Tax Credit and Tax Deduction

What Is The Difference Between A Tax Credit and A Tax Deduction?

First Published: ADawnJournal.com November 5, 2009

Tax Deduction

A tax deduction is an amount of money which lowers your taxable income.

Tax deductions reduce taxable income.

Tax deductions may make your taxable income zero by exceeding your employment income.

Tax deductions reduce more taxes for those who are in higher tax brackets than for lower tax brackets.

If you live in Ontario and in the highest federal tax bracket (29%), your federal and provincial combined marginal tax rate is 46.41% – as of 2009. If you have $100 tax deduction = you will save $46.41 in tax. If you are in a lower bracket, you will receive less savings.

Tax deduction examples: RRSPs, Childcare expenses, Capital losses, Moving expenses.

Tax Credit (Non-Refundable)

A tax credit is a dollar for dollar deduction which is subtracted from the amount of tax you pay.

Tax credits lower taxes payable at the lowest tax rate

Tax credits may not make your taxable income zero because it only reduces taxes payable at the lowest tax rate.

Tax credits are fixed amounts, so they reduce same monetary value to all taxpayers – if you have enough taxable income to make the deduction.

Tax credits are calculated based on the lowest federal and provincial tax rates. For 2009, lowest federal and provincial rates are 15% and 6.05% (Ontario). Therefore, if you have $100 tax credit, you will save $15 + $6.05 = Total $21.05 – regardless of tax bracket.

Tax credit examples: Medical expenses, Eligible dependent, public transit credit, Caregiver amount, Tuition and education amount, Charitable donations.

Tax Deduction or Tax Credit – which one is better? The answer can be a tricky one and it may not as simple as it looks. In general, tax deduction seems to favour the higher income group, but I would suggest you to consult a tax professional. For more Info,
please visit – Canada Revenue Website.

How To Use Canada Revenue Agency Website

Canada Revenue Agency Website

First Published: Nov 9, 2009 ADawnJournal.com

Canada Revenue Agency (CRA) Website provides tax related information, publications, guides, forms, and other services that educate general public and promote compliance with Canada’s Tax system. CRA website has a vast amount of information, and it can be overwhelming. Here is a video clip showing how to easily navigate throughout CRA website and find tax information you need quickly and efficiently.

5 Money Tips for Financial Success

Five Personal Finance Tips You Need to Know Right Now 

In order to become financially successful, you don’t need to spend year after year pursuing an MBA. Doing simple things consistently and religiously year after year can lead to the path of financial success. Today, I will describe 5 such things. 

Spend Less Than You Earn – Stick to spending less than your income, and financial success will come to you. This is the most important financial tip ever. If you can’t do this, doing everything else will be meaningless. 

Pay Yourself First – Depending on your ability, save 5 – 15 percent of your gross income into an investment account, mutual funds, registered account, etc. Stick to this plan as long as you can afford to.

Build An Emergency Fund – Set aside six months’ (or more) worth of living expenses in a savings account or in an investment that is comparatively safe and can be withdrawn in a short notice without paying any penalty. 
Set Goals - Know exactly when you would like to accomplish various goals throughout your life such as buying a house, paying off mortgage, retiring in the future, and so on. Take necessary steps to realise these goals. 

Review Progress – Review your progress at least once a year. If you are not on the right track towards achieving your goals, change and readjust your financial roadmap. Consult a fee-based financial professional if necessary. If you don’t have the knowledge to invest by yourself, seek professional help. I recommend fee-only financial professionals.

Questions To Ask Yourself Before Getting A Mortgage

Easy Ways to Get a Good Mortgage Deal

First Published Date : July 26, 2009 ADawnJournal.com

Finding the right mortgage is something that is becoming increasingly important for property buyers in a world which is more unforgiving than it ever has been towards bad debtors. As far as getting the mortgage you want is concerned, it is vital to ask yourself some questions be sure that you are giving realistic answers. The most important questions are as follows:

– How much can I realistically afford to pay, per month, to my mortgage?

– How long can the amortization on the mortgage be – how much longer will I have the ability to make these payments?

– Do I have options if I lose my job/fall ill? Will insurance cover the payments, or can someone else meet them for me?

The above are the instant questions which require immediate answers before you can in all good conscience move forward with a mortgage application on a property. If, at any given time during the process, the answers do not line up for you, you will need to put your application on the back burner. As the questions above are sequenced, so your priorities must also be. Before anything else is taken into account, you have to be sure you can make the monthly payments. This requires sitting down, working out what you have coming in and going out every month, and seeing what you can save if you need to.

The above can be done manually, or equally it can easily be done online with one of the vast range of online mortgage calculators. These are generally extremely simple websites which have a series of boxes to fill in, allowing you to break down your income and expenditure. The more advanced online mortgage calculators will be attached to comparison sites which will take your details and show you which lender has the best mortgage for you. A few words of advice regarding their use, though – using one mortgage calculator and comparison site will leave you with one view on the matter, so it is better to use two or three to ensure that you are happy with the accuracy of the information. Additionally, be as honest and as realistic as you can with the figures you enter. Different lenders will give the best deals to different borrowers, and a lie or a miscalculation could set you back considerably.

One thing you should always keep in mind is that although the many online resources for mortgage borrowers can be extremely helpful, not all are 100% independent. It is more than possible to visit a website looking for mortgage advice and come away with the strong impression that a particular bank is by far and away the best one for your purposes. This may be true, or it may be a carefully created impression that was always going to emerge from any research carried out on that website. Companies are not beyond putting up sites that have no visible connection to them, in order to support their positions. The best way to avoid falling victim to this is by using a range of sites.

A Dawn Books – A Showcase of Books by Personal Finance Author A Dawn

A Dawn Books Website Was Fully Designed By A Dawn

First Published: ADawnJournal.com August 9, 2009

Until now, whenever I needed a site I asked my programmers to design it for me and picked one from among those they designed. Take A Dawn Journal, for example. Once I described to my programmer exactly what I was looking for, he designed three sites for me, and I picked the one I thought best suited my needs and looked visually pleasing. The design I picked still exists and this is what A Dawn Journal currently looks like (as of July 20, 2009. I am mentioning this because if you read this article after ten or twenty years from now, most likely ADJ will have a different look). Starting then ’til now, my creative inner-self has been dying to design a website from scratch with 100% my own design and that’s what made it possible to design a website all by myself.

The only thing I had on my mind while designing A Dawn Books is simplicity. I tried to make it a very simple and easy-to-navigate site while giving it a visually pleasing look. On the right side of the homepage, I integrated my Books specific blog. It will show the first few lines of my latest blog on the current book I will be writing and once you click on the Read More tab, it will take you to the A Dawn Books Blog page which stays hidden inside A Dawn Books main page.

From now on, I will be using A Dawn Books to provide updates for the new books I will be writing. For example, I am hoping to start working on my next book Save Now shortly and I will provide updates as I go along on the A Dawn Books site. However, whenever I publish a new post on A Dawn Books, I will let my readers know on Canada’s Personal Finance Website-as ADJ has the highest traffic of all my sites. Take a look on A Dawn Books and give me your feedback. Your continuous support has made it possible for me to come this far and it is always appreciated. Cheers!