Canadian charities are facing a reduction in charitable donations due to the global financial crisis. An open letter was sent to the Prime Minister as well as the Finance Minister that was published in Canadian newspapers. The letter asked for tax breaks for corporate as well individual donations in order to increase charitable giving for Canadian charities.

Under the current laws, individuals and/or corporations can donate shares of publicly traded companies and do not have to pay the capital gains tax. The open letter asked for this same exemption for donations of private company shares as well as real estate. This would put Canada in the same playing field as the United States, and is expected to dramatically increase charitable donations. Currently a tax receipt is issued for donations of real estate and private shares, but a capital gains tax still must be paid on these types of donations.

Donating to charity is not only a great way to help the community, but also for financial planning due to the tax credits. In order to benefit from the tax credits, donors are required to donate to a registered charity. Currently qualified donees include:

• Registered Canadian charities;
• Registered Canadian amateur athletic associations;
• Prescribed universities outside of Canada;
• Charitable organizations outside of Canada that the Government of Canada has made a donation to in the current or previous tax year;
• The Government of Canada, a province, and/or a territory;
• Tax-exempt Canadian housing corporations that provide only low-cost housing for seniors;
• Municipal and/or public bodies that perform a function of government in Canada;
• The United Nations and its agencies.

Donations made to a registered charity do not have to be claimed in the current year, but can be used on any tax return for any of the next five years. Donations can only be claimed once. Tax credits that are carried forward from a previous year must be used before tax credits for gifts in the current year can be applied. When claiming a donation from a previous year, a note should be attached to the return indicating the year in which the receipt was submitted, as well as the portion of the eligible amount you are claiming for the current year and the amount that will be carried forward. Receipts can also be combined with those of a person's spouse/common-law partner and be claimed together on one tax return that will allow for the highest tax credit rate.

Currently, the first $200 that is donated is eligible for a federal tax credit of 15% of the amount donated. For amounts after the initial $200, the federal tax credit is increased to 29% of the remainder. All or a part of this amount is eligible generally up to 75% of the net income. Provincial tax credits are also available; these will vary among the provinces.

For those Canadians who wish to donate to charity and claim the tax credits, only donations made to a registered charity will be allowed. A list of registered charities can be found at the Canada Revenue Agency website. This also provides information regarding any charity that has had their status revoked, as well as new charities that have been registered within the past year. Life insurance policies can also be used to donate to charity, as well as property/cash gifts. When using a policy to donate the donor can either gift the ownership of an existing policy or allow the charity to take out a policy on the donor's life. In either circumstance the charity becomes the legal owner of the policy. When gifting an existing policy, the cash surrender value minus any outstanding policy loans plus any accumulated dividends and/or interest will be considered the fair market value. This amount will then be eligible for a tax receipt. If the donor pays the premiums for a policy in which the charity is the beneficiary, these payments are considered a charitable donation and can be issued a tax receipt yearly for the premiums paid. For more information regarding this charitable donation option, visit Life-Quotes.ca

Life-Quotes.ca published a blog in November regarding the new Tax-Free Savings Accounts that are now available to Canadians. The initial blog gave general information regarding this subject; this blog is intended to provide more detailed information.

The Tax-Free Savings Account (TFSA) gives Canadians more choice in how they wish to accumulate savings, retirement assets, etc. It allows all Canadians over the age of 18 to contribute initially $5000.00 per year into this account; this amount will increase in increments of $500.00 per year as inflation grows. The income derived from this account is exempt from taxation, including withdrawals; however there is no tax deduction available for deposits made to the account. Any withdrawals can later be replenished to the account without affecting that particular year's allowance.

This new type of account offers several advantages. As there is no taxable liability, 'income' taken from this plan does not increase your marginal tax rate. It also allows for long term financial planning; and as the added cash flow doesn't affect taxable income it can increase the after tax income you receive from other taxable plans, i.e. RRIFs. The TFSA can be a very effective estate planning tool as well as there is no taxable liability. While the language of the plan is somewhat unclear, it does suggest that there will be no tax on any income/gains accrued up until death.

The TFSA is almost as successful as an RRSP when used as a wealth accumulation tool. When the taxation is factored in, money saved in the TFSA is comparable to the RRSP due to the tax rates that are involved when withdrawing funds from the RRSP. As well, RRSPs can create other 'costs', i.e. loss of tax credits. As well, taxes can be higher on RRSP income due to the triggering of OAS when the minimum withdrawals are mandated. The total amount accumulated will be dependent on the tax rates that are applicable to withdrawing the funds from the RRSP; the TFSA does not incur any taxation costs upon withdrawal.

For Canadians who are trying to save money while earning a lower income, the TFSA can actually be more advantageous than an RRSP. The advantage of the RRSP deduction is reduced by the lower tax rates that this income bracket would pay. For people who will more than likely be earning more in their future, the TFSA can be a better financial planning tool and the RRSP room can be carried forward for future deductions at higher tax rates. For Canadians who are saving for their retirement, the TFSA has the advantage of allowing the individual to avoid the withdrawal penalties. Most people end up having to take more income from their RRIF due to the legislated minimums; the TFSA can be used as a way to continue to save these excess proceeds from future tax penalties, and does not affect any income-tested tax benefits.

The TFSA can be a great financial tool when it comes to financial planning for their child(ren). The parents can fund more of the education for the child with the agreement that the child save an equivalent amount in their TFSA. This allows the parents to benefit from the tax deductions and credits for funding their child’s education and benefits the child as they will begin to accumulate savings. As the majority of students are lower-income their contribution towards the TFSA comes with a very low after-tax cost and enables them to begin saving towards purchasing a home, starting a business, etc.

The TFSA gives all Canadians another tool when in regards to their financial planning needs. Alone, or combined with other saving strategies, this type of account can help Canadians save more money, especially when it comes to the amount of taxable income. It also allows for a more comprehensive saving strategy for those who are not only planning for retirement, but for other major financial transactions. When it comes to retirement planning, it's always a wise idea to ensure that your life insurance coverage is suitable for your estate planning needs.

The government of Ontario has launched a $1.1 billion over four year plan that is designed to help seniors reside in their own homes. The initiative was started at the end of August, 2007 and will help match the needs of seniors and their caregivers access the local support services they require to maintain their independence. The Aging at Home Strategy hopes to develop new ways to provide supports and/or services that ensure seniors can spend their final years living where and how they wish to.

The stated goals of the Aging at Home Strategy are:

• To ensure that seniors home support them;
• To ensure that seniors have supportive social environments;
• To ensure easy accessibility to senior-centered care;
• To identify innovative solutions to ensure that seniors are and stay healthy.

The Aging at Home Strategy will increase traditional services that enable seniors to be healthy and live independently in their homes such as:

• Community support services;
• Home care;
• Assistive devices;
• Assisted living services, supportive housing;
• Long-term care beds;
• End-of-life care.

This new approach will combine traditional services that are currently offered with new services that will be provided by Local Health Integration Networks (LHINs) on a community-based level. Each LHIN will be required to allocate a minimum of 20% of the funding throughout the first three years in order to deliver innovative care for seniors. Innovation proposals must be either evidence-based and/or build in an evaluation component if previously untested. Ultimately the goal is for LHINs to assume more responsibility for the planning, managing and funding of senior healthcare services at a local level. Support at the local level is intended to help seniors, especially those with chronic health issues, remain living at home, avoid unnecessary hospital emergency room visits and as well as avoid/delay admission to a Long Term Care facility.

This program is targeted for seniors who are living with age-related health conditions and/or age-related disabilities. Consideration will also be given to services, programs and/or supports that allow the family, friends as well as neighbors to help care for seniors in their community. The strategy will be based on the senior population of the community in Ontario; therefore services will vary depending on where the senior resides. Funding for each LHIN will be allocated on estimates of the basis of age, gender, socio-economic status and rural geography and health status in order to estimate the demand for services. The funding will also depend on the estimated population growth as well as the type of seniors who live in a specific LHIN territory and the current service level that is already in place.

For more information regarding this initiative please visit the Ministry of Health and Long-Term Care.

The Wage Earner Protection Program (WEPP) is offered to eligible Canadians by Service Canada on behalf of the Labour Program. The purpose of WEPP is to reimburse workers for any unpaid wages as well as vacation pay that is owed to them but has not been paid due to the employer declaring bankruptcy and/or is subject to receivership. This program does not cover severance pay, termination pay, and/or any other employee benefits. The maximum payment is four times the Employment Insurance weekly average wage, less any amounts that are prescribed by regulations.

Applications for WEPP must be submitted within 56 days of the date of bankruptcy or receivership to Service Canada. This payment is taxable; a T4A slip will be issued on or before the last day of February the year following the payment. When WEPP is added to the Income Tax Act, the applicable tax will be deducted at the source. Eligibility for WEPP includes:

• If your former employer filed for bankruptcy or is subject to receivership on or after July 7, 2008.
• You are owed wages by your former employer which was earned during six months preceding the date of  bankruptcy/receivership.
• A trustee or receiver has been appointed to administer the former employer's bankruptcy/receivership.
• You have stopped working for a period of 7 consecutive days for your bankrupt/insolvent employer.

Please note that you are not eligible for WEPP if your employer has not declared bankruptcy. Other criteria that may make you ineligible for this benefit are:

• If you were an officer or director of the former employer.
• If you had a controlling interest in the now bankrupt business.
• You were a manager in which your duties included making financial decisions that impacted the business and/or made binding financial decisions regarding the payment or non-payment of wages.

If you are related to the now bankrupt employer, you may still be eligible for this benefit. You will be required to fill out the WEPP Supplementary Form (Additional Information Regarding Your Relationship to Your Employer) in addition to your application. This will help determine whether or not you were treated in the same manner as the other employees despite your familial relationship to the owner. You may also be eligible if you are currently working for the receiver/trustee as long as your employment was terminated for 7 consecutive days by the former employer and no wages were earned during that time period. If you have only been partially compensated for your wages and/or vacation pay you are still eligible for the outstanding amount owed.

If you are collecting Employment Insurance benefits, you must report the receipt of your WEPP payment. Any outstanding owed monies that were not paid under WEPP can still be pursued under the regular bankruptcy process. You will need to contact the trustee/receiver for more information on pursuing this action.

You will need to have a copy of the information that is provided to Service Canada by the trustee or receiver appointed in your employer's bankruptcy/receivership before applying for this benefit. This information, along with your application, will determine your eligibility as well as your payment. If your employer has declared bankruptcy, you must contact the trustee to file a proof of claim. This proof of claim is essential in order to process your WEPP application. You also may be entitled to compensation beyond the limits of what can be paid under the WEPP.

For more information about the Wage Earner Protection Program, please visit Service Canada.

Starting in 2009, Canadians will be able to contribute their money into a tax-free savings account. This type of account will be available to all Canadians age 18 and over (19 in some provinces where 19 is the age of majority) who have a Social Insurance Number. A tax-free savings account (TSFA) can be a great addition to retirement planning as well as other financial planning needs. Due to the flexible nature of the account it can be used for all savings purposes.

The new tax-free savings account offers several advantages to Canadian residents. As much as five thousand dollars can be contributed annually (this amount will increase with inflation throughout the years in $500 increments), and any unused room can be carried forward if the maximum contribution is not met. Withdrawals are tax-free as well as creating future contribution opportunities. While contributions are not deductible, capital gains as well as other investment income that is earned in the TSFA are not subject to taxation. As well, any income earned as a result of this account and/or withdrawals will affect the person's eligibility for federal income-tested benefits and/or credits. Contributions to a spouse's (including common-law) TFSA are allowed; assets are transferable to the account upon the death of the spouse.

The TFSA will be a great savings tool for seniors and those who are planning for retirement. TFSAs provide more financial flexibility, as withdrawals are not subject to taxation (i.e. RRSPs). As circumstances can quickly change in a person's life, having financial options that come without being 'penalized' can provide more options that will not have a negative impact on locked-in financial assets. Along with other retirement savings plans, the TFSA will be a great addition for this goal.

The TSFA will be available starting in 2009 at most financial institutions; discuss with your financial advisor/banker when this will be available for you. It’s a wise idea to research all of your retirement savings options, including the type and/or amount of your life insurance.