My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, June 10, 2013

Why Spend Your Energy Being Frugal? Just Tax Plan!

This past February, I had some fun with a top ten list (look below the sports agent's fees post) on why you should vote for me in a blogging contest (thanks to all of you who helped vote me into the second round of the contest!). In this list I took some shots at frugal blogs and got some emails from furious Frugalites asking me what I had against frugality and frugal blogs? I responded to a couple of emails saying that I don't have anything against frugal bloggers or frugal blogs in particular: my issue is that I think people are far too focused on cost savings,
as opposed to increasing income and/or minimizing income taxes.

As per this tongue and cheek blog I wrote titled “Old and Not Thrifty”, I admit I am not thrifty, although my wife counterbalances my lack of frugality with her ability to get a great deal. Notwithstanding my personal spending habits, any long-time reader of The BBC will know I often write about how important it is to budget and spend within your means and I reiterate this now – always be cognizant of what you are spending. However, in my opinion, if you budget well and are frugal, I think you reach a point of diminishing returns. So you save $12 on a cheaper toaster, or $1.29 on a box of cereal. Yes, those are savings, but they are immaterial in my mind once you have already proven to be a disciplined spender. Why not put all that energy into producing more income or saving taxes?

Before you start sending me hate mail, this post is not intended for those whose financial situations are such that frugality is a necessity, but for those of moderate or greater income who seem to get a little carried away with their frugal efforts when they could be making a bigger change in another manner.

I can already hear the cries of “Mark don’t give me the you should earn more lecture. I am stressed out as it is with my current job and life.” So, I won’t tell you to consider turning a hobby or an expertise into a side business or to spend some energy creating a case for a raise from your current employer or to spend your energy looking for a better job opportunity. Nope, I am going to give you some lazy tips from my past blog posts to save you significant money in taxes so you won’t have to worry about saving money on the daily fresh fish special (if you call a fish floating with one gill above the water, fresh).

I have reviewed my past blog posts to unearth three effective if not fairly effortless ways to increase your cash-flow:

1. Capital Loss Planning

I have written several times about capital loss planning (see the third paragraph from the bottom of the post, “Creating Capital Losses – Transferring Losses to a Spouse Who Has Gains) where you have a capital gain and your spouse has an unrealized capital loss. If your situation meets the criteria in my post and you have, say, a $10,000 loss and your spouse has a gain greater than $10,000, you could potentially save almost $2,500 by undertaking this form of tax planning. That is a lot of cheap rolls of toilet paper. The only caveat for this tip is that you should probably get some professional advice to ensure you do not get tripped up by the technical rules with superficial losses.

2. Form T2200

How about spending your energy asking or prodding your company to provide you with a T2200 Form that allows you to claim your employment expenses. Many employees are shy about requesting these forms and many employers are reluctant to issue these forms (because of the administrative hassle). If you incur expenses such as automobile costs, telephone or home office costs and are not reimbursed or only partially
reimbursed, ask or convince your employer to issue this form so you can deduct any of your employment related expenses on your 2013 personal income tax return. Depending upon the amount of employment expenses you have been personally absorbing, you may save enough for a vacation, which to me is a lot more exciting than saving some money on steaks that expire that day.

3. Income Splitting with Your Spouse

Income splitting can be as simple as spending the higher income spouse’s money on living costs and using the lower income spouse’s salary to invest, so any investment income is earned by the lower tax rate spouse. Alternatively, income splitting can be as sophisticated as utilizing a family trust or a prescribed loan, the rate is currently only 1%.

I have just briefly touched on a few simple opportunities to save money through tax planning. My point? Frugality takes a lot of time and effort, whereas many tax planning strategies require only a few hours of consideration. Even if you require an hour of time from an accountant to review your plan, the tax savings can be substantial.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.


  1. OK you've convinced me. But now what do I do with these 48 dented cans of tuna?

    1. Bet, that is the other problem with being frugal. You go to Costco and buy 48 cans of tuna that you dont need or go bad; let alone, for those not disciplined, the other crap you dont intend to buy that you do buy.

  2. You seem to focus more on spouses. How about for those who are single? They don't have as many tax breaks as those who are common-law/married.

    That said, I do stock up on cans of salmon on sale that I eat regularly ;)

    1. Kat, the Tax Act is very skewed towards married and common law people. U r pretty much screwed when you are single. I threw out the T2200 option for single people. I should have called the post "Why spend energy being frugal- Except when your single"

    2. You should add "or widowed"!

  3. What types of employment expenses can you claim with a T2200 Form?
    Last year my employer provided a T2200 and I claimed employment expense of $2,000 for rent, insurance, utilities, telephone & internet, based on 10% prorated for occupying a small bedroom in my house.
    I didn't claim automobile expense as we are reimbursed for mileage.

    1. Anon,

      If you are reimbursed (not paid a tax free auto allowance, but actual reimbursement) u may be able to claim your auto expenses if they are higher than your reimbursement and deduct your reimbursement from your auto claim, leaving you a larger net auto claim

      You can also deduct things like supplies, entertaining clients, cell phone if your employer requires you to pay for them.

  4. In the June edition of MONEYSENSE, in the "Ask Moneysense" section,Bruce Sellery has suggested to a questioner that he can loan cash or a portfolio of stocks to his spouse who is in the lowest tax bracket and charge her the prescribed rate of interest (1%). The interest will be taxed in husband's hands while the income from the investment portfolio in the spouse's hands.

    Is loaning an investment portfolio (all of it or part of it, in kind) in a non-registered account, an acceptable strategy of income splitting? Is the loaned portion of such a taxable portfolio deemed to have been "sold" at the time of making such a loan, thereby triggering capital gains or loss which would then have to be reported or dealt with for taxation purpose?

    1. Be*en,

      I have discussed the use of a prescribed loan several times in the blog including this post If u use the search function on this blog, you will find other posts.

      Anyways, loaning investment assets other than cash makes the transaction a bit more problematic. To make sure it is done properly, you should speak to your accountant or investment advisor and you will need a proper legal document and yes there will be deemed dispositions triggered.

    2. Thanks Mark.

      I didn't think it would be as simple as the Moneysense article seemed to imply!

  5. Mark,
    I understand that proper tax planning can save thousands but I'm always unsure what questions I should be directing my account and which I should be asking of my financial advisor. Is the general rule of the thumb ask the account questions about what types/ways of investing minimize tax burden whereas the financial advisor should help with the specifics of the investment?

    1. Hey Martin

      Great ? In my mind, a financial adivsor doing their job would always consider investment advice and tax advice together. I know a couple of my clients advisor's are always considering the tax cost of their investment advice. So, I would suggest the investment advice should always be first and foremost, however, before purchasing the investment, the tax cost vis a vie such things as interest vs div vs capital gains, registered vs non-registered and current investment allocation need to be considered. Does that help?

  6. Hi Mark,

    Sorry to drudge up an older post, but this is the only one I could find that talks directly about using the lower-income spouses earnings to fund investments (rather than the higher income earning giving out a loan at the prescribed rate, which is easy enough to figure out and I'll likely do that separately).

    My wife and I have recently managed to max out each of our TFSAs and RRSPs, so any future investments would need to be in non-registered accounts. My wife makes significantly less income (part time minimum wage) so we'd like for her to do most (if not all) of the non-reg investing.

    My questions revolve around how this is all supposed to be executed, to make sure the records reflect this properly in case of audits.

    Unfortunately, I've only realized that we should be doing this recently, so we've always had all of our income land in the same chequing account. If I were to go forward with this plan with all her future income, I'm sure it would be wise to set up her own account where that income would go. That we can handle.

    The real question comes from what we can do, if anything, with her past income. Can she basically sum up all her paychecks which have entered our joint account (she hasn't worked that much, maybe a total of 16 months in Canada), and move the equivalent amount of money over to her new account? Or has this pas income been forever tainted by being mixed into the joint account, that regularly had money leaving to go to savings/RRSP/TFSA/etc.?

    Bonus question: If she can invest her past income, will her recent contribution of $1,500 to her own RRSP have to be counted as from 'her' income, reducing how much she has available to invest in the non-reg account? Or could that have been funded from 'my' income?

    Thanks so much for your help, not only with these questions, but your blog in general. It's one of my favourite feedly subscriptions!

    Take care.

    1. Hi Sebastien:

      Thx for the kind words. In my opinion, the prior income has been tainted and you cannot go back.

  7. Thanks a lot for your reply, that's understandable.

    Mini followup question: Would it be a nightmare to invest both her own money and money loaned to her at the prescribed rate in the same non-registered account? Or would it be best to keep those separate?

    Thanks again!

    1. No, you don't have to track the prescribed monies, only ensure you pay the interest by the due date and repay the loan at some point. So you can intermingle her own money and the prescribed loan monies IMHO