Comments on: How to Optimize Dividend Income Tax! http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm Building Wealth through Saving and Investing Sun, 12 Feb 2012 23:42:26 -0330 http://wordpress.org/?v=abc hourly 1 By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-116674 FrugalTrader Sun, 28 Nov 2010 00:48:27 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-116674 @showtime, what you are proposing is a leveraged investment strategy which is suited for those with high risk tolerance. Here is an article that may help you decide: http://www.milliondollarjourney.com/should-i-start-the-smith-manoeuvre.htm As well, it appears that you are using your HELOC for personal use, and intend to use it for investments as well. From my conversations with accountants, it is recommended to keep yoru personal and investment borrowing separate. To do this, you'll have to contact your bank to see if you can get sub accounts within your HELOC. @showtime, what you are proposing is a leveraged investment strategy which is suited for those with high risk tolerance. Here is an article that may help you decide: http://www.milliondollarjourney.com/should-i-start-the-smith-manoeuvre.htm

As well, it appears that you are using your HELOC for personal use, and intend to use it for investments as well. From my conversations with accountants, it is recommended to keep yoru personal and investment borrowing separate. To do this, you’ll have to contact your bank to see if you can get sub accounts within your HELOC.

]]> By: Showtime http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-116673 Showtime Sat, 27 Nov 2010 23:22:16 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-116673 FT, thx for the reply and link. Some more background info about my situation may clarify. - I have a work pension, an ok amount in rrsp, a miniscule amount in tfsa, zero in cash/margin acct. - I have no true liquid cash savings (by my definition). After expenses, rrsp contrib, and tfsa contrib, any extra cash is stored in heloc ie to pay down debt. Of course I have cash for the occasional discretionary expense. - I'm paying off a mortgage at 3% and a large heloc balance at 4% (current nums). If I borrowed to invest, it would be from heloc. - I am making concerted efforts to pay down debt but am exploring the possibility that I can still make investment profit even after factoring taxes and borrowing interest to invest. (Agree or disagree?) - I am looking at stocks/trusts that pay monthly distributions. I would use the distribs to either reinvest or pay down debt. - I'm looking to be well-rounded and cover my bases, that's why thinking of using tfsa and not rrsp, since i have much more in rrsp than tfsa. So now I'm thinking of holding assets in cash/margin acct and tfsa (both), depending on the type of distribs. Is this strategy sound or do you have other thoughts and recommendations? Thx. FT, thx for the reply and link. Some more background info about my situation may clarify.
- I have a work pension, an ok amount in rrsp, a miniscule amount in tfsa, zero in cash/margin acct.
- I have no true liquid cash savings (by my definition). After expenses, rrsp contrib, and tfsa contrib, any extra cash is stored in heloc ie to pay down debt. Of course I have cash for the occasional discretionary expense.
- I’m paying off a mortgage at 3% and a large heloc balance at 4% (current nums). If I borrowed to invest, it would be from heloc.
- I am making concerted efforts to pay down debt but am exploring the possibility that I can still make investment profit even after factoring taxes and borrowing interest to invest. (Agree or disagree?)
- I am looking at stocks/trusts that pay monthly distributions. I would use the distribs to either reinvest or pay down debt.
- I’m looking to be well-rounded and cover my bases, that’s why thinking of using tfsa and not rrsp, since i have much more in rrsp than tfsa.

So now I’m thinking of holding assets in cash/margin acct and tfsa (both), depending on the type of distribs. Is this strategy sound or do you have other thoughts and recommendations? Thx.

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-116665 FrugalTrader Sat, 27 Nov 2010 12:04:17 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-116665 @showtime, imo, you're better off using real savings to fund your TFSA. Do you have a defined benefit pension with work? Why aren't you using your RRSP? As to your last question, here is an article about <a href="http://www.milliondollarjourney.com/income-trust-distributions-and-taxation.htm" rel="nofollow">how income trusts taxation works</a>. @showtime, imo, you’re better off using real savings to fund your TFSA. Do you have a defined benefit pension with work? Why aren’t you using your RRSP? As to your last question, here is an article about how income trusts taxation works.

]]> By: Showtime http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-116660 Showtime Sat, 27 Nov 2010 04:42:04 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-116660 I read the article but I'm stil not sure what's best for me, mainly because I'm thinking about using tfsa, not rrsp. I plan on using borrowed money to invest in something that will bear dividends eg REITS, dividend stocks, funds/trusts, etc. Would it be better to hold this in a tfsa or a regular non-tax sheltered acct? TFSA is tax-free. But w/ regular acct, there is the dividend tax credit and deduction for borrowing money to invest. I'm hoping that someone w/ a better understanding of rules and math can help me out w/ this. Using average/typical numbers, which method is better financially? If it helps w/ the calculation, my gross/pre-tax employment income is about $76k/year. BTW, is the dividend tax credit applicable to all the investments I mentioned, including REITs? Thx. I read the article but I’m stil not sure what’s best for me, mainly because I’m thinking about using tfsa, not rrsp. I plan on using borrowed money to invest in something that will bear dividends eg REITS, dividend stocks, funds/trusts, etc. Would it be better to hold this in a tfsa or a regular non-tax sheltered acct? TFSA is tax-free. But w/ regular acct, there is the dividend tax credit and deduction for borrowing money to invest. I’m hoping that someone w/ a better understanding of rules and math can help me out w/ this. Using average/typical numbers, which method is better financially? If it helps w/ the calculation, my gross/pre-tax employment income is about $76k/year. BTW, is the dividend tax credit applicable to all the investments I mentioned, including REITs? Thx.

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-115078 FrugalTrader Thu, 02 Sep 2010 23:07:20 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-115078 @KK, thanks for the idea, I will update the data and report in the near future. @KK, thanks for the idea, I will update the data and report in the near future.

]]> By: KK http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-115073 KK Thu, 02 Sep 2010 10:59:14 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-115073 Hi FT, Would you please update the table with the 2010 numbers? Thanks! Hi FT,

Would you please update the table with the 2010 numbers?

Thanks!

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-100794 FrugalTrader Fri, 21 Aug 2009 12:37:01 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-100794 BCM, there are changes to be made to this post, stay tuned! BCM, there are changes to be made to this post, stay tuned!

]]> By: Big Cajun Man http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-100793 Big Cajun Man Fri, 21 Aug 2009 12:21:02 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-100793 Can you post an updated version of this table for 2009 or is it still mostly true? Can you post an updated version of this table for 2009 or is it still mostly true?

]]> By: The Mail Bag: Dividend Question and Strategy | Million Dollar Journey http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-67197 The Mail Bag: Dividend Question and Strategy | Million Dollar Journey Thu, 15 Jan 2009 11:30:12 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-67197 [...] not as simple as getting $57k in tax free dividends in Ontario. I’ve written about how to optimize dividend income tax before and the table indicated in the article is the maximum that you can earn INCLUDING your [...]

[...] not as simple as getting $57k in tax free dividends in Ontario. I’ve written about how to optimize dividend income tax before and the table indicated in the article is the maximum that you can earn INCLUDING your [...]

]]> By: YJ http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-66772 YJ Sun, 11 Jan 2009 17:39:52 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-66772 Hi FT, Thanks for the great postings! I live in BC and am looking at the table in the link: http://www.taxtips.ca/marginaltaxrates.htm#BC Q1. I am making about $50K. The table says -0.38% for Eligible Dividends (Canadian Dividends) for my income bracket. So how did you get $68700 for BC? Q2. Are all Canadian stocks paying that pay dividends in TSX Eligible Dividends? Thanks, Hi FT, Thanks for the great postings!

I live in BC and am looking at the table in the link: http://www.taxtips.ca/marginaltaxrates.htm#BC

Q1. I am making about $50K. The table says -0.38% for Eligible
Dividends (Canadian Dividends) for my income bracket. So how did you get $68700 for BC?

Q2. Are all Canadian stocks paying that pay dividends in TSX Eligible
Dividends?

Thanks,

]]> By: newbie http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22889 newbie Thu, 17 Jan 2008 20:29:24 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22889 Good advice... we'll have to start looking around for one. Our taxes may start getting complicated as I am self employed, so it makes sense. I think the wealthy barber even recommends professional help. I think I'll understand investing long before I can make sense of tax documents. I consider my hubbie a genius in so many ways and he has a head for numbers (he works with them for a living, never needs a calculator and works things out to the penny in the grocery store), but even he seems confused by taxation. Good advice… we’ll have to start looking around for one. Our taxes may start getting complicated as I am self employed, so it makes sense. I think the wealthy barber even recommends professional help. I think I’ll understand investing long before I can make sense of tax documents. I consider my hubbie a genius in so many ways and he has a head for numbers (he works with them for a living, never needs a calculator and works things out to the penny in the grocery store), but even he seems confused by taxation.

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22776 FrugalTrader Wed, 16 Jan 2008 13:37:15 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22776 newbie, if you plan on staying in NT for your working careers, then there is some tax benefit of keeping your dividends outside of an RRSP. However, you need to keep in mind the big picture. If you have kids etc, the extra income added onto the low income earner will reduce the child benefit from the government. If I were you, I would contact a GOOD accountant to see what the best scenario would be. newbie, if you plan on staying in NT for your working careers, then there is some tax benefit of keeping your dividends outside of an RRSP. However, you need to keep in mind the big picture. If you have kids etc, the extra income added onto the low income earner will reduce the child benefit from the government. If I were you, I would contact a GOOD accountant to see what the best scenario would be.

]]> By: newbie http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22743 newbie Wed, 16 Jan 2008 03:43:51 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22743 just to clarify: in NT would it be better in a couple for the low end earner (15 thousand) to do the dividend investment inside or outside a split spousal rsps, (i'm assuming outside by what you've said), or for the couple if the spouse with the high end income (73 thousand) puts dividends outside/inside? by that I mean if there is a split spousal rsp, would there be any benefit to the the higher wage earner having an additional rsp just for dividends, if that's even possible? or to simplify (because i'm even confusing myself), who should do what where? just to clarify: in NT would it be better in a couple for the low end earner (15 thousand) to do the dividend investment inside or outside a split spousal rsps, (i’m assuming outside by what you’ve said), or for the couple if the spouse with the high end income (73 thousand) puts dividends outside/inside? by that I mean if there is a split spousal rsp, would there be any benefit to the the higher wage earner having an additional rsp just for dividends, if that’s even possible?

or to simplify (because i’m even confusing myself), who should do what where?

]]> By: newbie http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22742 newbie Wed, 16 Jan 2008 03:29:18 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22742 so that makes it better outside of rsps? so that makes it better outside of rsps?

]]> By: FrugalTrader http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22725 FrugalTrader Tue, 15 Jan 2008 23:19:02 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22725 newbie, this is the tax tips chart for NT: http://www.taxtips.ca/marginaltaxrates.htm As you can see from the chart, someone making 73k in NT would pay around 5.41% in taxes on their dividends received for that year. NT is actually very favorable for dividend investors (taxation wise). newbie, this is the tax tips chart for NT:
http://www.taxtips.ca/marginaltaxrates.htm

As you can see from the chart, someone making 73k in NT would pay around 5.41% in taxes on their dividends received for that year. NT is actually very favorable for dividend investors (taxation wise).

]]> By: newbie http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22724 newbie Tue, 15 Jan 2008 23:07:25 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22724 I am having trouble understand the taxtips charts. Can someone tell me where would NT fit in this if you have two income family with one high (eg. 73 thousand), and one low (say 15 thousand). I am having trouble understand the taxtips charts. Can someone tell me where would NT fit in this if you have two income family with one high (eg. 73 thousand), and one low (say 15 thousand).

]]> By: Leveraged Dividend Investing for the Cash Flow | Million Dollar Journey http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22685 Leveraged Dividend Investing for the Cash Flow | Million Dollar Journey Tue, 15 Jan 2008 13:46:26 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22685 [...] note that Newfoundland has the highest dividend tax around, so if you are living in BC or other dividend favorable province, you'll most likely turn cash flow positive [...]

[...] note that Newfoundland has the highest dividend tax around, so if you are living in BC or other dividend favorable province, you'll most likely turn cash flow positive [...]

]]> By: FinancialJungle.com http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-22189 FinancialJungle.com Wed, 09 Jan 2008 18:50:57 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-22189 I was in the middle of writing a piece on dividend tax credit, and then stumbled on this great post of yours. Well, I'll probably just finish mine anyway even if it's redundant. I was in the middle of writing a piece on dividend tax credit, and then stumbled on this great post of yours. Well, I’ll probably just finish mine anyway even if it’s redundant.

]]> By: Adam Soltys http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-17984 Adam Soltys Mon, 26 Nov 2007 06:00:39 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-17984 [...] my RRSP this year and put any leftover cash into dividend paying stocks to take advantage of the dividend tax credit which is especially attractive to us British Columbians. So today I filled out applications for two [...]

[...] my RRSP this year and put any leftover cash into dividend paying stocks to take advantage of the dividend tax credit which is especially attractive to us British Columbians. So today I filled out applications for two [...]

]]> By: Konstantin http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm/comment-page-1#comment-12458 Konstantin Tue, 18 Sep 2007 19:17:15 +0000 http://www.milliondollarjourney.com/how-to-optimize-dividend-income-tax.htm#comment-12458 FT /C_F, Thank you guys! FT /C_F,

Thank you guys!

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