If you have investments, expect to pay taxes. Fortunately, there are four ways – almost anyone can use – to can save at tax time. First, as many people know having an RRSP allows you to defer taxes on your contribution, so you can withdraw the money at a future time in retirement at a lower rate. Unlike an RRSP, investments to Tax-Free Savings Accounts Accounts (TFSA) are not deductable, but future returns from investments in a TFSA are not taxed – ever.
- Other options for saving money on your taxes (outside an RRSP or TFSA) include choosing tax saving investments that allow you to use the dividend tax credit, or will return capital gains, which are taxed at 50 percent in the year you sell it versus 100 percent from fixed income.
- The dividend tax credit is a non-refundable tax credit which applies when Canadian dividends are included in income.
- Taxpayers can even benefit from a capital loss by deducting it their capital gains going back three years or forward indefinitely.
“Tax breaks aren’t easy to come by for the average investor. That’s why it’s important to take advantage of whatever is available.”