Free Porn
xbporn
https://www.bangspankxxx.com
voguerre
southampton escorts
Home Business Move over RRSP, TFSA: Here are 7 strategies for maximizing investment returns...

Move over RRSP, TFSA: Here are 7 strategies for maximizing investment returns you might not know about

By Jason Heath

Investors tend to focus first and foremost on gross returns. Since an investor only gets to keep their net return after-tax, tax should be an important factor when it comes to investment decisions. The most basic example of this is to make the most of available tax shelters. Most people are aware of tax shelters like RRSPs, TFSAs and RESPs, but, if you are self-employed, you can even create your own tax shelter by incorporating and leaving some of your income in a corporation, paying a lower tax rate than you would otherwise pay personally. Jason Heath outlines seven more considerations for how to make your investments more tax-efficient.

How the wealthy can beat Ottawa’s new rules by becoming low-income to save big on their taxes

A new tax strategy for high-income earners: Ted Rechtshaffen outlines how a family can maintain their $180,000-lifestyle on taxable income of just $30,000.

  1. Investors with RRSPs and TFSAs may think that they don’t need to worry about the tax implications of their investments, but that isn’t true: foreign dividends earned in a TFSA are subject to withholding tax from the source country, and Canadian mutual funds or Canadian-listed exchange-traded funds that own foreign stocks are also subject to withholding tax on the dividends earned in an RRSP. Furthermore, RRSP withdrawals will be taxable someday, so how big to grow an RRSP and when to take withdrawals is another important tax consideration for registered accounts.

U.S. stocks that trade on a U.S. stock exchange are not subject to withholding tax when held in an RRSP — but they are in a TFSA. So RRSPs may be a better option than TFSAs for U.S. stocks. But where you hold non-U.S. foreign stocks depends on your overall asset allocation and whether you have non-registered investments as well.

  1. 2. Investors with non-registered investments should consider leaning more towards earning capital gains or Canadian dividend income. Capital gains are only 50 per cent taxable in a non-registered account. Canadian dividends are taxed at a lower rate than interest or foreign dividends, but the exact tax rate varies depending on your tax bracket.
  2. Real estate investment trusts (REITs) and limited partnerships (LPs) generally pay out distributions to investors that take different forms. While some of the income may be considered taxable dividend income, some portion may also be considered return of capital. Tax is not immediately payable on return of capital, but will reduce your cost base on an investment and increase the taxable capital gain when you ultimately sell it. REITs and LPs can boost after-tax returns in a taxable account.
  3. 4. In the ETF space, Purpose Investments’ corporate class ETFs currently allow investors to switch between different funds without incurring taxable capital gains. Horizons Exchange Traded Funds offers swap-based ETFs that convert taxable interest and dividends into deferred capital gains.

Corporate-class mutual funds have higher fees and promote active management versus their lower-fee, passive ETF cousins, but can also reduce tax on non-registered investments. CI Investments is the largest in the corporate class mutual fund industry in Canada, with over 60 offerings. But, the recent federal budget will do away with the tax-free switching option available to corporate-class investors later this year, so the clock is ticking on this particular corporate class tax efficiency.

  1. Universal life insurance has a savings feature that can be allocated into various active and passive investment options that grow tax-free. Fees tend to be higher than non-insurance solutions, so fees and tax savings need to be compared. Whole life insurance invests some of your premiums on a tax-free basis by the insurance company into unique asset classes, such as private placement bonds, residential and commercial mortgages, private equity and policy loans to other policyholders. Commissions are generally high up-front, so a whole life policy should not be a short-term commitment.
  2. Rental real estate can be extremely tax-efficient. Mortgage interest is tax-deductible and a financed rental property can sometimes create tax refunds. Even cash flow positive properties can have income sheltered from tax by claiming depreciation on your tax return.
  3. Flow-through shares can earn tax-effective returns and create tax refunds in excess of 50 per cent of your investment. The government incentivizes investors to buy flow-through shares issued by junior resource companies. These shares are especially risky and that is why tax refunds are used to attract investors.

In summary, there are many different tax-efficient ways to invest, but keep in mind that tax should never be the primary decision-making factor. A thorough understanding of retirement and estate objectives should be a starting point for any investment plan. From there, seek out tax-efficient returns, because when all is said and done, you only get to keep the after-tax amount.

Jason Heath is an advice-only / fee-only Certified Financial Planner (CFP) and income tax professional at Objective Financial Partners Inc. in Toronto

 

Most Popular

How to Safely Celebrate Easter and Passover

Though it may not be quite the same as past holidays, this Easter, Passover or any other event can still be filled with love,...

Magic Days Coming to Museum of Surrey

Surrey, BC – Lon Mandrake, magician, and son of the late famous Mandrake the Magician, will perform a little abracadabra at Museum of Surrey on...

TransLink completes modernization of 1980s-era SkyTrain technology

NEW WESTMINSTER: TransLink has replaced aging speakers and signs on the SkyTrain system by installing 280 new customer information screens and over 1,400 new...

Fraser Health declares COVID-19 outbreak at Abbotsford Regional Hospital

SURREY – Fraser Health has declared a COVID-19 outbreak at Abbotsford Regional Hospital after evidence of transmission in a medicine unit. Four patients at Abbotsford Regional...