The TFSA Vs. RRSP Debate. Which one’s better?

This has been ongoing hot topic for discussion with different financial experts coming up with different opinions. So, what’s the answer?

Well the clear answer is: It depends.

Financial Planning is not a one size fits all thing. Both the plans have unique tax benefits and depending on the income level and financial goals of an individual, one plan may be better than the other.

So, let’s see what does it depend on?


  • If you are working part time, have some savings and make less than $12,000, only use TFSA as RRSP deduction will not benefit you. Also, any RRSP contributions will hurt your GIS (Guaranteed Income Supplement) payments in retirement.
  • If you are working full time and making less than $35,000, have no pension plan, TFSA is still a preferred choice as you do not want to hurt your GIS payments in retirement.
  • If you are making more than $50,000 have no pension plan, RRSP becomes a good option and tax deduction will save you taxes and considering your income level at this time, there is little chance that you will qualify for a GIS payment.

Other Factors

  • Long Term Savings Vs Short Term Savings: If you are saving for short term and will be withdrawing the saving in near future, TFSA should always be preferred irrespective of any other factor.
  • Saving for a House: If you have already not saved $25,000 for a house, you can put your house savings in RRSP, get a tax deduction and then withdraw the savings under the Home Buyers’ Plan.
  • Saving for Education: If you are saving for higher education, you can use RRSP account to do that and get tax deduction benefits. The money can be withdrawn under the Lifelong Learning Plan.
  • Employer Pension Plans: RRSPs are primarily an investment tool for retirement planning. If you have generous retirement plan, then it is advised that TFSA should be preferred RRSPs so as o avoid huge tax liabilities in retirement years.

Financial and Tax Planning can be complex. At Softron, we have experts who can guide you on benefitting from Home Buyers’ Plan, Lifelong Learning Plan, Managing RRSP contributions and help you get the value out of your investments.

Call 905-273-4444 today and let the best handle your taxes!

Short Term Rentals are not Tax-Free

Are you renting your property or part of it on AirBnB, VRBO or HomeAway? Well, the income you earned is taxable and has to be reported on your tax return.

Short Term Renting is renting of residential property to a guest for a short length of time. Let’s discuss how this works:

Rental Income:

Any income generated through short term rentals constitutes rental income. Just like conventional rental income, a “Statement of Real Estate Rental” – T778 needs to be completed with the tax return to be compliant with Canada Revenue Agency. But that’s not all. There are other requirements unique to Short Term Rentals

GST/HST Requirements-

Short term rentals started out as a part time renting of the extra room to generate some cash. They have evolved as a business today. Some people have gone on to purchase properties for the sole purpose of short term renting. While it depends how good the occupancy rate you have and what is the average cost you charge for your property, numbers can add up quickly, and short-term rental owners are required to have a GST number and be GST compliant if they generate a revenue greater than $30,000. This includes the gross amount of rental income generated and includes all fees and other charges that home owners are required to pay to the AirBNB and HomeAway for their services.

City Requirements

Housing affordability is a major issue in major Canadian cities and short-term rentals don’t help the cause. They take away from the housing supply that could have catered to long term rentals for individuals and families. So, all city governments are coming up with stringent laws for short term renting and all home owners are advised to be compliant with City bylaws as well.

Claiming Expenses

As mentioned earlier, short term rental income counts as rental income and therefore a property owner can claim all the expenses that a conventional rental income owner does. These expenses include mortgage interest, utilities paid, maintenance costs and other costs relating to renting the property. However, some of the costs are very unique to short term rentals. These include the service fee charged by the service providers like AirBnB and HomeAway, cleaning costs, advertising costs and other related costs. A short-term rental owner can claim all these costs.

Claiming expenses can be tricky and complicated as they might have to prorated if you are renting only part of the property. Also, any expense claimed must be expense made to generate rental income. At Softron, we have studied the short-term rental market in detail and can help you in being fully compliant with Canada Revenue Agency for your short-term rental income.

Call 905-273-4444 and let the best handle your taxes!

Are you planning your taxes or just filing them?

It’s not tax season right now and therefore not many people are thinking about taxes. But while we will all be filing our taxes a few months later, major tax changes are taking place everyday and they are mostly bad news.

The Government of Canada has recently announced new tax measures against income sprinkling. Income sprinkling is the process where a small business owner can distribute the business income with his/her spouse or an adult child. So if the spouse or adult child is in a lower tax bracket, this can result in huge tax savings.

The Government of Ontario has already announced a 15 percent punitive tax on foreign property buyers but this is not all. The Federal Government announced last year that all property sales must be reported with the tax return even if you sold your principle residence. So, in case you missed it, you should be running to your tax accountant’s office as failure to report can result in penalties up to $8000.

The estate planning laws have also gone through major changes in the last year and an estate of a deceased individual can now only reap the benefits of progressive tax rates for 36 months after the death of an individual. In the past, income splitting could be achieved through testamentary trusts for a longer time period.

The opportunities for tax planning are becoming scarce and complicated every single day. The tax credits are getting reduced or completely getting discontinued every single year. Children’s fitness tax credit, arts tax credit, public transit credit are all a thing of the past now.

So, in these changing times, tax planning is more important than ever. It is important to make use of tax saving tools like TFSA and have an estate plan that will allow for passing on your wealth to the beneficiaries in the most efficient way. Poor estate planning often results in huge tax liabilities and time consuming legal complications for the beneficiaries.

The time to plan your taxes is when you are making investments, selling investments or when you are ready to plan your estate. It is when you are finalizing a structure for your business and also when you are saving funds for your retirement. All this just does not happen during the months of March and April.

Tax planning works best when you have a proactive approach. Talk to your tax accountant today if you are taking a big financial decision or it might be too late. Call 905-273-4444 and book an appointment for all tax issues and Softron tax professionals will be happy to help