Posts Tagged ‘Calendar Years’
Canadians May Be Missing Out on Home Ownership Tax Savings (Golombek)
Monday, April 25th, 2011
Canadians may be missing out on home ownership tax savings
CIBC’s Jamie Golombek offers tips to help Canadians
TORONTO, April 7 /CNW/ – Canadian homeowners can find a number of ways to use their home to reduce their tax bill this year and into the future says CIBC’s tax and estate planning expert, Jamie Golombek.
In the first of a series of tax tips this month, Mr. Golombek looks at how Canadians can take advantage of often overlooked available credits, deductions and exemptions on their home to minimize their tax bills.
“With spring in the air, house-hunting season is in full bloom,” notes Mr. Golombek. “Whether you’re looking at buying your first home or you’re already a homeowner, there are programs and strategies out there to help you manage your tax costs.”
Mr. Golombek’s report, called “Home, Sweet Home” identifies three areas Canadians should look at when preparing their taxes this year: tax credits, repayments under the Home Buyers’ Plan and how best to claim the sale of a vacation property. He also focuses on how to make your mortgage interest tax deductible for future years.
Tax Credits
Home Buyers’ Tax Credit (line 369) – This new non-refundable tax credit is worth $750 to “first-time home buyers” who purchased a home after January 27, 2009.
“For the purposes of this credit, you are considered a first-time home buyer if neither you nor your spouse or partner owned and lived in another home in the calendar year of purchase or any of the four preceding calendar years,” says Mr. Golombek.
The credit is also available for the purchase of a home either by, or on behalf of, an individual eligible for the disability tax credit if the home enables the disabled individual to live “in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.”
While either partner can claim the Home Buyers’ Tax Credit, it is limited to one credit of $750 (as opposed to $750 for each spouse or partner).
Home Buyers’ Plan Repayments (HBP) – This plan currently allows a first-time home buyer to withdraw up to $25,000 from his or her RRSP to purchase or construct a new home without having to pay tax on that withdrawal. Amounts withdrawn under the HBP must be repaid over a maximum of 15 years or the amount not repaid in a year is added to the participant’s income for that year.
“If you participated in the HBP previously and were required to make a repayment for 2010, be sure to designate a portion of your RRSP contributions as a HBP repayment on Schedule 7 of your personal tax return, under “PART B – Repayments under the HBP,” notes Mr. Golombek.
Provincial property tax credits - Residents of Quebec, Ontario or Manitoba may get some additional tax relief on their property taxes. Quebec provides a refund for property tax paid during the year (line 460 of the Quebec Provincial tax return), while both Ontario (Form ON 479) and Manitoba (Form MB 479) provide a tax credit for property tax or rent paid during the year.
Make your mortgage interest tax deductible
If you have a mortgage and also have non-registered investments, you may wish to consider making your mortgage interest expense effectively tax-deductible by paying off mortgage debt with your non-registered funds.
“This technique has been employed by many Canadians who own non-registered investments and are advised to liquidate these investments and use the proceeds to pay off their mortgage,” notes Mr. Golombek. “The investor would then obtain a loan secured by the newly replenished equity in their home, and use the loan for earning investment income, thus making the interest on the loan fully tax-deductible.”
However he cautions that “before doing so, be sure to speak with an advisor to discuss any tax consequences of selling your non-registered investments along with any prepayment fees for paying off your mortgage early.”
Claiming the principal residence exemption when selling your home
If you own more than one home and sold one of them in 2010 you need to determine if you should be claiming the principal residence exemption (“PRE”) on that property to shelter it from capital gains tax. A principal residence can include either your main home or a vacation property, even if it’s not where you primarily live during the year as long as you “ordinarily inhabit” it at some point during the year.
A cottage is considered to be ordinarily inhabited by someone, even if that person lives in that property for only a short period of time during the year such as the summer months, as long as the main reason for owning the property is not for the purpose of earning income.
“Generally, the decision to claim the PRE when you sell a property as opposed to “saving it” for the disposition of your other property will depend on a number of factors,” says Mr. Golombek. “These include the average annual gain on each property; the potential for future increases or decreases in value of the unsold property; and the anticipated holding period of the unsold property.”
Further Mr. Golombek points out that if you sold a home in 2010, a conscious decision should be made as to whether the gain should be reported. “Failure to report will result in the assumption (by the Canada Revenue Agency) that the “sold property” has been designated as your principal residence for the years you owned it, precluding you from using the PRE in the future on the sale of your other property, at least during the overlapping years.”
Mr. Golombek notes that homeowners also need to assess the impacts of a current, immediate tax liability today versus a tax liability payable later – say upon death – on the sale of their other property.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.
Tags: Calendar Years, Canadian, Canadian Homeowners, Canadian Market, CIBC, Cnw, Disability Tax Credit, First Time Home Buyer, First Time Home Buyers, Full Bloom, Future Years, Golombek, Home Sweet Home, Hunting Season, Interest Tax, Mortgage Interest, Personal Needs, Refundable Tax Credit, Spring In The Air, Time Home Buyer, Time Home Buyers, Vacation Property
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Sixteen Dow Recoveries (dshort.com)
Sunday, July 25th, 2010
This article is a guest contribution by Doug Short (dshort.com).
How does the current Dow recovery compare with major recoveries in the past? The chart below overlays the first 500 days of sixteen recoveries in the Dow Jones Industrial Average since its creation in 1896. I’m counting market days, so each recovery is truncated to approximately two calendar years. At present we are 346 market days beyond the March 2009 low.
The next chart is based on Dow daily closes with the sixteen rallies highlighted. Since the first chart is limited to 500 days, this chart offers a cross reference to get an idea of the ultimate length and gain of the rallies and also when they occurred in the larger historical context.
Recovery Selection Process
My initial selection criterion was to overlay all the Dow rallies following a 30% or greater decline. Using the traditional 20% decline associated with bear markets would have made the chart too busy, and it occasionally runs against conventional wisdom. For example, the Tech Crash in the Dow consisted of 3 baby bears (if you round up the 19.91% decline in January-March 2000) separated by two rallies over 20%. I consider it a single bear market with a decline of 37.85% and thus included the rally that began in 2002. I also treated the Crash of 1929 as a single bear decline, even though the 20% rule would have divided it into six bear markets with five intervening rallies. Likewise, and more to the point for the overlay, I treated the rally after the 1932 low as a single rally, even though the 20% rule would see it as an oscillation between three bull and bear markets.
Another liberty I took in selecting recoveries for the overlay was to include two rallies after declines of less than 30%. In both cases, they marked the beginning of a new economic era. One is the recovery that began in 1949 after the 23.95% post-war decline. The 12-year, 355% advance that followed warranted inclusion. Likewise I added in the first 500 days of the 250% rally that started in 1982 after a 24.13% decline. The 1982 recovery brought an end to the decade of stagflation and launched the great Boomer bull market. Here’s a larger view of the overlay.
The Current Recovery
The Dow is currently 56.3% above the March 2009 low after reaching an interim closing high up 71.1% on April 26th. Compared to the other 15 rallies at the equivalent point, the current rally is in 8th place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. The second, fourth, fifth and sixth place rallies date from yet earlier periods.
Where do we go from here? Some of the historic 500-day rallies went on to substantially higher gains — the launch of the Roaring Twenties, the Boomer Era that started in 1982 and resumed after the Black Monday misadventure in 1987. Even the recovery from the Crash of 1929 falls into this category, although the Great Depression would eventually lead to some significant retracements.
On the other hand, several of the earliest rallies (1903, 1907, 1914) would soon falter, a fate that later befell the rallies in 1962, 1970 and 1974. If we look at the Dow chart adjusted for inflation, the failure of these recoveries is more obvious. The chart below is adjusted for inflation using the technique popularized by Robert Shiller, namely adjusting with a spliced index based on the Consumer Price Index for Urban Consumers (CPI-U), which dates from 1913, and the Warren and Pearson’s price index for the pre-1913 inflation estimate. In my real version I’ve chained the daily prices to the May 1896 dollar value.
The Critical Uncertainty
The question remains unchanged from our previous review of this chart: Is the rally of the past 16.5 months the early stages of a secular bull market? Or will the future resemble something closer to the early 1900s, the late 1960s-1970s, or something in between?
For a broader perspective on the history of Dow rallies, see my real (inflation-adjusted) analysis.
Copyright (c) Doug Short
Tags: Bear Market, Bear Markets, Bull And Bear, Calendar Years, Conventional Wisdom, Crash Of 1929, Cross Reference, Decline, Declines, Dow Jones, Dow Jones Industrial Average, Dow Rallies, Historical Context, Inclusion, Initial Selection, Oscillation, Post War, Rally, Selection Criterion, Selection Process
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Sixteen Dow Recoveries
Monday, April 19th, 2010
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This article is a guest contribution by Doug Short, of dshort.com
How does the current Dow recovery compare with major recoveries in the past? Let’s take a look. The first chart overlays the first 500 days of sixteen recoveries in the Dow Jones Industrial Average since its creation in 1896. I’m counting market days, so each recovery is truncated to approximately two calendar years. At the end of last week, we were 280 days beyond the March 2009 low — a little past the half-way mark in our comparisons.
The second chart is based on Dow daily closes with the sixteen rallies highlighted. Since the first chart is limited to 500 days, this chart can be used as a cross reference to get an idea of the ultimate length and gain of the rallies and also when they occurred in the larger historical context.
My initial selection criterion was to overlay all the Dow rallies following a 30% or greater decline. Using the traditional 20% decline associated with bear markets would have made the chart too busy, and it occasionally runs against conventional wisdom. For example, the Tech Crash in the Dow consisted of 3 baby bears (if you round up the 19.91% decline in January-March 2000) separated by two rallies over 20%. I consider it a single bear market with a decline of 37.85% and thus included the rally that began in 2002. I also treated the Crash of 1929 as a single bear decline, even though the 20% rule would have divided it into six bear markets with five intervening rallies. Likewise, and more to the point for the overlay, I treated the rally after the 1932 low as a single rally, even though the 20% rule would see it as an oscillation between three bull and bear markets.
Another liberty I took in selecting recoveries for the overlay was to include two rallies after declines of less than 30%. In both cases, they marked the beginning of a new economic era. One is the recovery that began in 1949 after the 23.95% post-war decline. The 12-year, 355% advance that followed warranted inclusion. Likewise I added in the first 500 days of the 250% rally that started in 1982 after a 24.13% decline. The 1982 recovery brought an end to the decade of stagflation and launched the great Boomer bull market. Here’s a larger view of the overlay.
The Current Recovery
The Dow closed last week 68.3% above the March 2009 low after reaching an interim closing high up 70.2% the previous day. Compared to the other 15 rallies at the equivalent point, the current rally is in 4th place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. Second and third place date from yet earlier periods, as does the fifth place.
Where do we go from here? Some of the historic 500-day rallies went on to substantially higher gains — the launch of the Roaring Twenties, the Boomer Era that started in 1982 and resumed after the Black Monday misadventure in 1987. Even the recovery from the Crash of 1929 falls into this category, although the Great Depression would eventually lead to some significant retracements.
On the other hand, several of the earliest rallies (1903, 1907, 1914) would soon falter, a fate that later befell the rallies in 1962, 1970 and 1974. If we look at the Dow chart adjusted for inflation, the failure of these recoveries is more obvious. The chart below is adjusted for inflation using the technique popularized by Robert Shiller, namely adjusting with a spliced index based on the Consumer Price Index for Urban Consumers (CPI-U), which dates from 1913, and the Warren and Pearson’s price index for the pre-1913 inflation estimate. In my real version I’ve chained the daily prices to the May 1896 dollar value.
The question is whether the rally of the past 13 months is the early stages of a secular bull market. Or will the future resemble something closer to the early 1900s, the late 1960s-1970s, or something in between?
Source: dshort.com
Tags: Bear Market, Bear Markets, Bull And Bear, Calendar Years, Conventional Wisdom, Crash Of 1929, Cross Reference, Decline, Declines, Dow Jones, Dow Jones Industrial Average, Dow Rallies, Historical Context, Initial Selection, Oscillation, Post War, Rally, Selection Criterion
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