Tuesday, July 23, 2013

Mortgage Market Commentary - July 23, 2013

As at close of markets Monday
  • S&P/TSX +73.25 to 12,758.38 climbed to its highest level in more than 1-1/2 months on Friday, ending the week higher after a rise in commodity prices buoyed shares of natural resource companies and boosted market sentiment.
  • Dow +1.81 to 15,545.55 experiencing its best month since January and looks poised to extend the rally with a deluge of earnings next week, though significant gains may be harder to come by with major indexes at record highs.
  • Dollar +0.0001 to 96.74 US
  • Oil -0.49 to 106.45
  • Gold -7.10 to 1,328.90

Canadian 5 year bond yields markets -.00 to 1.65
The spread (obtained by subtracting the bond yield above from the industry average 5 yr rate published mortgage rate of 3.59) is finally back again within the profit range at 1.94. If this remains steady we may see some good rate specials again! If the increase in bond yield continues upward, the spread shrinks, which could prompt interest rates to rise. The range for investor desired profitability is currently in the region of 1.90 and 2.10

Turn your next move into a tax deduction

Special to The Globe and Mail
Published Wednesday, Jul. 10 2013,

Are you moving this summer? Lamont Butler did. Mr. Butler, 28, recently moved into a mansion in Bethesda, Md., and invited his friends over to celebrate. The home is among the largest mansions in the region, has floors of imported marble, 12 bedrooms and six kitchens. According to the Washington Post, it also has a history of hosting many high-profile politicians and guests.

The problem? Mr. Butler didn’t own the home he was moving into. Nor was he renting it. He simply claimed the vacant property as his own. Evidently this type of behaviour is in vogue in the U.S. these days as a group called the Moorish American Nationals is laying claim to properties all over the place.

I wonder if Mr. Butler is also planning to claim moving expenses when he files his next tax return?

In Canada, there’s nothing that says you must own, or even rent, the home in which you live to be entitled to claim moving expenses. Still, if you’re making a move, keep in mind the following tips and tricks.

Move for the right reasons
To claim moving expenses you have to move to a new location for employment, to carry on your own business, or attend school full time.

In the case Glen Wunderlich v. The Queen, Mr. Wunderlich moved closer to his employer after receiving a promotion. The taxman tried to argue that he did not move to begin work at a new work location (since he was going to continue working in the same office) and therefore couldn’t deduct moving expenses.
The court sided with the taxpayer suggesting that there is no requirement to begin work at a new location; the change in Mr. Wunderlich’s job responsibilities was enough to entitle him to claim moving expenses.

Move the right distance
To claim moving expenses, the distance from your new home to your place of work or school must be at least 40 kilometres closer than from your old home to your work or school. The 40 kilometres is measured by the shortest normal route open to the travelling public.

Time your move
You’re generally considered to be resident in the province in which you resided on Dec. 31 each year. So, if you’re moving to a lower-taxed province, you would be wise to consider moving in this calendar year rather than next year. This will entitle you to the lower rates of tax for the entire year.
On the flip side, if you’re moving to a higher-taxed province you should consider delaying your move until next year if possible.

Meet the other tests
You'll be able to deduct moving expenses to the extent that they are not paid by your employer; they were not deducted in a prior year; they were not deducted as some other type of expense (such as child care expenses); they are not more than your income for the year from your work or school; and any reimbursement or allowance you received for these expenses has been included in your income.

Claim the right expenses
Consider deducting the following costs: Travel for you and your family, transportation and storage of your stuff, meals and lodging for up to 15 days, lease cancellation costs, revision of legal documents to reflect your address change, replacing driver’s licence and vehicle permits, connecting or disconnecting utilities, costs of selling your old home (advertising, legal fees, real estate commissions, mortgage prepayment or discharge fees), legal fees, land transfer taxes, up to $5,000 of costs related to your old home while it was vacant and you were trying to sell it (including interest, property taxes, insurance, and utilities).

Earn qualifying income
You've got to earn income in your new location to be eligible to claim moving expenses. This can be income from employment, self-employment, or school (scholarship or research grant income), but not simply investment income. You can only deduct up to the amount of income earned in the new location in the year of your move, although you can carry the excess amounts forward and deduct them in the next year, up to your income from eligible sources in that second year.

Pay your kids to help

You can hire any of your children who are 18 or older to help in the move. You can claim a deduction for these costs provided you meet the other test to claim moving expenses. Your child will have to report the income, but won’t pay any tax if his total income is under the basic personal credit of $11,038 in 2013.

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