How My Wife's Obsession With Nick Nacks Could Send Our Kids To College: My wife is the ultimate garage sale and flea market enthusiast.
If I did not (occasionally) put my foot down I would spend every Saturday and Sunday rooting through other people's unwanted household items for the odd gem.
So how can my spouse's obsession with finding that (very occasional) gem, equate to a tax refund / tax rebate for the whole family? Simple really, by taking advantage of the tax rewards the Canadian government has put in place to encourage charitable donations you can pay less tax..
So, how does it work? •Let's say that you go to a garage sale and you find a piece of jewellery that you know is worth $2,000 and that any jewellery store would confirm that price.
•The owner is selling the jewellery for the insane price of $500.
What do you do? Buy it of course, it's a bargain.
•For the tax benefits of the donation you need to not donate the item for 3 years and 1 day.
When you donate the item, the charity will give you a donation receipt for the amount the item has been fairly valued at.
•You then attach the receipt to your tax return and receive around 50% of the amount of the item is worth as a tax credit.
•The importance of waiting 3 years and 1 day is the fact that after 3 years the CRA must look at the amount it is valued at and not the amount which you paid for.
Which is how you make your tax saving.
Isn't it amazing that 1 day represents 4 times more money for you? This is a really basic version of a tax shelter, which is a legal form of tax avoidance.
Illegally withholding tax money is called tax evasion or tax fraud and is a whole different ball game.
So, next time you have to drag yourself out of bed on a Sunday morning for a garage sale, view it as an essential, speculative component of your integrated financial planning (if you can think in terms of planning before coffee, you are one step up on me!) Although this principle would work as it is based on Income Tax law, which is guided by the Income Tax Act, it is worth considering taking part in a registered tax shelter scheme which has benefits such as large legal defense funds if the CRA does attempt to dispute your claim.
If I did not (occasionally) put my foot down I would spend every Saturday and Sunday rooting through other people's unwanted household items for the odd gem.
So how can my spouse's obsession with finding that (very occasional) gem, equate to a tax refund / tax rebate for the whole family? Simple really, by taking advantage of the tax rewards the Canadian government has put in place to encourage charitable donations you can pay less tax..
So, how does it work? •Let's say that you go to a garage sale and you find a piece of jewellery that you know is worth $2,000 and that any jewellery store would confirm that price.
•The owner is selling the jewellery for the insane price of $500.
What do you do? Buy it of course, it's a bargain.
•For the tax benefits of the donation you need to not donate the item for 3 years and 1 day.
When you donate the item, the charity will give you a donation receipt for the amount the item has been fairly valued at.
•You then attach the receipt to your tax return and receive around 50% of the amount of the item is worth as a tax credit.
•The importance of waiting 3 years and 1 day is the fact that after 3 years the CRA must look at the amount it is valued at and not the amount which you paid for.
Which is how you make your tax saving.
Isn't it amazing that 1 day represents 4 times more money for you? This is a really basic version of a tax shelter, which is a legal form of tax avoidance.
Illegally withholding tax money is called tax evasion or tax fraud and is a whole different ball game.
So, next time you have to drag yourself out of bed on a Sunday morning for a garage sale, view it as an essential, speculative component of your integrated financial planning (if you can think in terms of planning before coffee, you are one step up on me!) Although this principle would work as it is based on Income Tax law, which is guided by the Income Tax Act, it is worth considering taking part in a registered tax shelter scheme which has benefits such as large legal defense funds if the CRA does attempt to dispute your claim.
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