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[music] We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss what you might want to keep in mind ahead of the RRSP deadline. TD Wealth Nicole Ewing joins us.
MoneyTalk's Anthony Okolie will give us a preview of what to expect from this afternoon's Fed rate decision.
And in today's WebBroker education segment, Caitlin Cormier is going to take us through the resources available in the tech centre on WebBroker.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index.
We have some pressure to the downside, 65 points below the breakeven line, about 1/3 of a percent.
Noticing a sizable pullback in the price of West Texas intermediate, American benchmark you today, down about 2 1/2%.
A few explanations being thrown around. I know China had some disappointing manufacturing data which could be flying in to the commodities trade.
Let's check in on Canadian Pacific on the move. It is forecasting double-digit earnings growth for this year. CP Kansas City is up to the tune of 1.8%, 108 bucks and change.
With the price of crude under pressure, some big energy names are trading to the downside including Baytex energy among the most actively traded issuers at this hour.
It's down 2 1/4% to 429 per share.
South of the border, the sake of earnings season, we have the Fed this afternoon and the crush of big tag earnings this week.
First you out of the gate: at Microsoft and Google.
Not pleasing the market all that much. The S&P 500 is down 41 points, almost a full percent.
Take a look at the NASDAQ, the tech heavy NASDAQ is feeling a bit more pain particularly with Google under some selling pressure today.
The NASDAQ is 226 points or 1 1/2% down.
We will talk about AMD. Disappointing sales guidance from the chipmaker. It is under pressure. 167 bucks and change, that stock is down almost 3%. And that's your market update.
The deadline to contribute to your RRSP for the 2023 tax year is just around the corner. Joining us to discuss is Nicole Ewing, director and tax and estate planning at TD Wealth.
Soon he will be in February. We have a deadline to keep in mind.
Walk us through what we need to be thinking about.
>> At the end of February, February 29, we have the deadline for contributing money to our RRSP that can be used against income in 2023.
Even though we are contributing it now, we have that first couple of months per year where we are able to use our contributions against income from last year or this year.
That does provide us with some good flexibility. Of course, we have to be within our contribution limit, making sure that we are not over contributing, but making sure that we also have looked at what the opportunities are more broadly for contributing to RRSPs versus other registered plans and making sure that we are optimizing the opportunity because contributions to an RRSP can be claimed as a deduction against your income for the year, reduced tax significant lay, it can grow in this tax-deferred environment, allowing you to have the growth over a number of years. You will be taxed on this when the funds come out.
This is where the math comes in, looking at your own personal circumstances, when are you expecting to retire, what is your timeline, what is your age now and what is your tax bracket.
If your tax bracket right now, if you are in a higher earning bracket but you expect your retirement will see you in a lower tax bracket, then an RRSP is a really beneficial tool.
If it's not the case, if we are in a lower tax bracket now, that doesn't mean that we wouldn't also want to make those contributions if it allows us for that tax free growth. It's a little bit of math and weighing the opportunities and costs.
But we don't have that same opportunity if we don't make those contributions by the deadline.
>> He talked about a little bit of math there. It talking about contribution room and not exceeding it, there is a little bit of math there. I don't know the formula either.
There is an easy way to get that number, right?
Just make sure you are within your boundaries.
>> You can check in with the CRA. You can look at your account online to see what your contribution limits are.
I would caution that these are not necessarily real-time numbers that you are seeing. We have situations where people are baby over contributing to their TFSA because the contributions that they had made in the current year were not reflected on that tool. So just make sure that you are aware of what the contribution limit is because you may have made some additional contributions and it may be a little bit surprising for people.
For example, if you have a contribution match, that's going to be counted against your contribution limit. If you are in other sorts of pensions contribute in towards those, that will count against your contribution for your RRSPs as well.
We cannot think about it in a vacuum, we need to make sure we are aware of which of our contributions to various types of plans will be caught under the umbrella of your RRSP contribution limit.
>> Important things to keep in mind.
Sometimes this time of year, you hear people talking about a strategy to contribute to the RRSP before the deadline for the previous tax year.
And they talk about borrowing money it to you invest in an RRSP. Now, when would a situation like this make sense for someone?
>> This is great. We are thinking about putting our money to work for us in the most tax efficient way so sometimes borrowing to invest is going to be a great strategy but what we want to be thinking about though is how quickly we are going to be able to repay that loan, what are the terms of the loan.
Sometimes, we can see a short-term, three month time frame. Maybe we have a line of credit we can borrow against, but we need to ensure that we have a plan to pay those funds back so you are not paying more in interest on a loan then we are earning in the account it's allowing us to grow tax-free.
This comes down to the math. Will you have the opportunity to be able to repay that?
Is your interest rate going to be one that is digestible and allow you to invest the money within your RRSP and outperform with the interest that you need to pay against that loan would be?
And you are age as well.
The compounding growth in the opportunity that the RRSP provides is quite significant the longer those funds are in, so being able to maximize your contributions and have that tax-deferred growth over a prolonged period of time can really be a significant benefit that does outweigh perhaps a short-term loan in order to allow you to put those funds in.
Generally speaking, a lot of people think about this when they are intending to repay that loan with the refund that they will be receiving as a result of using the contribution towards the deduction to reduce their income. They are going to get a refund and immediately pay back the loan.
That's a great strategy but we do have to keep in mind whether or not we can hold ourselves to that because ultimately we could end up spending a little bit more on interest than we might realize if we treat that loan as a longer-term strategy.
>> Need some fiscal discipline to consider that strategy. Once you get to the end of February, the deadline for contributing to the 2023 tax year is over, it would probably be a mistake to sit back and say, I'm done now and don't have to worry about anything else, because we enter tax season.
What should we be thinking about this year?
>> Exactly. It comes before we know it.
There might be the temptation to file really early but be aware that we do, if you file and do not report some of the income that you may have earned, maybe there's a slip that came out a little bit later, there are penalties. Asked me how I know.
And if you do this repeated years, these penalties can be quite high.
Now is a great time to be looking at your previous year's return, looking at the income sources that you received, the tax slips that you received so you have an understanding of what to expect and was this year any different. We can use this time to gather receipts. For example, if you are able to use medical senses, employment expenses, maybe you have made some donations to charity, this is the time to be gathering all of that information so that you are in a position to know what your obligations are going to be. Now, there has been some things that are different this year than last year and so having these on the radar nights and early would be important.
One of those being this underused housing tax that has created a lot of confusion for a number of people in that it applies in ways that we are not necessarily anticipating. There was a deadline that has been extended and extended again. So the 2022 years obligation to report and file and pay the underused housing tax has been extended to April 30 out of 2024 but that is only for the 2022 tax year.
Whether or not you have a 2023 filing, you will also be wanting to look into that to see if there is for example a joint account or joint names on a property, which might have created a requirement for you to file. We also have new T3 requirements for many trusts that previously did not need to file.
If you have a trust that the year-end is on or after December 31, 2023, you will then also have a trust filing obligation.
Now is really the time to be thinking about what new circumstances might I have found myself in this year, what research do I need to do about these new rules to know whether they apply to me and frankly to get your tax advisors working with you now because come tax filing time, they are not going to have the bandwidth to be able to help you work through these more complex issues.
>> Great insights as always with Nicole Ewing. We are going to get your questions about tax and estate planning for Nicole in just a moment.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Investors appear underwhelmed by the first crop of big tech earnings. Microsoft and Alphabet the first out of the gate.
Quarterly reports be expectations. For Alphabet, the quibble appears to be with ad sales revenue. For Microsoft, it looks like the earnings forecast is failing to impress the street.
These are stocks that have run up quite a bit recently. They might have just been priced to perfection. You can see pressure here including Alphabet down more than 6%.
Meantime, Starbucks, it appears to be getting a pass from investors today despite a disappointing quarter.
Nope, looks like it's slid back into negative territory. Earlier, there was a bit of positive territory.
They fell short of earnings expectations and sales also came in lower for the most recent quarter. That said, there is one interesting stat. Starbucks broke its own record for gift cards.
Customers loaded $3.6 billion onto Starbucks gift cars in that quarter. I had to look at that number again. That's a lot of coffee, $3.6 billion.
Let's talk about the Canadian economy. It held a better-than-expected in the final months of 2023. New numbers from StatCan shows GDP growth was a take higher-than-expected in November and in early read for December suggests continued strength. TD Economics taking a look at this report says it appears to them that the fourth-quarter GDP is now tracking at about 1% growth, compared to the Bank of Canada's projection of no growth for the last few months of the year.
A quick check on the market, we will start here on Bay Street with the TSX Composite Index.
Considerable pressure on the price of crude today, American benchmark is down 2.6% which swings on some energy names and the topline. Nothing too dramatic, we are down 36 points or benefits of a percent.
South of the border, disappointment and tech was not good enough for investors after the run we have seen recently. The S&P 500 is down about 36 takes.
We are back with Nicole Ewing, taking your questions about tax and estate planning.
We will start with this one.
Our viewer says: I help out a senior who is 75 with limited months left due to health. He owns her condo, worth $400,000, no mortgage. She is considering adding her daughter to the deed so as to avoid probate and red tape… One of the tax implications for the daughter? Also to note unlikely that the condo will sell for much more than $400,000.
This is from Gord in London.
Let's go through it.
>> This is a really common scenario of people wondering about how we can have that efficiency and ease with the administration with the property.
What I need to make really clear is that if this is mom's property and has been in her hands the whole time, she likely will be able to avail herself of the principal residence exemption and so would not have tax payable on the increase in the value.
I will just say this in a couple of segments.
If that is the case, then upon mom's death, she will have a deemed disposition of all of her assets at fair market value.
She will have it deemed to have exposed of the condo at fair market value but because she has this principal residence exemption, there will not be any tax liability or any tax payable. It daughter, as the beneficiary, would inherit the property and to the extent that there is any growth between the time the daughter inherited and the time that she sells it, daughter would be responsible for that growth, the difference in fair market value from the date of death, the date she received the property to the date that she sold it. Mom would not necessarily have any tax payable on it and daughter would from the date of death onward, that would then be daughters tax liability.
Now, where things can get a little bit fuzzy is where we start doing this adding children onto accounts, adding them onto your property in order to make that ease of transfer so maybe we don't have the probate requirements.
But there is so much confusion with respect to what our joint accounts and what does having your name jointly on a deed really mean, and this goes into the whole concept of what is a trust, whether or not daughter being added to that property is being added as a trustee it, essentially, and holding that asset then on behalf of the estate when it transfers over to her. If she is been a trustee, does she have a filing requirement as we discussed in terms of the trust trust reporting requirements are increasing. If she is listed as a trustee she may have a filing requirement. There are lots of nuances when it comes to adding children on jointly. Strictly from a tax perspective, unless when mom added her daughter onto title, unless she intended to gift that property or a portion of that property to her at that time, there wouldn't necessarily be a tax consequence.
If she did it intend to give her 50% or take that 50% on mom's death, only the 50% of that mom owned would be available for the principal residence exemption and daughter would then have that amount going forward.
It's a little bit step-by-step working through but the main message I would say is that mom's home that she has her own, she is solely responsible for that tax liability unless and until she transfers beneficial ownership to daughter, adding her name on the property doesn't necessarily do that but on death, mom will be deemed to have dispose of the property and the tax liability going forward would be that of the beneficiary.
A long question with a long answer.
>> Made sense to me. Very interesting stuff indeed. Let's get to another audience question.
I viewer says, I'd like to know if NexGen Energy would fit the criteria of the CRA for carrying cost. To be clear, I want to borrow money, by Next Gen, record the interest payments as a carrying cost on my tax return. Does Next Gen take all the right boxes? Is there someplace where one could see what companies qualify for this scenario in a black-and-white fashion?
They want some clarity.
>> Understood because we don't want to find ourselves claiming the interest expense and then finding out that we are not able to use it. What we are looking at here is when we borrow to invest and earn income, we are able to claim those borrowing costs against our income. But only to the extent that the property is intended to earn income.
This means interest and dividends. It does not include a stock that is only a capital gain that we are expecting only a capital gain on that.
If the stock itself, if the security is currently not paying dividends or interest of any kind, I would suggest to you that it probably does not take all the boxes and if there is not an expectation that it would be having dividend income and at some point, then it probably does not take the boxes.
So capital gain income does not qualify as income for the purposes of that borrowing to invest calculation.
>> Very interesting. I didn't know that.
Make sure to check out the dividend profile of any company, do research on that one.
Another question here, real estate. One of the tax implications of gifting a rental house to one of your children?
>> Interesting similarly to the other example, we would have tax implications.
If you are gifting it, you are deemed to have sold it for fair market value and so you are gifting the rental property at today's value to the extent that there is again on that, you as the parent would be responsible for that game and any income you received up to the time of that transfer. When you transfer it or gifted to your child, their tax obligations begin that day and they would be responsible for any income earned from the rental property. If they subsequently sell it, they would be responsible for the gain on the property.
Up until the date of transfer. Caution caution. Do not get cute and try to transfer it for less than fair market value.
People have tried to do this, I'm going to sell it for a dollar. This is a terrible idea because not only does it not work, if we transfer property to a non-arm's length person, arm's length, this is our family, if you transfer property to a non-arm's length person for less than fair market value, you for tax purposes it will be deemed to have sold it for fair market value, you will have the tax bill on the fair market value regardless that you only received a dollar. Your child will receive that property and their cost base will be one dollar.
So you will eventually, you are paying a tax on that growth. When your child sells it, they will be paying tax on the same growth because they don't get the benefit of that bumped up cost base because they paid less than fair market value. Be very careful there when you are transferring it, making it a gift or transferring it at fair market value and have then purchase it for value because otherwise he can get to some really unfortunate tax situations.
>> Most definitely. A double whammy on that one of considerations to make.
As always, make sure you do your own research before making any investment or tax planning decisions. We will get back to your questions for Nicole Ewing on tax and estate planning in just a moment.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In today's education segment, Caitlin Cormier, client education instructor at TD Direct Investing shows us where we can find tax resources here on the platform.
Have a listen.
>> Today, we are going to look at the different tax information available for you as an investor within the WebBroker platform.
Without further ado, let's go ahead and hop into the platform.
Where we can actually find information about important dates, we are going to come up here in the top bar under account, we are going to scroll across over self-service and click on the tax information Centre. That is going to open up a separate page. There's a whole bunch of information here about taxes and lots of different questions and categories here that you can review if you have any questions about anything to do with taxes.
As well as the first link here on the top left-hand side under filing taxes, if you click there, you are able to see the important dates. These are dates that you would need to know about when you need to file as well is when you can expect these documents to come in the mail.
If you are looking for certain documents, feel free to come to this page so you can figure out when you will expect those documents coming to you in the mail.
Back into WebBroker, we are also actually able to, prior to getting these documents, see a little bit of information about what sort of returns he may have had during the year.
In order to see that, I'm going to click on accounts again. But I'm going to come down here to gains and losses.
This is not an actual tax document. This is just for information purposes.
You will eventually get your tax document.
However, if you wanted to get an idea of what sort of returns you received in the previous year, you can come in here to do that. We can either separate this by investment or by transaction. We can choose whatever account we want to see this information on, so registered or nonregistered. We can choose the types of securities that we are looking to get the information on. We can choose date range.
If we want last year for taxes, we can choose that.
And it will actually show us a review appear at the top about what those totals are and as we scroll down, is going to show us the individual transactions.
If I click by transaction instead of investment, it will show me the dates that I had these types of transactions and I get even more detail here on those. These are some great places to start when you're kind of doing some tax planning this time of the year. Hop onto WebBroker, check out our gains and losses as well as our attack centre to help you officially file your taxes this year.
>> Our thanks to Caitlin Cormier, client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Nicole Ewing, taking your questions about tax and estate planning.
Plenty of questions. You are very popular.
Let's get to the next one. The $8000 contribution room that the government gives for first-time homebuyers every year, it earns interest. What happens when a person does not use it, must the interest be paid back as well? How does one withdraw the money from that account?
Is there a penalty?
>> Frankly, this is one of the reasons why think of this as the magic account. It's it's a fantastic account for saving in that if you do not use it for purchasing a home within the prescribed period, so generally within 15 years of opening or age 71, if you do not use the funds, you can transfer it into your RRSP, it does not impact your contribution room and you do it on a tax-free basis. If you are not using the funds, you don't have to pay, return it the way you might have to for an RESP. I suspect that's where the question is coming from. With RESPs, if you don't use it towards education, you have to repay the grant money that the government provided.
In the situation of a first homebuyer savings account, you do not have to repay the interest that has grown in the account, you can either transfer it to your RRSP or take it out, take it into income, in which case the full amount, fair market value, will be taxed.
Both your contributions and the interest that has accrued.
>> Very interesting set. Here's the next question.
My wife and I are 60 something retirees.
We both have RRIFs, RESPs and my wife has an LIRA. We draw the minimum amounts from the registered plans and live off OAS, CPP and eligible dividends from our nonregistered account.
We also split our pension income. My aim is to be as tax efficient as possible. As we age, and is one of his passes, the minimum withdrawal amount from the registered plans will significantly increase the marginal tax rate of the remaining spouse. I would also like to avoid the OAS clawback. Other than withdrawing more funds from registered plans each year, can you recommend any other strategies to minimize the tax it?
>> There's a lot they are and to be honest with you, my recommendation really would be to sit down and do a fulsome plan, really looking at the different options and different scenarios that might play out, so depending if we change the life expectancy of one or both of you, how does that affect the calculation? It sounds like you are being quite mindful of the types of income that you are receiving and when it comes to an RRIF, there is the required minimum that we must take out.
So within the RRIF, we want to be thinking about the types of income that we are earning, the types of investments that we have because the higher the amount, the more we need to take out, but it really is going to come down to trade-offs at the end of the day because if we have an OAS clawback, it's because we we were receiving significant income from other means. If we can spread that income over a number of years order for it, that's great, but sometimes people are just in the very fortunate position of having so much money that this is not available to them.
Unfortunately, I can't give a straight answer. It sounds like you are quite mindful of the different considerations.
There is a lot of talk about accelerating RRIF withdrawals or RRSP withdrawals and pull it out more quickly. Just be cautious with that because you are accelerating the tax bill. I don't want to pay tax, I don't want my estate to be paying at a 50% tax rate language withdraw it now, but you've accelerated to the tax and pulled out of the tax-deferred environment and perhaps don't have the opportunity to put it into another tax-free vehicle. I would suggest to you that if you are thinking about the considerations, perhaps model of the different scenarios and see where your comfort lies with the different analysis and risks.
>> Important things to consider on that one. Next question.
Viewer wants to know if they can contribute a GIC that they presently known as an in-kind contribution to their TFSA?
>> There is no rule against doing that.
Depending on which financial institution you are with, they might have different restrictions.
You can certainly transfer your GIC into a TFSA and client but if you are doing that because you think that if when it matures you have sheltered all of that income, that is not the case.
Only to the extent, only for the period in which the GIC was in near TFSA will be returned be tax-free. To the extent that you have been holding it for a longer period of time, think of it as a prorated return that you would still need to be reporting that is income if it was coming from a nonregistered account.
>> If you had a five year GIC and at the midmarket put it into your TFSA, they're not gonna say, well, we are not worried about the interest payments. The CRA will be looking.
>> It's only sheltered for the time in which is is in the TFSA.
>> I didn't know that.
>> But good thinking.
>> Creative, we will call that. We are going to impact your questions for Nicole Ewing on tax and estate planning in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
The Fed is on deck to make its first interest rate decision of the year later this afternoon. Nearly all of Wall Street seems to be in agreement: we are not going to get a change today. So what will be be a focus on? It will be the press conference, Jerome Powell. Anthony Okolie joins us now in TD Security's outlook on potential Fed rate cuts, because that's going to be the star of the afternoon.
>> The Fed is widely expected to hold rates steady for 1/4 consecutive meeting between five and 4:45 and 1/2%.
In TD Security space case, they believe that the Fed will be biased to retain optimality as the economy remains on solid footing, which points to no rush to ease rates and with the decision unlikely to provide any surprises, TD Securities expects that the Fed Chairman's post management meeting press conference will focus on, will be a focus of attention.
They believed that quantitative tightening, tapering and the timing and pace of cuts will be the biggest drivers.
TD Securities is an expect to see changes to their near-term policy outlook but an update to the current assessment of inflation could be a first step in that direction.
TD Securities expects that Chairman Powell will convey a more middle-of-the-road approach towards the Fed's next policy steps and argue for data dependence. That points to preferring to be patient, ensuring that the move lower in inflation can be sustained towards a 2% target.
Given the improved outlook for inflation and anticipation of rising rates, TD Security says the Fed is unlikely to commit to a cut in March but they continue to expect a cut in May.
That view aligns with current market expectations as well.
TD Securities expects 250 basis points of cumulative cuts and roughly 200 basis points of those cuts will happen this year as growth concerns will likely lead the Fed to frontload their policy accommodation.
With regards to the US dollar, TD Securities believes that the Fed is unlikely to signal a timeline for cuts and that the data should remain in the driver's seat. But a combination of good data and low inflation could mean that Fed cuts are just further downside to the US dollar through 2024. TD Securities does not believe it's going to be a straight line, especially given geopolitics that will feature heavily on the market calendar and the markets will be data dependent.
We will have full coverage on that decision this afternoon. I will be interviewing Scott Colbourne, Managing Director and head of fixed income at TD Asset Management this afternoon.
>> All right. A lot going on. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map function, view of the market movers.
Let's start with the TSX 60 by Price and volume.
Some potential pullback in the price the American benchmark crew today but that has been a choppy trade, giving back fairly substantial gains of recent sessions. We have some downward pressure among some of the energy names but it's not all that dramatic.
You got Cenovus down just 1/3 of a percent. Taking a look at the financials, Sun Life showing a bit of strength, a group that is doing all that much today, bit of a mixed bag there and the materials, CP Rail, the streetlights what they heard from them in terms of their earnings forecast. It is up almost 2%.
GIB.A, that would be CGI, they are making gains today, about 2% on the back of their latest report as well. South of the border, we are less than 90 minutes away from the decision from the US Federal Reserve. Then we get the press conference afterwards, which is a bit of caution in the market but there some names moving off of actual news for them. Googles stands at a 7% pullback for Alphabet, the parent company of Google. Earnings beat for the quarter, the ad sales raising concerns.
These stocks have had an impressive run all throughout last year into this year.
Microsoft was also at with earnings after the bell, it's down about 1 1/2%.
Not so good this time around for these big tech names.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
I recently received a large pension payment from Britain for close to two decades worth of missed payments from the UK government. Will I need to pay Canadian income tax on this and if so what form should I be looking for?
>> Generally speaking, the Canadian government and countries in the UK have a treaty that does allow, does prevent, rather, double taxation.
So it does say that in the event that a pensioner receives income while in Canada, it will be taxed in Canada and not the UK.
However, the very important caveat is you must file the appropriate documentation in the UK, otherwise he would be taxed potentially in both countries. We do have a treaty that allows you to avoid double taxation and only be taxed in Canada.
However, there is paperwork that would need to be completed in order for that to work.
In Canada, it would be included in your income and taxable.
>> Interesting stuff. Another question from the audience. Someone says they will be filing taxes for the first time since getting married.
Congratulations on getting married.
Anything I should keep in mind?
>> This is an interesting one to me because a lot of the information that we have generally comes from the US and TV shows and things and some people think that there is an option whether to file jointly or individually and that is not an option in Canada.
In Canada, if you have a spouse, whether common-law or married, you are required to report their income and their circumstances on your information as well and you will be treated as a family unit for the purpose of certain credits and deductions that might be available to you.
One that's really easily missed I would suggest is when it comes to tax-loss selling or any type of tax planning that you might doing, you need to be aware that you and your spouse's accounts are going to all be considered.
If for example you sell something at a loss and your spouse purchases that identical security within the 60 days, your loss is going to be denied and it will be added instead to your spouse's cost base. So making sure that you are aware of where the interaction between your accounts are going to be now going to be relevant for you.
You can combine charitable receipts and use them against the higher income spouse.
If you are someone who has been receiving other income tested credits, maybe GST, that may no longer be coming to you so that often hits people as a bit of a surprise. Those are family tested income amounts and so some of the calculations will change because it depends on whether you have children, what sorts of income you are earning but I would suggest just really working together, lay it all bear which hopefully we are doing in the instance of coming together as a family in any event that we are showing our financial cards to each other and then planning as a unit both in terms of filing your tax returns but also in the sorts of strategies that you are utilizing.
>> Interesting one there. This next question mitt. My 16-year-old son got a T4 from his part-time summer job. He didn't make enough money to get above the threshold for paying income tax. Does he still need to file?
>> Good question. I think it's worthwhile noting it. If they received a T4, it's very likely that income tax was deducted from their pay. So without filing, they are not going to be able to recover any taxes that they have overpaid. So being below that amount is great in that we don't have any tax ultimately do but they may actually have some tax due to them.
In my humble opinion, I think that if you are earning income, it is worthwhile filing those tax returns and making sure that you are getting in the habit of it, not just simply being that you owe taxes that you are filing because sometimes there is going to be additional credits that might be available to those who file their taxes and we want to make sure that we are not missing out on any of those.
But certainly, if you have already paid tax and you are not obligated to, you have some money coming back to you and it's worth doing the return.
>> We are going to squeeze in one more question before we let Nicole go.
I have several TFSA accounts and I think I may have over contributed.
How do you fix this? I'm hoping to avoid a penalty.
>> This can happen. It can happen for a number of different reasons.
When it comes to over contributions, we don't have that buffer room that we have with an RRSP, the $2000 buffer.
So any dollar that we have over contributed is going to be subject to that 1% tax per month so we will want to, we are early in the new year. You may have new additional room, $7000 of room that might put you in a non-over contribution position so that is one thing we look at.
If you would through any in a previous year, that will have been re-contributed this year's so available to you once again. You might no longer be in an over contribution position.
If you are, you want to get out of it as quickly as possible. You want to pull those funds out of your TFSA. You want to file if you have already received a letter or notice from CRA, you want to respond to that.
If this was a big mistake and you genuinely did not mean to do this and you have some grounds, you may be able to request that any penalties or interest be waived but I would suggest that's a very rare circumstance. The best thing to do is to get yourself out of the over contribution as quickly as possible and pay whatever penalties need to pay, keeping in mind that any overdue taxes now owing at a rate of 10%, interest you on that. So to the extent that there's any amount of tax owing to CRA, paying it off as quickly as possible is really in your best interest.
>> Always great to have you on the show. I learned a lot over the past 45 minutes and I know the audience did as well. I look forward to the next time.
>> So do I. Thanks for having me.
>> Our thanks to Nicole Ewing, director of tax and estate planning a TD Wealth.
As always, make sure you do your own research before making any investment or tax planning decisions. If we didn't have any time for your questions today, we will try to get them in the next time we have Nicole on the program. Stay tuned for tomorrow show. Sam Chai, VP of active fixed income portfolio management with TD Asset Management will be our guest. We will get his reaction and analysis of today's Fed rate decision and answer your questions about fixed income. Be sure to be on the lookout. Anthony will have breaking coverage this afternoon of the Fed's rate decision at 2 PM Eastern time.
TD Asset Management Scott Colbourne will join him after that and break it all down.
When it comes to getting questions for us, you can always get a Headstart. Just email moneytalklive@td.com. That's all the time we have for the program today. Thanks for watching. We will see you tomorrow.
[music]
Coming up on today show, we are going to discuss what you might want to keep in mind ahead of the RRSP deadline. TD Wealth Nicole Ewing joins us.
MoneyTalk's Anthony Okolie will give us a preview of what to expect from this afternoon's Fed rate decision.
And in today's WebBroker education segment, Caitlin Cormier is going to take us through the resources available in the tech centre on WebBroker.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index.
We have some pressure to the downside, 65 points below the breakeven line, about 1/3 of a percent.
Noticing a sizable pullback in the price of West Texas intermediate, American benchmark you today, down about 2 1/2%.
A few explanations being thrown around. I know China had some disappointing manufacturing data which could be flying in to the commodities trade.
Let's check in on Canadian Pacific on the move. It is forecasting double-digit earnings growth for this year. CP Kansas City is up to the tune of 1.8%, 108 bucks and change.
With the price of crude under pressure, some big energy names are trading to the downside including Baytex energy among the most actively traded issuers at this hour.
It's down 2 1/4% to 429 per share.
South of the border, the sake of earnings season, we have the Fed this afternoon and the crush of big tag earnings this week.
First you out of the gate: at Microsoft and Google.
Not pleasing the market all that much. The S&P 500 is down 41 points, almost a full percent.
Take a look at the NASDAQ, the tech heavy NASDAQ is feeling a bit more pain particularly with Google under some selling pressure today.
The NASDAQ is 226 points or 1 1/2% down.
We will talk about AMD. Disappointing sales guidance from the chipmaker. It is under pressure. 167 bucks and change, that stock is down almost 3%. And that's your market update.
The deadline to contribute to your RRSP for the 2023 tax year is just around the corner. Joining us to discuss is Nicole Ewing, director and tax and estate planning at TD Wealth.
Soon he will be in February. We have a deadline to keep in mind.
Walk us through what we need to be thinking about.
>> At the end of February, February 29, we have the deadline for contributing money to our RRSP that can be used against income in 2023.
Even though we are contributing it now, we have that first couple of months per year where we are able to use our contributions against income from last year or this year.
That does provide us with some good flexibility. Of course, we have to be within our contribution limit, making sure that we are not over contributing, but making sure that we also have looked at what the opportunities are more broadly for contributing to RRSPs versus other registered plans and making sure that we are optimizing the opportunity because contributions to an RRSP can be claimed as a deduction against your income for the year, reduced tax significant lay, it can grow in this tax-deferred environment, allowing you to have the growth over a number of years. You will be taxed on this when the funds come out.
This is where the math comes in, looking at your own personal circumstances, when are you expecting to retire, what is your timeline, what is your age now and what is your tax bracket.
If your tax bracket right now, if you are in a higher earning bracket but you expect your retirement will see you in a lower tax bracket, then an RRSP is a really beneficial tool.
If it's not the case, if we are in a lower tax bracket now, that doesn't mean that we wouldn't also want to make those contributions if it allows us for that tax free growth. It's a little bit of math and weighing the opportunities and costs.
But we don't have that same opportunity if we don't make those contributions by the deadline.
>> He talked about a little bit of math there. It talking about contribution room and not exceeding it, there is a little bit of math there. I don't know the formula either.
There is an easy way to get that number, right?
Just make sure you are within your boundaries.
>> You can check in with the CRA. You can look at your account online to see what your contribution limits are.
I would caution that these are not necessarily real-time numbers that you are seeing. We have situations where people are baby over contributing to their TFSA because the contributions that they had made in the current year were not reflected on that tool. So just make sure that you are aware of what the contribution limit is because you may have made some additional contributions and it may be a little bit surprising for people.
For example, if you have a contribution match, that's going to be counted against your contribution limit. If you are in other sorts of pensions contribute in towards those, that will count against your contribution for your RRSPs as well.
We cannot think about it in a vacuum, we need to make sure we are aware of which of our contributions to various types of plans will be caught under the umbrella of your RRSP contribution limit.
>> Important things to keep in mind.
Sometimes this time of year, you hear people talking about a strategy to contribute to the RRSP before the deadline for the previous tax year.
And they talk about borrowing money it to you invest in an RRSP. Now, when would a situation like this make sense for someone?
>> This is great. We are thinking about putting our money to work for us in the most tax efficient way so sometimes borrowing to invest is going to be a great strategy but what we want to be thinking about though is how quickly we are going to be able to repay that loan, what are the terms of the loan.
Sometimes, we can see a short-term, three month time frame. Maybe we have a line of credit we can borrow against, but we need to ensure that we have a plan to pay those funds back so you are not paying more in interest on a loan then we are earning in the account it's allowing us to grow tax-free.
This comes down to the math. Will you have the opportunity to be able to repay that?
Is your interest rate going to be one that is digestible and allow you to invest the money within your RRSP and outperform with the interest that you need to pay against that loan would be?
And you are age as well.
The compounding growth in the opportunity that the RRSP provides is quite significant the longer those funds are in, so being able to maximize your contributions and have that tax-deferred growth over a prolonged period of time can really be a significant benefit that does outweigh perhaps a short-term loan in order to allow you to put those funds in.
Generally speaking, a lot of people think about this when they are intending to repay that loan with the refund that they will be receiving as a result of using the contribution towards the deduction to reduce their income. They are going to get a refund and immediately pay back the loan.
That's a great strategy but we do have to keep in mind whether or not we can hold ourselves to that because ultimately we could end up spending a little bit more on interest than we might realize if we treat that loan as a longer-term strategy.
>> Need some fiscal discipline to consider that strategy. Once you get to the end of February, the deadline for contributing to the 2023 tax year is over, it would probably be a mistake to sit back and say, I'm done now and don't have to worry about anything else, because we enter tax season.
What should we be thinking about this year?
>> Exactly. It comes before we know it.
There might be the temptation to file really early but be aware that we do, if you file and do not report some of the income that you may have earned, maybe there's a slip that came out a little bit later, there are penalties. Asked me how I know.
And if you do this repeated years, these penalties can be quite high.
Now is a great time to be looking at your previous year's return, looking at the income sources that you received, the tax slips that you received so you have an understanding of what to expect and was this year any different. We can use this time to gather receipts. For example, if you are able to use medical senses, employment expenses, maybe you have made some donations to charity, this is the time to be gathering all of that information so that you are in a position to know what your obligations are going to be. Now, there has been some things that are different this year than last year and so having these on the radar nights and early would be important.
One of those being this underused housing tax that has created a lot of confusion for a number of people in that it applies in ways that we are not necessarily anticipating. There was a deadline that has been extended and extended again. So the 2022 years obligation to report and file and pay the underused housing tax has been extended to April 30 out of 2024 but that is only for the 2022 tax year.
Whether or not you have a 2023 filing, you will also be wanting to look into that to see if there is for example a joint account or joint names on a property, which might have created a requirement for you to file. We also have new T3 requirements for many trusts that previously did not need to file.
If you have a trust that the year-end is on or after December 31, 2023, you will then also have a trust filing obligation.
Now is really the time to be thinking about what new circumstances might I have found myself in this year, what research do I need to do about these new rules to know whether they apply to me and frankly to get your tax advisors working with you now because come tax filing time, they are not going to have the bandwidth to be able to help you work through these more complex issues.
>> Great insights as always with Nicole Ewing. We are going to get your questions about tax and estate planning for Nicole in just a moment.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Investors appear underwhelmed by the first crop of big tech earnings. Microsoft and Alphabet the first out of the gate.
Quarterly reports be expectations. For Alphabet, the quibble appears to be with ad sales revenue. For Microsoft, it looks like the earnings forecast is failing to impress the street.
These are stocks that have run up quite a bit recently. They might have just been priced to perfection. You can see pressure here including Alphabet down more than 6%.
Meantime, Starbucks, it appears to be getting a pass from investors today despite a disappointing quarter.
Nope, looks like it's slid back into negative territory. Earlier, there was a bit of positive territory.
They fell short of earnings expectations and sales also came in lower for the most recent quarter. That said, there is one interesting stat. Starbucks broke its own record for gift cards.
Customers loaded $3.6 billion onto Starbucks gift cars in that quarter. I had to look at that number again. That's a lot of coffee, $3.6 billion.
Let's talk about the Canadian economy. It held a better-than-expected in the final months of 2023. New numbers from StatCan shows GDP growth was a take higher-than-expected in November and in early read for December suggests continued strength. TD Economics taking a look at this report says it appears to them that the fourth-quarter GDP is now tracking at about 1% growth, compared to the Bank of Canada's projection of no growth for the last few months of the year.
A quick check on the market, we will start here on Bay Street with the TSX Composite Index.
Considerable pressure on the price of crude today, American benchmark is down 2.6% which swings on some energy names and the topline. Nothing too dramatic, we are down 36 points or benefits of a percent.
South of the border, disappointment and tech was not good enough for investors after the run we have seen recently. The S&P 500 is down about 36 takes.
We are back with Nicole Ewing, taking your questions about tax and estate planning.
We will start with this one.
Our viewer says: I help out a senior who is 75 with limited months left due to health. He owns her condo, worth $400,000, no mortgage. She is considering adding her daughter to the deed so as to avoid probate and red tape… One of the tax implications for the daughter? Also to note unlikely that the condo will sell for much more than $400,000.
This is from Gord in London.
Let's go through it.
>> This is a really common scenario of people wondering about how we can have that efficiency and ease with the administration with the property.
What I need to make really clear is that if this is mom's property and has been in her hands the whole time, she likely will be able to avail herself of the principal residence exemption and so would not have tax payable on the increase in the value.
I will just say this in a couple of segments.
If that is the case, then upon mom's death, she will have a deemed disposition of all of her assets at fair market value.
She will have it deemed to have exposed of the condo at fair market value but because she has this principal residence exemption, there will not be any tax liability or any tax payable. It daughter, as the beneficiary, would inherit the property and to the extent that there is any growth between the time the daughter inherited and the time that she sells it, daughter would be responsible for that growth, the difference in fair market value from the date of death, the date she received the property to the date that she sold it. Mom would not necessarily have any tax payable on it and daughter would from the date of death onward, that would then be daughters tax liability.
Now, where things can get a little bit fuzzy is where we start doing this adding children onto accounts, adding them onto your property in order to make that ease of transfer so maybe we don't have the probate requirements.
But there is so much confusion with respect to what our joint accounts and what does having your name jointly on a deed really mean, and this goes into the whole concept of what is a trust, whether or not daughter being added to that property is being added as a trustee it, essentially, and holding that asset then on behalf of the estate when it transfers over to her. If she is been a trustee, does she have a filing requirement as we discussed in terms of the trust trust reporting requirements are increasing. If she is listed as a trustee she may have a filing requirement. There are lots of nuances when it comes to adding children on jointly. Strictly from a tax perspective, unless when mom added her daughter onto title, unless she intended to gift that property or a portion of that property to her at that time, there wouldn't necessarily be a tax consequence.
If she did it intend to give her 50% or take that 50% on mom's death, only the 50% of that mom owned would be available for the principal residence exemption and daughter would then have that amount going forward.
It's a little bit step-by-step working through but the main message I would say is that mom's home that she has her own, she is solely responsible for that tax liability unless and until she transfers beneficial ownership to daughter, adding her name on the property doesn't necessarily do that but on death, mom will be deemed to have dispose of the property and the tax liability going forward would be that of the beneficiary.
A long question with a long answer.
>> Made sense to me. Very interesting stuff indeed. Let's get to another audience question.
I viewer says, I'd like to know if NexGen Energy would fit the criteria of the CRA for carrying cost. To be clear, I want to borrow money, by Next Gen, record the interest payments as a carrying cost on my tax return. Does Next Gen take all the right boxes? Is there someplace where one could see what companies qualify for this scenario in a black-and-white fashion?
They want some clarity.
>> Understood because we don't want to find ourselves claiming the interest expense and then finding out that we are not able to use it. What we are looking at here is when we borrow to invest and earn income, we are able to claim those borrowing costs against our income. But only to the extent that the property is intended to earn income.
This means interest and dividends. It does not include a stock that is only a capital gain that we are expecting only a capital gain on that.
If the stock itself, if the security is currently not paying dividends or interest of any kind, I would suggest to you that it probably does not take all the boxes and if there is not an expectation that it would be having dividend income and at some point, then it probably does not take the boxes.
So capital gain income does not qualify as income for the purposes of that borrowing to invest calculation.
>> Very interesting. I didn't know that.
Make sure to check out the dividend profile of any company, do research on that one.
Another question here, real estate. One of the tax implications of gifting a rental house to one of your children?
>> Interesting similarly to the other example, we would have tax implications.
If you are gifting it, you are deemed to have sold it for fair market value and so you are gifting the rental property at today's value to the extent that there is again on that, you as the parent would be responsible for that game and any income you received up to the time of that transfer. When you transfer it or gifted to your child, their tax obligations begin that day and they would be responsible for any income earned from the rental property. If they subsequently sell it, they would be responsible for the gain on the property.
Up until the date of transfer. Caution caution. Do not get cute and try to transfer it for less than fair market value.
People have tried to do this, I'm going to sell it for a dollar. This is a terrible idea because not only does it not work, if we transfer property to a non-arm's length person, arm's length, this is our family, if you transfer property to a non-arm's length person for less than fair market value, you for tax purposes it will be deemed to have sold it for fair market value, you will have the tax bill on the fair market value regardless that you only received a dollar. Your child will receive that property and their cost base will be one dollar.
So you will eventually, you are paying a tax on that growth. When your child sells it, they will be paying tax on the same growth because they don't get the benefit of that bumped up cost base because they paid less than fair market value. Be very careful there when you are transferring it, making it a gift or transferring it at fair market value and have then purchase it for value because otherwise he can get to some really unfortunate tax situations.
>> Most definitely. A double whammy on that one of considerations to make.
As always, make sure you do your own research before making any investment or tax planning decisions. We will get back to your questions for Nicole Ewing on tax and estate planning in just a moment.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In today's education segment, Caitlin Cormier, client education instructor at TD Direct Investing shows us where we can find tax resources here on the platform.
Have a listen.
>> Today, we are going to look at the different tax information available for you as an investor within the WebBroker platform.
Without further ado, let's go ahead and hop into the platform.
Where we can actually find information about important dates, we are going to come up here in the top bar under account, we are going to scroll across over self-service and click on the tax information Centre. That is going to open up a separate page. There's a whole bunch of information here about taxes and lots of different questions and categories here that you can review if you have any questions about anything to do with taxes.
As well as the first link here on the top left-hand side under filing taxes, if you click there, you are able to see the important dates. These are dates that you would need to know about when you need to file as well is when you can expect these documents to come in the mail.
If you are looking for certain documents, feel free to come to this page so you can figure out when you will expect those documents coming to you in the mail.
Back into WebBroker, we are also actually able to, prior to getting these documents, see a little bit of information about what sort of returns he may have had during the year.
In order to see that, I'm going to click on accounts again. But I'm going to come down here to gains and losses.
This is not an actual tax document. This is just for information purposes.
You will eventually get your tax document.
However, if you wanted to get an idea of what sort of returns you received in the previous year, you can come in here to do that. We can either separate this by investment or by transaction. We can choose whatever account we want to see this information on, so registered or nonregistered. We can choose the types of securities that we are looking to get the information on. We can choose date range.
If we want last year for taxes, we can choose that.
And it will actually show us a review appear at the top about what those totals are and as we scroll down, is going to show us the individual transactions.
If I click by transaction instead of investment, it will show me the dates that I had these types of transactions and I get even more detail here on those. These are some great places to start when you're kind of doing some tax planning this time of the year. Hop onto WebBroker, check out our gains and losses as well as our attack centre to help you officially file your taxes this year.
>> Our thanks to Caitlin Cormier, client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Nicole Ewing, taking your questions about tax and estate planning.
Plenty of questions. You are very popular.
Let's get to the next one. The $8000 contribution room that the government gives for first-time homebuyers every year, it earns interest. What happens when a person does not use it, must the interest be paid back as well? How does one withdraw the money from that account?
Is there a penalty?
>> Frankly, this is one of the reasons why think of this as the magic account. It's it's a fantastic account for saving in that if you do not use it for purchasing a home within the prescribed period, so generally within 15 years of opening or age 71, if you do not use the funds, you can transfer it into your RRSP, it does not impact your contribution room and you do it on a tax-free basis. If you are not using the funds, you don't have to pay, return it the way you might have to for an RESP. I suspect that's where the question is coming from. With RESPs, if you don't use it towards education, you have to repay the grant money that the government provided.
In the situation of a first homebuyer savings account, you do not have to repay the interest that has grown in the account, you can either transfer it to your RRSP or take it out, take it into income, in which case the full amount, fair market value, will be taxed.
Both your contributions and the interest that has accrued.
>> Very interesting set. Here's the next question.
My wife and I are 60 something retirees.
We both have RRIFs, RESPs and my wife has an LIRA. We draw the minimum amounts from the registered plans and live off OAS, CPP and eligible dividends from our nonregistered account.
We also split our pension income. My aim is to be as tax efficient as possible. As we age, and is one of his passes, the minimum withdrawal amount from the registered plans will significantly increase the marginal tax rate of the remaining spouse. I would also like to avoid the OAS clawback. Other than withdrawing more funds from registered plans each year, can you recommend any other strategies to minimize the tax it?
>> There's a lot they are and to be honest with you, my recommendation really would be to sit down and do a fulsome plan, really looking at the different options and different scenarios that might play out, so depending if we change the life expectancy of one or both of you, how does that affect the calculation? It sounds like you are being quite mindful of the types of income that you are receiving and when it comes to an RRIF, there is the required minimum that we must take out.
So within the RRIF, we want to be thinking about the types of income that we are earning, the types of investments that we have because the higher the amount, the more we need to take out, but it really is going to come down to trade-offs at the end of the day because if we have an OAS clawback, it's because we we were receiving significant income from other means. If we can spread that income over a number of years order for it, that's great, but sometimes people are just in the very fortunate position of having so much money that this is not available to them.
Unfortunately, I can't give a straight answer. It sounds like you are quite mindful of the different considerations.
There is a lot of talk about accelerating RRIF withdrawals or RRSP withdrawals and pull it out more quickly. Just be cautious with that because you are accelerating the tax bill. I don't want to pay tax, I don't want my estate to be paying at a 50% tax rate language withdraw it now, but you've accelerated to the tax and pulled out of the tax-deferred environment and perhaps don't have the opportunity to put it into another tax-free vehicle. I would suggest to you that if you are thinking about the considerations, perhaps model of the different scenarios and see where your comfort lies with the different analysis and risks.
>> Important things to consider on that one. Next question.
Viewer wants to know if they can contribute a GIC that they presently known as an in-kind contribution to their TFSA?
>> There is no rule against doing that.
Depending on which financial institution you are with, they might have different restrictions.
You can certainly transfer your GIC into a TFSA and client but if you are doing that because you think that if when it matures you have sheltered all of that income, that is not the case.
Only to the extent, only for the period in which the GIC was in near TFSA will be returned be tax-free. To the extent that you have been holding it for a longer period of time, think of it as a prorated return that you would still need to be reporting that is income if it was coming from a nonregistered account.
>> If you had a five year GIC and at the midmarket put it into your TFSA, they're not gonna say, well, we are not worried about the interest payments. The CRA will be looking.
>> It's only sheltered for the time in which is is in the TFSA.
>> I didn't know that.
>> But good thinking.
>> Creative, we will call that. We are going to impact your questions for Nicole Ewing on tax and estate planning in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
The Fed is on deck to make its first interest rate decision of the year later this afternoon. Nearly all of Wall Street seems to be in agreement: we are not going to get a change today. So what will be be a focus on? It will be the press conference, Jerome Powell. Anthony Okolie joins us now in TD Security's outlook on potential Fed rate cuts, because that's going to be the star of the afternoon.
>> The Fed is widely expected to hold rates steady for 1/4 consecutive meeting between five and 4:45 and 1/2%.
In TD Security space case, they believe that the Fed will be biased to retain optimality as the economy remains on solid footing, which points to no rush to ease rates and with the decision unlikely to provide any surprises, TD Securities expects that the Fed Chairman's post management meeting press conference will focus on, will be a focus of attention.
They believed that quantitative tightening, tapering and the timing and pace of cuts will be the biggest drivers.
TD Securities is an expect to see changes to their near-term policy outlook but an update to the current assessment of inflation could be a first step in that direction.
TD Securities expects that Chairman Powell will convey a more middle-of-the-road approach towards the Fed's next policy steps and argue for data dependence. That points to preferring to be patient, ensuring that the move lower in inflation can be sustained towards a 2% target.
Given the improved outlook for inflation and anticipation of rising rates, TD Security says the Fed is unlikely to commit to a cut in March but they continue to expect a cut in May.
That view aligns with current market expectations as well.
TD Securities expects 250 basis points of cumulative cuts and roughly 200 basis points of those cuts will happen this year as growth concerns will likely lead the Fed to frontload their policy accommodation.
With regards to the US dollar, TD Securities believes that the Fed is unlikely to signal a timeline for cuts and that the data should remain in the driver's seat. But a combination of good data and low inflation could mean that Fed cuts are just further downside to the US dollar through 2024. TD Securities does not believe it's going to be a straight line, especially given geopolitics that will feature heavily on the market calendar and the markets will be data dependent.
We will have full coverage on that decision this afternoon. I will be interviewing Scott Colbourne, Managing Director and head of fixed income at TD Asset Management this afternoon.
>> All right. A lot going on. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map function, view of the market movers.
Let's start with the TSX 60 by Price and volume.
Some potential pullback in the price the American benchmark crew today but that has been a choppy trade, giving back fairly substantial gains of recent sessions. We have some downward pressure among some of the energy names but it's not all that dramatic.
You got Cenovus down just 1/3 of a percent. Taking a look at the financials, Sun Life showing a bit of strength, a group that is doing all that much today, bit of a mixed bag there and the materials, CP Rail, the streetlights what they heard from them in terms of their earnings forecast. It is up almost 2%.
GIB.A, that would be CGI, they are making gains today, about 2% on the back of their latest report as well. South of the border, we are less than 90 minutes away from the decision from the US Federal Reserve. Then we get the press conference afterwards, which is a bit of caution in the market but there some names moving off of actual news for them. Googles stands at a 7% pullback for Alphabet, the parent company of Google. Earnings beat for the quarter, the ad sales raising concerns.
These stocks have had an impressive run all throughout last year into this year.
Microsoft was also at with earnings after the bell, it's down about 1 1/2%.
Not so good this time around for these big tech names.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
I recently received a large pension payment from Britain for close to two decades worth of missed payments from the UK government. Will I need to pay Canadian income tax on this and if so what form should I be looking for?
>> Generally speaking, the Canadian government and countries in the UK have a treaty that does allow, does prevent, rather, double taxation.
So it does say that in the event that a pensioner receives income while in Canada, it will be taxed in Canada and not the UK.
However, the very important caveat is you must file the appropriate documentation in the UK, otherwise he would be taxed potentially in both countries. We do have a treaty that allows you to avoid double taxation and only be taxed in Canada.
However, there is paperwork that would need to be completed in order for that to work.
In Canada, it would be included in your income and taxable.
>> Interesting stuff. Another question from the audience. Someone says they will be filing taxes for the first time since getting married.
Congratulations on getting married.
Anything I should keep in mind?
>> This is an interesting one to me because a lot of the information that we have generally comes from the US and TV shows and things and some people think that there is an option whether to file jointly or individually and that is not an option in Canada.
In Canada, if you have a spouse, whether common-law or married, you are required to report their income and their circumstances on your information as well and you will be treated as a family unit for the purpose of certain credits and deductions that might be available to you.
One that's really easily missed I would suggest is when it comes to tax-loss selling or any type of tax planning that you might doing, you need to be aware that you and your spouse's accounts are going to all be considered.
If for example you sell something at a loss and your spouse purchases that identical security within the 60 days, your loss is going to be denied and it will be added instead to your spouse's cost base. So making sure that you are aware of where the interaction between your accounts are going to be now going to be relevant for you.
You can combine charitable receipts and use them against the higher income spouse.
If you are someone who has been receiving other income tested credits, maybe GST, that may no longer be coming to you so that often hits people as a bit of a surprise. Those are family tested income amounts and so some of the calculations will change because it depends on whether you have children, what sorts of income you are earning but I would suggest just really working together, lay it all bear which hopefully we are doing in the instance of coming together as a family in any event that we are showing our financial cards to each other and then planning as a unit both in terms of filing your tax returns but also in the sorts of strategies that you are utilizing.
>> Interesting one there. This next question mitt. My 16-year-old son got a T4 from his part-time summer job. He didn't make enough money to get above the threshold for paying income tax. Does he still need to file?
>> Good question. I think it's worthwhile noting it. If they received a T4, it's very likely that income tax was deducted from their pay. So without filing, they are not going to be able to recover any taxes that they have overpaid. So being below that amount is great in that we don't have any tax ultimately do but they may actually have some tax due to them.
In my humble opinion, I think that if you are earning income, it is worthwhile filing those tax returns and making sure that you are getting in the habit of it, not just simply being that you owe taxes that you are filing because sometimes there is going to be additional credits that might be available to those who file their taxes and we want to make sure that we are not missing out on any of those.
But certainly, if you have already paid tax and you are not obligated to, you have some money coming back to you and it's worth doing the return.
>> We are going to squeeze in one more question before we let Nicole go.
I have several TFSA accounts and I think I may have over contributed.
How do you fix this? I'm hoping to avoid a penalty.
>> This can happen. It can happen for a number of different reasons.
When it comes to over contributions, we don't have that buffer room that we have with an RRSP, the $2000 buffer.
So any dollar that we have over contributed is going to be subject to that 1% tax per month so we will want to, we are early in the new year. You may have new additional room, $7000 of room that might put you in a non-over contribution position so that is one thing we look at.
If you would through any in a previous year, that will have been re-contributed this year's so available to you once again. You might no longer be in an over contribution position.
If you are, you want to get out of it as quickly as possible. You want to pull those funds out of your TFSA. You want to file if you have already received a letter or notice from CRA, you want to respond to that.
If this was a big mistake and you genuinely did not mean to do this and you have some grounds, you may be able to request that any penalties or interest be waived but I would suggest that's a very rare circumstance. The best thing to do is to get yourself out of the over contribution as quickly as possible and pay whatever penalties need to pay, keeping in mind that any overdue taxes now owing at a rate of 10%, interest you on that. So to the extent that there's any amount of tax owing to CRA, paying it off as quickly as possible is really in your best interest.
>> Always great to have you on the show. I learned a lot over the past 45 minutes and I know the audience did as well. I look forward to the next time.
>> So do I. Thanks for having me.
>> Our thanks to Nicole Ewing, director of tax and estate planning a TD Wealth.
As always, make sure you do your own research before making any investment or tax planning decisions. If we didn't have any time for your questions today, we will try to get them in the next time we have Nicole on the program. Stay tuned for tomorrow show. Sam Chai, VP of active fixed income portfolio management with TD Asset Management will be our guest. We will get his reaction and analysis of today's Fed rate decision and answer your questions about fixed income. Be sure to be on the lookout. Anthony will have breaking coverage this afternoon of the Fed's rate decision at 2 PM Eastern time.
TD Asset Management Scott Colbourne will join him after that and break it all down.
When it comes to getting questions for us, you can always get a Headstart. Just email moneytalklive@td.com. That's all the time we have for the program today. Thanks for watching. We will see you tomorrow.
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