-# Business IDUSINSSS ee Clear comment on clutches and clawbacks “Can you escape the claw- back’s clutches? Is rental property a tax shelter? How might a retired single person save tax? Let’s find out. “What is meant by the $50,000 ceiling and the clawback?” - J.B. If your “net income before adjustments” for 1989 (that’s line 234 on the 1989 tax return) is more than $50,000, you will have to pay back part of any old age security (but not Canada Pension Plan) or family allowance pay- ments you received last year. Take 15 per cent of your net income above $50,000. (Example: net income is $51,000, so 15 per cent of $1,000 is $150.) If this figure is less than the OAS or FA total, you pay back one-third of this figure. If this figure is more than the OAS or FA total, you pay back one-third of the OAS or FA total. (in 1990, the payback is two- thirds, and in 1991, it goes to the full amount. The net income threshold will also be increased each year by the inflation rate for ‘the previous year minus three per cent.) If you are married, the calcula- tion is based on each individual’s net income. With family allow- ance, that’s usually the person in the higher tax bracket. “I am renting out the house I used to live in and get $800 a month. I took out a mortgage (payments are $1,200 a month) to buy a new place where I now live. Does my rental property qualify as a tax shelter so I can claim the mortgage interest (and other expenses) to give me a loss to reduce my other income? If so, do I need a tax shelter identification number?” - BE. Technically, you may not deduct the mortgage interest because you borrowed the money to buy your principal residence, not the rental property. In theory, you should have sold your place, used the cash to buy your new home, then taken out a mortgage to finance the purchase of the rental. However, depending on the val- ues of the two places, your situa- tion now could be effectively the same as if you had followed those steps. So if you are an aggressive tax planner, you could go ahead and claim the mortgage interest. But be prepared for a fight if Revenue Canada ever challenges you. This sort of rental property is not considered a tax shelter as far as an identification number goes, so you don’t need one. Revenue Canada’s Rental Income Tax Guide provides help- ful information and the form you must complete to report rental income and expenses. You can get a free copy from any: tax office. If you need further help, shop around for an accountant who specializes in tax planning and retum preparation for people who have revenue’ property. “T am an 85-year-old widow with no children. I pay about $2,300 tax on about $18,000 income from the old age pension, GICs and CSBs — no CPP or RRSP. Any suggestions?” - L.S. Yes. Use some of your CSBs to buy from a life insurance company a term deposit (or GIC) or a prescribed annuity. This will create private pension income so you can take advantage of the $1,000 pension income amount — in your tax bracket, giving you $1,000 a year tax-free. Anybody 65 or older who has nO private pension from a former employer should look into creating enough pension income this way. This woman is in the lowest tax bracket. But even if you are in a higher bracket, with taxable income of more than about $28,000, you will still receive the cent instead of 41-50 per cent. first $1,000 of pension income at a lower tax rate - paying 14-23 per ‘Ask Revenue Canada for its free Business and Professional Income Guide. Major accounting firms offen have free literature on fax tactics for self- employed individuals. ’ “T retired early so my wife and I could help out in Third World countries. Sometimes we get paid, sometimes we pay. Also, I now work at a wide variety of jobs — tutoring, security guard, sales, etc. Should T incorporate? Where can I get more information on saving tax?” - E.R. Usually, it makes sense to incor- porate only if you are in the top bracket and regularly eam more New Fisheries boat christened in North Saanich THE ROBSON Reef, a new Fisheries patrol vessel for duty in the inshore waters of B.C.’s central coast and the Queen Charlotte Islands, was christened March 24 in North Saanich. The 17-metre, 442-horsepower vessel, designed by. naval architect Peter Hatfield and built by Canoe Cove Manu- facturing, cruises at 12 knots. The Robson Reef will replace the Fal- con Rock, and will serve the department with a complement of three crew and two Fisheries offi- CCrs. * OK * “THIS IS one friendly town,” says Jeremy Borsos of Mayne SCS INCOME TAX We welcome you to compare: PRICE: METHOD: “QUALITY: Returns from $20 — Fully computerized Accuracy guaranteed or no charge. | SHAW COMPUTER SERVICES 1592 VERLING AVE. Lesley A. shaw 652-1353 HOURS: 9-5 Mon.-Fri. Saturday and evenings by epEDauneg Z Island, location manager for Part- ners Film Co. Ltd. The company produced a Canadian Tire com- mercial at a Sidney home, last month. Everyone was extremely helpful, Borsos says. Watch for the commercial April 16. * kK TheReyiew Wednesday, April 11, 1990 money than you need for current expenses. However, you can still have your own unincorporated business and take advantage of many tax-saving approaches. For example, if you are in a higher tax bracket than your wife, you might be able to pay her to work for you. That would shift income into her lower-tax- bracket hands. Ask Revenue Canada for its free Business and Professional Income Guide. Major accounting firms often have free literature on tax tactics for self-employed individu- als. It might even pay to meet with a financial adviser to make sure you are taking advantage of all possible tax benefits. Mike Grenby is a Vancouyver- based columnist and independent personal financial advisor; he B7 will answer your questions as space ailows in his column - write to him clo The Review, Box 2070, Sidney, B.C. V8L 385. A CAREER IN REAL ESTATE Have you ever considered a career in real estate sales? Why. not explore the opportunities? We offer some of the most excit- ing, successful marketing tools and programs in our industry and ongoing training that is second to none. Sound interesting? For com- plete details call today. BERNIE WILKINSON NRS BLOCK BROS. 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