If you are asking yourself this question... you most likely are not
Income tax planning is not just putting together all your information slips and completing your tax return.
Tax planning for the 2023 tax year (last year) should be done before 2023 or at least early in 2023.
Tax planning is not trying to find tax credits you can use when completing your returns, true tax planning eliminates potential tax liabilities and takes advantage of the few ways to reduce your taxes available to Canadians
This is best done at the beginning of the year. Start tax planning for 2024 NOW
How does tax work on my investments?
The Canadian tax system does not treat all investment income equally. Different types of investment income have different tax calculations.
Interest Income - All the interest income earned from bank accounts, GICs, bonds, and other interest-paying investments is added to your earned income at an equal rate.
Dividend Income - Has a discounted task rate as compared to interest income because of the dividend tax credit available
Capital Gains Income - Earned from the net profits made from an investment are taxed more favourably. Only 50% of capital gains earned are taxable.
So how much tax will I pay on these different investments?
If you made $1000 of investment income, at the highest tax rate in Ontario, how much would you pay approximately?
If it's Interest Income, tax = $536
If it's Dividend Income, tax = $390
If it's Capital Gains Income, tax = $270
These are things that can have a drastic impact on your net investment growth and are important to keep in mind when building your portfolio!
If you have more questions on tax planning or the tax impact on your investments, be sure to book a meeting with your advisor!
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