Question:
How does the British Columbia Property Tax Deferment Program work?
Answer:
Two provincial property tax deferment programs are generally available in B.C.:
- Regular Program is open to: Seniors (aged 55 or over; Widows and widowers (at any age); Persons with disabilities (at any age, if meeting certain criteria)
- Families with Children Program is open to: Households financially “supporting”* a dependent child, if certain conditions are met
Both of these programs let you defer property tax payments on certain properties** until you sell the property, Add a person (other than your spouse) to the property title, remove a person (who is not deceased) from title or refinance.
If meeting minimum equity requirements, you can usually continue tax deferral even if the property becomes subject to an easement, statutory right of ways (but first contact the office for consent), or similar interest.
You are charged modest fees and simple (non-compounding) interest (normally set every six months) on tax deferred. All or part of the loan can be repaid at any time, without penalty.
For more information on eligible properties or other program details, please see the BC government website. Seek advice on issues and strategies you might wish to first consider.
*”Supporting” is broadly defined, e.g., can include paying child support for a child not living with you.
** Not available for second residences, leased properties, or taxes paid to a First Nation, for example.
Question:
What is the difference between a tax deduction versus a tax credit?
Answer:
Tax deductions reduce taxable income, on which federal and provincial tax are calculated, always reduce both federal and provincial tax, and typically subtracted from total income (which includes income from employment, business, pensions, taxable capital gains, etc.) to get net income.
Common examples include: RRSP contributions being claimed that year, Employee Registered Pension Plan contributions, moving expenses, carrying charges or interest expenses and child care expenses.
Some deductions, like the capital gains deduction or net capital losses of other years, are deducted later—from net income to get taxable income.
Tax credits credit amounts typically differ between the same type of federal and provincial credits, and not all credits are offered by both levels of government.
When calculating federal credits, typically, federal credits are added together and multiplied by the lowest federal tax rate (some exceptions exist, for example, charitable donations). The result is deducted from federal tax to get net federal tax.
Common federal credits include: Basic personal amount; Amount for spouse/eligible dependant; Age credit; Pension income credit; Canada caregiver credit*; Disability amount; Tuition amount**; Medical expenses; Charitable donations; Home accessibility expenses (for seniors 65+ or persons qualifying for the Disability Tax Credit).
Provincial tax credits are usually similar to federal, but could be for a different amount (such as B.C.’s Age Credit), or could be a credit unique to B.C. (such as the B.C. Tax Reduction Credit for low-income individuals). Typically, the sum total is multiplied by the lowest provincial tax rate, then deducted from provincial tax to get net provincial tax.
Refundable credits: If the value of the credits exceeds the tax you owe, excess credits can be paid out to you as a tax refund.
Non-refundable credits: If the value of the credits exceeds your tax owed, the excess credits may have no value (they cannot create a tax refund). But, check if the excess credits can be transferred to someone else, such as your spouse or parent, or carried over to future years.
For more on what you can deduct, federal tax credits, and BC tax credits, please refer to the relevant resources.
*2017 Federal Budget consolidated three existing caregiver credits (the caregiver amount, infirm dependant amount, and family caregiver tax credit) into a new Canada Caregiver Credit effective for 2017 and later years.
** 2017 Federal Budget extended tuition tax credit to include tuition fees paid for occupational skills courses offered by a university.
Question:
Can you answer basic questions on Canada Pension Plan?
Answer:
Canada Pension Plan offers what types of benefits?
Retirement Pension: Available upon retirement of CPP contributor age 60 or older.
Post-Retirement Benefit (PRB): Available the year after a PRB contribution, as income for life.
Survivor’s Benefits: Available upon death of CPP contributor:
- Death Benefit: $2,500 one-time payment to the contributor’s estate.
- Survivor’s Pension: Monthly pension to common-law partner or spouse (common-law partner’s claim takes precedence, in case of a person who’s legally separated from their spouse but had been in a common-law relationship for at least a year before death) of a deceased CPP contributor.
- Children’s Benefit: Flat monthly benefit for dependent children of deceased contributor.
Disability Benefits: Available upon qualified disability of CPP contributor:
- Disability Benefit: Monthly pension for disabled contributor.
- Children’s Benefit: Flat monthly benefit for dependent children of disabled contributor.
Where can I find more information on CPP retirement benefits?
Where can I find more information on Post-Retirement Benefit (PRB)?
Here.
Where can I find more information on CPP Survivor’s pension?
Here’re some interesting information about Survivor’s pension:
- To be eligible, the deceased contributor must have contributed to the CPP during the lesser of:
- 10 calendar years, or
- 1/3 of their contributory period (including partial years), but cannot be less than 3 years.
- Deathbed marriages may not result in survivor’s pension, if the deceased did not have a life expectancy of at least one year at the time of marriage and dies within a year of their marriage (including time spent as common-law prior to the marriage).
- A survivor can only receive 1 survivor pension, but a person widowed a second time is entitled to the greater of the two survivor’s pensions.
Only the contributor can receive post-retirement benefit thereby calculation of survivor benefit does not take into account of PRB.
See here or this article for more information.
Where can I find more information on CPP Disability benefits?
Here.
What factors determine the amounts of Canada Pension Plan benefits you receive?
- Contribution period
- Contribution amounts
- In some cases, age when applying for benefits
To estimate the amount of CPP benefit you may be eligible for, you can request a statement of contributions online, or contact Service Canada for a copy to be mailed to you, or try using the Canadian Retirement Income Calculator. More information on payment amounts.
Is it common to receive the maximum CPP retirement pension?
Reasons for not getting the highest possible CPP can include:
- Electing to start CPP benefits before age 65 (benefits are reduced).
- Having more years where “pensionable earnings” were below the Year’s Maximum Pensionable Earnings (YMPE) than can be “dropped out” of the CPP formula*.
*Starting in 2014, 17% of your lowest CPP contributory years can be “dropped out” when calculating your pension; plus, a “child rearing drop out” is allowed. Using either or both “drop-outs” can increase your CPP pension, by boosting your average earnings in the pension formula.
What is the CPP child rearing drop out (CRDO) provision?
CPP considers that caring for young children can mean leaving the workforce or working fewer hours. If your earnings stopped or dropped while you raised children born after 1958 and under the age of seven, CPP can calculate if excluding some or all of those years could increase your CPP entitlement. As CPP will only exclude years if this works in your favour, it is a good idea to apply.
For more information see the CPP Retirement Pension Application (ISP1000) or ask CPP to consider the CRDO in your CPP calculation by completing section B4 of the CPP Retirement Pension Application.
What is the earliest age you may start collecting a CPP retirement pension?
While you can start CPP retirement benefits as early as age 60, benefits started before age 65 result in those benefits being permanently reduced, at a rate of 0.6% per month before your 65th birthday. For example, if starting CPP immediately after your 60th birthday, your benefits are reduced by 36% (0.6% x 12 months x 5 years).
What is the latest age you can start to receive a CPP retirement pension?
There is no maximum age when you can apply for a CPP retirement pension. Delaying your starting age until after age 65 will increase your CPP retirement pension by 0.7% per month over age 65, to a maximum of a 42% increase, at age 70. But since no further increases are awarded once age 70, starting CPP later than age 70 is uncommon. As an example, waiting until you turn age 66 before collecting CPP would make your monthly benefit 8.4% (12 x 0.7%) higher than starting it at age 65.
When should I start CPP? Before, after, or at age 65?
There is a good discussion of factors to consider before starting or delaying your CPP retirement benefits in this article.
What is CPP credit sharing?
It is a way for a couple to share their CPP benefits (other than Post-Retirement Benefits) between them, to potentially lower their combined income tax. See CPP Pension Sharing for more detail.
What is CPP credit splitting?
It is a way to divide CPP credits that one or both spouses acquired while living common-law or married, when a couple break up (which basically divides their future CPP benefits). See Divide CPP in separation or divorce for more detail.
I understand the federal government made changes to the CPP. What are the changes?
Starting in 2019, if you work and contribute to CPP, your CPP deductions will gradually increase in exchange for higher benefits:
- From 2019 to 2023, contribution rates increased gradually until it reached 5.95% in 2023 (from 4.95% in 2018) for employees and 11.9% (from 9.9%) for the self-employed, on earnings between $3,500 and the Year’s Maximum Pensionable Earnings (YMPE).
- Starting in 2024, in addition to contributions made up to the YMPE, for earnings between the YMPE and a new second earnings ceiling, contribution rates will be 4% for employees and 8% for the self-employed.
For more information, see CPP enhancement and Canada Revenue Agency.
I have started receiving CPP retirement pension already. What if I change my mind?
If you change your mind and want to cancel your CPP pension, you only have up to 12 months from the date you commence the CPP pension to cancel it in writing and you need to return all the benefits received.
Can I receive CPP through Direct Deposit?
Since April 2016, the Government of Canada only offers direct deposits (not cheques) for benefits such as Old Age Security (OAS), Canada Pension Plan (CPP), Canada Child Benefit (CCB), etc. You can set up direct deposit online or with your financial institution. See more information here.
The response set out above is for your information only and is based on general assumptions and the facts presented to Vancity Investment Management. While our goal is to offer current, accurate, and clearly expressed information, Vancity Investment Management does not warrant the accuracy, adequacy, or timeliness of this information. Changes to the assumptions or facts or to any applicable laws or regulations could affect the validity of this information. The information is not intended to be investment, legal, accounting, tax, or other advice and you should not rely on it without seeking the advice of professional advisors to ensure your particular circumstances are properly considered. Vancity Investment Management is not responsible for loss or damage that results from reliance on this information.
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