| Tax Planning For A Bigger 2007 Refund | | | | these tax reduction strategies are called) it is important |
| The time to start your tax planning strategies is earlier | | | | that you inquire about how the program deals with |
| in the year rather that later. In Canada, and from what I | | | | issues of “valuation”, “advantages”, and |
| read in the newspapers and online, most taxpayers | | | | “impoverishment”. |
| worldwide feel that they are paying too much tax. And | | | | Valuation: |
| to add insult to injury, most of the taxes paid are not | | | | In Canada, recent legislation has established rules that |
| being put to good use. Almost daily, we hear about the | | | | prohibit tax payers from receiving a tax credit for |
| misuse of some huge amount of tax funds gathered | | | | donating property at an appraised price that is higher |
| from taxpayers. | | | | than the property’s purchase price. Previously, |
| While it seems we can do little about these | | | | donors were allowed to acquire property at a low |
| transgressions, we can use effective tax planning | | | | price and gift it to a charitable organization, receiving in |
| strategies that will help us minimize our tax liabilities. | | | | exchange a donation receipt at the higher appraised |
| Tax planning does not involve convoluted tactics to | | | | value. Under the new legislation, the value of the |
| hide or reduce income. These will get you into big | | | | receipt must equal the original purchase price of the |
| trouble with your tax collector and are not worth the | | | | donated item provided that this amount does not |
| effort, especially when there are legal and more | | | | exceed fair market value. Advantage: |
| beneficial ways to keep more money in your pockets | | | | The value of any “advantage” (personal financial |
| and away from the Taxman. A very effective tax | | | | benefit) that you might receive from making your |
| planning strategy is to make charitable donations. In | | | | donation must now be deducted from the value of |
| Canada, the Canada Revenue Agency allows tax | | | | your donation receipt. For example, those donors who |
| payers to donate up to 75% of their income. Which | | | | purchase a $200 charity golf tournament ticket and |
| means your income for taxes would be on just 25% | | | | received dinner, drinks and course fees valued at $140, |
| of your earnings. A very effective tax reduction | | | | would only receive a $60 donation receipt. |
| incentive! However, not many tax payers can realistic | | | | Impoverishment: |
| afford to do this. | | | | To claim a tax credit for a donation, donors must |
| Many Canadian tax payers do make charitable | | | | demonstrate they are impoverished financially after |
| donations in an effort to be philanthropic as well as to | | | | making their donation. In other words, donors must be |
| receive the resulting tax credits. | | | | “out of pocket” as a result of the transaction. |
| Beware! Not all charities are created equal and some | | | | To make your charitable donation effective as a tax |
| are downright suspect. At the very least a charitable | | | | planning ensure that any program you choose is |
| organization should be registered and have a verifiable | | | | compliant in all these aspects. |
| tax ID number. Not all charitable organizations adhere | | | | There is no point in using tax planning strategies that |
| to the strict guidelines that make a good charity | | | | will not stand up to scrutiny or worse yet, have you |
| program effective and sustainable even when | | | | accused of attempting to circumvent the rules of |
| challenged by the tax collecting agencies. | | | | compliancy. |
| When looking at tax shelter programs (this is what | | | | |