M.I.A.G.E. Business Solutions Inc. Newsletter
Tax Saving Strategies
10/2013


As a property owner, business person or an employee, you need to know the best tax strategies to suit your needs. We are the one shop finance and tax specialists (since 1992) that can help you grow and succeed in all you do. 

In This Issue
Principal House and Other Real Estate
Tax Advice and Guidance for Dentists
Practical tools for your business needs
Principal house and other properties
  
  VACATION PROPERTIES AND CAPITAL GAINS -
  REMEMBER TO TRACK YOUR COSTS

As most Canadians know, the capital gain that you may realize when you sell your home is exempt from tax. Under our tax rules, a family unit (generally you, your spouse and your minor children) can exempt a capital gain from one residence only. 
If you or your family unit owns more than one property, this means that some tax will be payable on the gain from one property when it is sold. Often, tax is paid on the sale of the property with the lower value (on the assumption that the gain is lower on that property) and this property is often the vacation property.

 

Since the gain on your vacation home may be taxable in the future, it is important to keep track of the cost to acquire the property - both at the time of purchase and for any improvements made. The higher the documented cost, the lower the gain when you sell. Therefore, be sure to track these costs and keep receipts. Remember to keep in mind that some items may be difficult to categorize in terms of an expense vs. an improvement. Unlike tax planning for net income calculations (such as net rent), you'll want to justify (within reason) as many expenditures as you can as improvements as opposed to operating costs. The key test is whether the expenditure maintained or returned the property to its original condition, or the expenditure made the property better than it was previously.

Tax advice and guidance for Dentists
dentists
         Issues to Consider When Evaluating an Associateship:

  Consider the following issues when evaluating an associate position:

  - Does it meet your financial, clinical and practice management goals?
  - What do previous associates think and why did they leave?
  - Prepare Day sheets? This may indicate the type of work being done, the     level of volume, etc.
  - What services are being referred out versus performed in house?
  - Determine number of active patients and new patients per month.
  - Determine age and ethnic mix of the patients; what language do
    patients speak?
  - Determine if co-payments are being collected.
  - Determine which fee guide the dental office uses.
  - Determine the amount of patients on social assistance.

  Several issues need to be addressed, some with assistance from your        lawyer/or accountant:

  1) Associate agreement? Consider the radius clause which is likely
  tucked inside the non-solicit/compete agreement. This is a clause
  that may restrict where you can practice once you leave your
  associate position. Discuss the enforce ability of this clause with
  your lawyer.

  2) What about Goods and Services Tax (GST) exposure?

  3) Are you an "employee" or "independent contractor"? Did the
  agreement properly reflect this relationship? Being an independent
  contractor permits you to deduct more business related expenses in
  calculating your tax bill. Before signing the agreement, have your
  accountant review the agreement. Be careful of the implication
  which a non-solicit/compete agreement has on your independent
  contractor status.

  Which Loans to Repay First?
 
 Which debts or loans should I repay first? These debts might include        student loan, personal loan or line of credit, home mortgage, car loan,  investment loan and business loan. Generally, you should repay loans  which generate non-deductible interest as soon as possible, i.e. home 
 mortgage, personal loan, or line of credit, which were used for personal  purposes. Note: loans used for business or investment purposes can  reduce your tax bill, since the interest is tax deductible.
 Student loans such as the Canada Student Loan, and loans made by the  respective provinces generate interest. This interest will reduce your tax  bill via a non-refundable tax credit. If these loans (Canada Student Loans,  Provincial Student Loans) are paid off using a line of credit, you will not  get any tax relief arising from the line of credit's interests.

  Traps to Avoid:

 Some traps to avoid during your career are:

 - Borrowing to buy expensive car before buying your dental practice.

 - Getting divorced without a marriage contract or alternatively consider a
 prenuptial agreement.
 
 - Spending more than you earn; because dentists get paid for the
 services they provide, fairly quickly, many base their spending on these
 collections. They often ignore their expenses or the taxes they owe.

 Each month, consider having your taxes, RRSP's, funding for
 children's education and investments automatically withdrawn from
 your bank account. What you do not see, you will not likely spend.

 - Pretending to be an expert in all fields; know your strengths and
 weaknesses; research those who can assist in compensating for your
 weaknesses; then hire them. Concentrate on those things which you
 do best.

 - A disciplined approach to virtually any activity you pursue will most
 often yield better results than the "home run" approach i.e. trying to get
 a base hit every time you are at bat will yield better results than risking
 everything for that home run. This philosophy applies to investing,
 operating your practice, etc.

 - Keeping up with the Jones' often lead to financial disaster; run your
 own race as you are your best competitor.

Practical tools for your business needs










 

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Sincerely,
 
Mrs. Mahtab Saghafi
Senior finance and tax advisor
President and founder
M.I.A.G.E. Business Solutions Inc.    
Tel: 514.426.7200 ext. 101
msaghafi@miagesolutions.com
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