Make no mistake: taxes matter

You decide how, when and if to pay investment taxes

Linda is living a comfortable retirement. She has a hefty pension, receives Old Age Security and CPP, RRIF and annuity income, and has a non-registered investment portfolio. She has been told that dividend-paying stocks are good investments and offer some tax relief through the dividend tax credit.

That sounded like a good idea. But then seemingly out of the blue the government started clawing back her Old Age Security based in part on her grossed up dividend income. It turns out the dividend tax credit isn’t even considered when the government decides how much of her OAS she gets to keep.

And what about Penelope? For the life of her she can’t figure out why she lost her Guaranteed Income Supplement. She has little in the way of income. But then she received an inheritance that provided her with (you guessed it) dividend income.

Once it is grossed up for taxes, her GIS is clawed back at a rate of close to 75 cents on the dollar. Then there’s the HST tax credit as well as the subsidy she loses on her MSP premiums, plus whatever taxes she has to pay. She might as well not even receive dividends.

Ed’s another story — a reformed day-trader who still had something left when he gave up trying to speculate on the next big thing (though he did fall off the wagon to pick up some Facebook). To his credit he made some brilliant investment decisions during the last bull market, but has had trouble holding on to his gains during corrections. But now he wants to invest responsibly – in things that are more conservative. The problem is, however, that he has capital loss carry-forwards from his days as a stock market guru and would like to put them to use.

Then there is Jennifer – a widow with no children of her own, but one stepson who will receive her investment portfolio after she is gone. If Jennifer had her druthers, her estate would pay all the investment taxes after she is gone – rather than her paying them now.

It turns out they can all have their druthers. Using a recently developed process, investors today have the ability to choose their poison. No longer does investing in bonds, for example, necessarily mean interest income. Instead – when, how, and if you pay taxes can be your decision, and can be based on you individual circumstances.

Linda can have her dividends taxed primarily as capital gains, thereby helping to preserve her Old Age Security. Penelope can invest in a bond portfolio with the bulk of the taxes deferred to a time of her choosing.

Ed can invest in safer investments, but elect to have income characterized as capital gains. And Jennifer can still receive income from her portfolio, but defer the bulk of the taxes until after she is gone.

How is all this possible? There is no simple answer as the solutions will vary depending on individual circumstances. But the tools and the process are there for your benefit.

Feel free to call or email for more on this topic, or visit  HYPERLINK “http://www.jimgrant.ca” www.jimgrant.ca for info on upcoming presentations on this or other topics.

 

 

 

Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). The views of the author do not necessarily reflect those of RJL. This article is for information only. Raymond James Ltd. is a member of Canadian Investor Protection Fund.  For more information feel free to call Jim at (250) 594-1100, or email at  HYPERLINK “mailto:jim.grant@raymondjames.ca” jim.grant@raymondjames.ca. and/or visit www.jimgrant.ca.

 

 

Just Posted

Parksville’s Arrowsmith Lodge and Cokely Manor celebrate 50 years

Week of ‘60s-themed activities starts on April 26

UPDATE: Missing kayakers located safe and sound in Welcome Bay

Pair were reported missing April 22, in vicinity of Lasqueti Island

Review: The Magic of ‘Almost, Maine’

ECHO Players production runs through May 5 at the Village Theatre in Qualicum Beach

Coombs farm auction returns April 28

CFI hosts 41st annual auction

What’s age got to do with it? B.C. couple with 45-year gap talks happy marriage

An Armstrong couple that has 45-year age gap began turning heads after being featured on show Extreme Love.

WATCH: South Vancouver Island shooting an ‘isolated and targeted’ incident, say police

One person in custody, another fled following shooting and crash on West Shore

Woe, Canada: Bruins down Maple Leafs 5-1 in Game 7

No Canadian teams left in Stanley Cup playoffs

Defence accuses officer of ‘incompetence’ in trial for B.C. man accused in daughters’ murder

Double murder trial for the Victoria father accused of killing his two young daughters continues

Should B.C. parents receive money if they make sure their kids are vaccinated?

New survey looks at public opinion around government’s role in forcing immunizations

B.C. men challenge constitutionality of Canada’s secret no-fly list

Parvkar Singh Dulai says he received a “denial of boarding” notification under the no-fly program last May 17

Murder on B.C. property didn’t need to be disclosed before sale, court rules

Buyer had tried to break contract after learning a man with ties to crime had been murdered there

B.C.’s largest Vaisakhi festival target of threatening Facebook post: Surrey RCMP

Police say they are investigating the posts on Facebook, after local MLA forwarded screenshots

Pug life: B.C. town boasts waggish list of dog names

Freedom-of-information request lists most ‘pupular’ dog names registered in White Rock

Most Read