
year stand to gain the maximum benefits. Nevertheless, an investment in
either could constitute an appropriate strategy, depending on the
saver's particular situation."
The Registered Education Savings Plan: An Investment in the Future
The Registered Education Savings Plan (RESP) is a tax-exempt savings
account for education purposes designed to help parents and
grandparents save for a child's postsecondary schooling. "The current
debate on lifting the freeze on tuitions reinforces the importance of
planning for the costs of children's education," Stéphane Girard points
out. "Fortunately, RESPs are available and may be subject to more
favourable changes from one year to another."
The RESP offers a federal subsidy of 20% on the first $2,500 of annual
contributions. In the case of families with medium and modest incomes,
this subsidy could amount to 30% or 40% of the first $500 of annual
contributions for each child. There is also a Québec subsidy equal to
half the federal grant, thus bringing the basic subsidy rate to 30% of
contributions to the RESP. Annual payments into this plan are not
deductible for the contributor, however, the return can accumulate
tax-free during a maximum period of approximately 35 years. As such,
these subsidies allow contributors to amass significant sums over a
number of years for their children's or grandchildren's studies. The
maximum federal subsidy for one child could be as much as $7,200 over
18 years, while the provincial grant could reach $3,600.
Splitting Retirement Revenues to Reduce Tax Rates
The anxiously awaited measure of splitting pension income among spouses
was introduced by the federal and provincial governments in 2007, much
to the delight of many a couple. This measure offers particular
benefits to couples where one of the spouses has substantially higher
retirement income while the other's is more modest. In some cases, the
annual tax saving could actually amount to several thousand dollars.
According to Stéphane Girard, "by splitting the two incomes, the spouse
with the higher revenue can drop to a much more favourable tax bracket.
In so doing, the spouse's tax rate will be considerably lower, and the
couple will enjoy significant tax savings while their combined revenue
remains the same."
Effective tax planning involves a series of actions employed throughout
the year based on existing circumstances, as well as on regularly
occurring changes in tax laws. Laurentian Bank's financial planners are
in a position to provide valuable advice about all the possibilities
available to individuals, families and companies for easing their tax
About Laurentian Bank
Laurentian Bank of Canada is a banking institution operating across
Canada and offering its clients diversified financial services.
Distinguishing itself through excellence in service, as well as through
its simplicity and proximity, the Bank serves individual consumers and
small and medium-sized businesses. The Bank also offers its products to
a wide network of independent financial intermediaries through B2B
Trust, as well as full-service brokerage solutions through Laurentian
Laurentian Bank is well established in the Province of Quebec, operating
the third-largest retail branch network. Elsewhere throughout Canada,
it operates in specific market segments where it holds an enviable
position. Laurentian Bank of Canada has more than $23 billion in
balance sheet assets and more than $15 billion in assets under
administration. Founded in 1846, the Bank employs more than 3,600
SOURCE LAURENTIAN BANK OF CANADA
For further information:
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514 284-4500, extension 4695