Donate, Recover Your Taxed Income and Invest – Tax and Financial Strategy for Canadians
I recently filed my 2010 tax return, and thought that a lot of people that are considering filing for bankruptcy may have questions about a potential refund on their own 2010 taxes. For many, this refund is a huge part of the beginning of the year. For some, it can be the difference between being able to survive the year (even after bankruptcy) and having to make even more drastic changes.
Tax planning always involves taking decisions early that later will have a n effect in how much money do you save. One way to save in taxes and give your financial planning a boost is with the “Donate, recover your taxed income, and invest” strategy.
This strategy can help you to keep more of your hard-earned dollars and boost your family’s net worth. The Income Tax Act allows Canadian taxpayers to make donations to registered charities and then claim up to 50% of the amount donated. If you take advantage of a donation, your tax refund will increase as much as twice the size you thought it was. It lets you to recover close to 30% of our salary income withheld by the government as income tax. It is like having a raise every year of 30%.
Adjusted Gross Income: The amount of adjusted gross income is sometimes referred to as the “magic line”, since it is the basis for several deduction limitations. For example, the limitation on medical expenses is one. A tax payer’s AGI is used to determine the phase-out of the otherwise allowable itemized deductions and personal dependency exemption amounts.
The second question is what can be done to protect the refund should an individual file for bankruptcy. Once the debtor’s interests or assets become property of the estate, the debtor may claim certain exemptions protecting that property. One specific exemption that may apply in California is the “wild card” should a bankruptcy debtor choose the California (bankruptcy only) exemption statute. In this case, a debtor can exempt any property in the amount of $1,100 plus any portion or a residence or burial plot (around $20,000).
Exemptions: The personal exemption and the dependency exemption were $3650 for 2009 and have remained the same for 2010. Keep in mind that there is a Phase-out tax bracket for high-income families. (This can also be discussed in detail in a later hub if requested)
Managing and building personal wealth is very important and can start with this excellent tax and financial planning strategy. Having the funds available for investment purposes it’s often a challenge but participating in a tax saving program like Mission Life Financial could be the mean of freeing capital or cash that otherwise is not available.
Donating, recovering your hard-earned income, and invest; again and again, year after year, it’s very simple and an easy strategy to do. If I have been able to do it, any Canadian taxpayer can do the same. It is not rocket science. It is decision taking action.
Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit . Clear Debt Now offers links to Debt Consolidation and consolidation programs in your area.