Comments on: How Investing Taxes Work (Part 1 – Capital Gains)

By: Paul

Paul — Wed, 11 Nov 2009 19:23:21 +0000

One follow up question, is it okay for me to assume that platform fees paid will be deducted for tax purposes in non registered, non business account?

By: FrugalTrader

FrugalTrader — Tue, 10 Nov 2009 19:23:36 +0000

paul, investing fees should be paid outside an RRSP. The reason being is that RRSP contribution room is limited, so might as well use non-rrsp dollars to pay expenses.

By: paul

paul — Tue, 10 Nov 2009 19:17:11 +0000

Hi guys,

I am about to sign up for a questrade platform. But could not decide if i want it to pay for my platform fee from within the rrsp account or non rrsp. is that fee deductable.

Thanks

By: FrugalTrader

FrugalTrader — Mon, 27 Jul 2009 15:54:10 +0000

I know that XDV can be under a synthetic DRIP with any discount brokerage (ability to buy at least 1 share/distribution, otherwise distributed as cash). However, I don’t think you can drip directly from ishares.

By: invetor

invetor — Mon, 27 Jul 2009 15:01:15 +0000

Great information.
I have a few questions need to be clarified.
I am going to buy etf XDV through sharewoner. I know there is ROC.
Is XDV good for Drip

Thanks

By: FrugalTrader

FrugalTrader — Mon, 27 Jul 2009 14:57:05 +0000

invetor, here is a detailed explanation of how return of capital works.

By: invetor

invetor — Mon, 27 Jul 2009 14:54:36 +0000

Great information.
I have a few questions need to be clarified.
I am going to buy etf XDV through sharewoner. I know there is ROC.
Like you said I have to half the ROC as my income.
If I use qicken to file my tax Is there form available for the ROC.

Thanks

By: FrugalTrader

FrugalTrader — Sun, 12 Jul 2009 11:51:21 +0000

Sam, I’m no guru. :) But to answer your question, if you transfer shares to an RRSP, it’s deemed to be sold on the day of transfer. So if there’s a capital gain, you will have to pay tax anyways. If you really want to avoid the capital gains tax, you could donate the shares to charity.

http://www.milliondollarjourney.com/charitable-donation-tax-credit-part-2-strategies.htm

By: sam

sam — Sun, 12 Jul 2009 03:23:13 +0000

Please guru help me out on this..
I have capital gain this year around $1000 on ths stock with Etrade and i have RRSP with different institution so is there any way if i can move this money to RRSP to save capital gain amount.
Not sure how it will work but please advise.

Thanks

By: FrugalTrader

FrugalTrader — Fri, 05 Jun 2009 11:54:30 +0000

pwt, yes that will work and will result in $0 capital gains tax. However, note that when you withdraw from the RRSP down the road that it will be taxed as income.

By: poor white trash

poor white trash — Fri, 05 Jun 2009 02:21:01 +0000

I’ve recently decided on a new registered/non-registered strategy please tell me what you think. It’s pretty simple but i dont know if anyone really thinks of it.

1. Invest everything in non-registered equities
2. put 50% of any capital gains into RRSP’s

putting 1/2 your capital gains into RRSP’s will give you a deduction that year equal to what you owe the Feds on the capital gains.

Basically you get to invest the money in RRSP’s now that otherwise would goto the government for free. Then even if you lose it all in RRSP investments it was the governments money anyway.

By: investment advisor

investment advisor — Wed, 20 May 2009 01:13:43 +0000

The real tricky part is that no one knows what tax rates will be when you want to take the money out. That’s why it’s good advice not to have all of your retirement money in one “tax bucket”. If you have it spread around different “tax buckets”, you can choose the best one to pull from depending on tax rates at the time.

By: Jay

Jay — Sat, 09 May 2009 21:11:05 +0000

I have a US funded Forex account and im living in Canada. How are the capital gains calculated? Do i have to keep track of the exchange rate for every trade i make and capital gains will be calculated in the canadian currency? if so that seems like alot of work, no

By: Miguel

Miguel — Mon, 16 Feb 2009 17:45:56 +0000

I appreciate the article, it helps shed some light on things. I do have one question though… If you have capital gains/losses in a given year, is that sort of thing tracked for you by your broker, or do you have to keep track yourself?

By: mojo30

mojo30 — Thu, 12 Feb 2009 21:37:33 +0000

thanks

By: FrugalTrader

FrugalTrader — Thu, 12 Feb 2009 16:52:14 +0000

mojo30, in a taxable (non-reg) account, capital gains tax is owed upon selling a profitable stock.

By: mojo30

mojo30 — Thu, 12 Feb 2009 15:38:25 +0000

Hi Guys,

first post, I have been browsing off and on for a while and decided to join the conversation.

Do capital gains taxes have to be paid if the money is not withdrawn?

By: Income Trust Distributions and Taxation | Million Dollar Journey

Income Trust Distributions and Taxation | Million Dollar Journey — Mon, 26 Jan 2009 11:31:08 +0000

[...] Capital Gains – Capital gains is another popular method of distributions and is taxed 50% of your marginal rate. [...]

By: FrugalTrader

FrugalTrader — Sun, 18 Jan 2009 00:51:32 +0000

RM, at first glance, your math looks correct. Looking back, perhaps I was a bit quick to assume that keeping capital appreciating investments outside the RRSP is the best bet. However, one thing you have to note is that you assume that the investor reinvests 100% of the tax refund. Once the investor starts "spending" the rrsp tax refund (which is, unfortunately, what a majority of people do), the rrsp's power quickly dwindles. A common question these days is not rrsp vs non-reg, it's now rrsp vs. tfsa.

By: RM

RM — Sun, 18 Jan 2009 00:06:48 +0000

I have a question about your RRSP vs. non-registered account conclusion. When I contribute to my RRSP, the contribution is tax deductible. So (simplistically) if I’m in the top marginal bracket and get a $5,000 bonus at the end of the year, I can contribute $5,000 to my RRSP to earn investment returns. After 30 years at 8% returns (all cap gains) I would have $50,313 in my RRSP. If I took it all out, and was taxed on the full amount at the top marginal tax rate (43%) I would have $28,679 (=$50,313*(1-43%)).

Now, if instead I invested the money in a non-registered account outside of my RRSP, I would start with $2,850 after tax (at 43%). Compounding this at 8% for 30 years I would have $28,679 in my non-registered account. If I sold all of my securities at that point and realized a $25,829 gain (=$28,679 minus $2,850) I would incur taxes of $5,553 (=$25,829*50% inclusion rate*marginal 43% tax rate). This would leave me with $23,126 (=$28,679-$5,553).

If I compare the two, I’d be $5,553 wealthier ($28,679-$23,126) by investing through my RRSP. Note that, the benefit from investing through my RRSP would be even greater if I begin drawing from my RRSP after I retire, because I would no longer be taxed at the top marginal rate on the money that I am withdrawing (since the withdrawals from my RRSP would be my only source of income).

Let me know if there’s something wrong with my analysis.