Comments on: How Investing Taxes Work (Part 2 – Dividends and Interest) http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm Building Wealth through Saving and Investing Sat, 21 Nov 2009 03:00:37 -0500 http://wordpress.org/?v=abc hourly 1 By: Tax Guy http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-2#comment-95013 Tax Guy Fri, 31 Jul 2009 02:33:11 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-95013 @ Mark: Outside a TFSA or RRSP - Yes. You pay tax on the dividend and will receive a tax slip. The amount of the dividend is used to buy more shares so your ACB changes as well. @ Mark:

Outside a TFSA or RRSP – Yes. You pay tax on the dividend and will receive a tax slip. The amount of the dividend is used to buy more shares so your ACB changes as well.

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-95008 FrugalTrader Fri, 31 Jul 2009 02:08:09 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-95008 Mark, if the DRIPs are held in a taxable account, then the dividends are taxable, even if they are reinvested. Mark, if the DRIPs are held in a taxable account, then the dividends are taxable, even if they are reinvested.

]]> By: Mark in Nepean http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-95002 Mark in Nepean Fri, 31 Jul 2009 01:58:56 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-95002 Question for all.... If you have DRIPs, such as ones with CIBC Mellon or Computershare, and you never "see" the dividend income (because its always reinvested) do you have to pay tax on it? Thanks! Question for all….

If you have DRIPs, such as ones with CIBC Mellon or Computershare, and you never “see” the dividend income (because its always reinvested) do you have to pay tax on it?

Thanks!

]]> By: Mark in Nepean http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-95001 Mark in Nepean Fri, 31 Jul 2009 01:57:58 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-95001 Question for all.... If you have DRIPs, such as ones with CIBC Mellon or Compushare, and you never "see" the dividend income (because its always reinvested) do you have to pay tax on it? Thanks! Question for all….

If you have DRIPs, such as ones with CIBC Mellon or Compushare, and you never “see” the dividend income (because its always reinvested) do you have to pay tax on it?

Thanks!

]]> By: Ed Rempel http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-94188 Ed Rempel Tue, 28 Jul 2009 03:17:33 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-94188 Hi Shannon, Pardon the typo. I meant WHOEVER claims the interest deduction on the loan must also claim any tax on the investments. Ed Hi Shannon,

Pardon the typo. I meant WHOEVER claims the interest deduction on the loan must also claim any tax on the investments.

Ed

]]> By: Ed Rempel http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-94016 Ed Rempel Mon, 27 Jul 2009 00:55:06 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-94016 Hi Shannon, However, claims the interest deduction on the loan must also claim any tax on the investments. Tax Guy is right about the beneficial owner being taxed, not necessarily the one whose name is on the account. You need to take a tax position on who borrowed the money to invest. Ed Hi Shannon,

However, claims the interest deduction on the loan must also claim any tax on the investments.

Tax Guy is right about the beneficial owner being taxed, not necessarily the one whose name is on the account. You need to take a tax position on who borrowed the money to invest.

Ed

]]> By: Northern Alex http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-93972 Northern Alex Sun, 26 Jul 2009 16:55:58 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-93972 Me again! :) Just read in the forum that Canadian ETFs are included in the dtc. Me again! :) Just read in the forum that Canadian ETFs are included in the dtc.

]]> By: Northern Alex http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-93953 Northern Alex Sun, 26 Jul 2009 13:44:03 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-93953 Can I use the dividend tax credit for Canada ETFs, too, like XIU? Can I use the dividend tax credit for Canada ETFs, too, like XIU?

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-83930 FrugalTrader Sun, 24 May 2009 17:26:13 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-83930 Frank, all eligible dividends are grossed up by 45% to calculate the dividend tax credit. Frank, all eligible dividends are grossed up by 45% to calculate the dividend tax credit.

]]> By: Frank http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-83925 Frank Sun, 24 May 2009 17:07:51 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-83925 I am confused by this calculation: Ex: $1000 dividends received in 2006 * 45% = $1450 Should it be $450? I am confused by this calculation:

Ex: $1000 dividends received in 2006 * 45% = $1450

Should it be $450?

]]> By: Tax Guy http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-80063 Tax Guy Wed, 29 Apr 2009 11:45:17 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-80063 @ Shannon Here is my answer: 1) Whose account the investments are in is not relevant for tax purposes. The CRA will look at who beneficially owns the investment. That is, with whose funds were the investments purchased? Technically the Tax Act requires marries couples to track every dollar earned in the marriage. 2) If the investment was bought with a loan the interest deductibility depends on whose loan it is. With a joint HELOC the issue is not clear at all. At best it may be 50/50. I know a colleague has posed this exact question to the CRA but a response isn't expected until the fall. Ed Rempel may have some thoughts as well. @ Shannon

Here is my answer:
1) Whose account the investments are in is not relevant for tax purposes. The CRA will look at who beneficially owns the investment. That is, with whose funds were the investments purchased?

Technically the Tax Act requires marries couples to track every dollar earned in the marriage.

2) If the investment was bought with a loan the interest deductibility depends on whose loan it is. With a joint HELOC the issue is not clear at all. At best it may be 50/50. I know a colleague has posed this exact question to the CRA but a response isn’t expected until the fall.

Ed Rempel may have some thoughts as well.

]]> By: Shannon http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-80001 Shannon Wed, 29 Apr 2009 01:57:35 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-80001 I make $80,000. My wife makes $55,000. My dividend's are taxed at 12.91%. My wife's would be taxed at 6.94% if she were to hold them. Question is can she claim the dividends on her Tax Return even though they are in my brokerage account? Would there be any complications because the loan I have for these investments is an investment loan. Will I still be able to write off the interest as an expense? I make $80,000. My wife makes $55,000. My dividend’s are taxed at 12.91%. My wife’s would be taxed at 6.94% if she were to hold them. Question is can she claim the dividends on her Tax Return even though they are in my brokerage account?
Would there be any complications because the loan I have for these investments is an investment loan. Will I still be able to write off the interest as an expense?

]]> By: Marly http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-79993 Marly Wed, 29 Apr 2009 00:26:58 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-79993 Wonderful and informative web site.I used information from that site its great.0 Wonderful and informative web site.I used information from that site its great.0

]]> By: The Canadian Tax Blogger http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-72435 The Canadian Tax Blogger Tue, 03 Mar 2009 18:04:34 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-72435 Foreign securities inside the TFSA will be subject to foreign withholding tax based on the terms of the tax treaty Canada has with the other country. Right now U.S. dividends are subject to 15% withholding and interest on U.S. bonds is not subject to withholding. Also, there is no foreign tax credit available for withholding taxes inside the TFSA. Canada would have to re-negotiate its tax treaties before withholding could be eliminated...Since we just finished the treaty with the US I doubt withholding for TFSA would be eliminated any time soon. Foreign securities inside the TFSA will be subject to foreign withholding tax based on the terms of the tax treaty Canada has with the other country. Right now U.S. dividends are subject to 15% withholding and interest on U.S. bonds is not subject to withholding.

Also, there is no foreign tax credit available for withholding taxes inside the TFSA.

Canada would have to re-negotiate its tax treaties before withholding could be eliminated…Since we just finished the treaty with the US I doubt withholding for TFSA would be eliminated any time soon.

]]> By: MAC http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-38808 MAC Tue, 10 Jun 2008 14:43:53 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-38808 Banks in the US are getting beat, would this be a good time to buy them. Example Bank of America | BAC-N is trading at ~$30.44 and pays a yearly dividen of 2.56 (~8.4% dividen rate of return). Is this correct, seems like this is a good investment even when taxed at 100%? MAC Banks in the US are getting beat, would this be a good time to buy them.

Example
Bank of America | BAC-N is trading at ~$30.44 and pays a yearly dividen of 2.56 (~8.4% dividen rate of return). Is this correct, seems like this is a good investment even when taxed at 100%?
MAC

]]> By: Hedge Against Your Bills by Owning the Company | Million Dollar Journey http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-35354 Hedge Against Your Bills by Owning the Company | Million Dollar Journey Mon, 12 May 2008 09:30:52 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-35354 [...] do I hedge against these painful bills? By becoming part owner of the company and collecting the tax efficient dividends. You see, most of our (Canadian) bills are from big strong dividend payers that are on the market [...]

[...] do I hedge against these painful bills? By becoming part owner of the company and collecting the tax efficient dividends. You see, most of our (Canadian) bills are from big strong dividend payers that are on the market [...]

]]> By: Four Pillars http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-33706 Four Pillars Fri, 02 May 2008 14:21:13 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-33706 RG - just to add to FT's comment - while it's true that only Canadian companies are eligible for the enhanced dividend, it doesn't matter which exchange you buy it in (or what currency) - you will own the same company. ie one share of BMO bought on the TSX is the same as a share bought on AMEX. Mike RG – just to add to FT’s comment – while it’s true that only Canadian companies are eligible for the enhanced dividend, it doesn’t matter which exchange you buy it in (or what currency) – you will own the same company.

ie one share of BMO bought on the TSX is the same as a share bought on AMEX.

Mike

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-33627 FrugalTrader Fri, 02 May 2008 06:00:56 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-33627 RG, only Canadian public companies are eligible for the enhanced div tax credit. US div are taxed like interest, 100% @ your marginal rate. Some trusts do contain a dividend portion, but most distribute interest and return of capital. RG, only Canadian public companies are eligible for the enhanced div tax credit. US div are taxed like interest, 100% @ your marginal rate.

Some trusts do contain a dividend portion, but most distribute interest and return of capital.

]]> By: RG http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-33607 RG Fri, 02 May 2008 02:09:26 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-33607 Hi Mark, Great articles! I just had a couple of questions I am interested in buying stock in a Canadian public company, does it matter if I buy it on the TSE or the NYSE to be eligible for the "enhanced dividend tax credit" you spoke of? Also, what is the scope on "TRUST" funds? Thanks! Hi Mark,

Great articles! I just had a couple of questions

I am interested in buying stock in a Canadian public company, does it matter if I buy it on the TSE or the NYSE to be eligible for the “enhanced dividend tax credit” you spoke of?

Also, what is the scope on “TRUST” funds?

Thanks!

]]> By: Ed Rempel http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm/comment-page-1#comment-32311 Ed Rempel Wed, 23 Apr 2008 05:07:32 +0000 http://www.milliondollarjourney.com/how-investing-taxes-work-part-2-dividends-and-interest.htm#comment-32311 Hi Mark, Oops, did I say "as high as 7%" for low income seniors? Tax on dividends after age 65 is actually 73% if you have no other income. That is punitively high. It is generally 30% or higher for anyone over 65 with income over $37,000 or under $15,000. Ed Hi Mark,

Oops, did I say “as high as 7%” for low income seniors? Tax on dividends after age 65 is actually 73% if you have no other income. That is punitively high.

It is generally 30% or higher for anyone over 65 with income over $37,000 or under $15,000.

Ed

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