February 5, 2019

Four tax tools to boost investment returns

Taxes are usually the bane of investors, because they nibble away at investment earnings. However, there are several tax tools that could safeguard or even plump up your investment dollars. For example, using a tax-free savings account, or a registered retirement savings plan, allows investors to grow their dollars in a tax-free way, using any of a wide array of available securities. Other ways that investors can potentially avoid losing some of their investment earnings include using a capital gains exemption or a dividend tax credit.

Key Takeaways:

  • One main difference between a registered retirement savings plan (RRSP) and a tax-free savings account (TFSA) is that in the latter, you cannot deduct contributions from taxable income.
  • Contributions and gains inside an RRSP are not taxed until they are withdrawn – ideally in retirement when the plan holder is in a lower tax bracket.
  • An investor should also consider the capital gains exemption (only half of equity gains are taxed), using equity losses to offset gains, or the dividend tax credit (for eligible dividend stocks) to boost returns over the long-term.

“Taxes are normally seen as a drain on investments but there are four tax tools available to the average investor that could actually boost returns over the long term.”

Read more: https://www.bnn.ca/personal-investor-four-tax-tools-to-boost-investment-returns-1.1058096

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