Your clients who are invested in non-registered investments need to be aware of the taxation of their investments so that they can select the solution that will put the most money in their pocket.

This chart shows the difference in the after-tax value of $10,000 in income from interest, dividends, capital gains and return of capital1.

1Assumes a marginal tax rate of 46.4%.

Here’s the breakdown of how different investments are taxed:

  1. GIC, bonds and other fixed-income returns are taxed as regular income at their full marginal tax rate (MTR) – this means that on $10,000 of income, they lose $4,640 or almost half to tax.
  2. Income from Canadian dividends is taxed at approximately 29.5% – so they pay about $2,950 in tax.
  3. Capital gains attract a 23% rate – so they pay only $2,320 in tax on $10,000.

Return of capital – ROC – attracts no tax since it is considered a return of a portion of the original capital. Please note that T-Class shares also may pay a taxable quarterly dividend.

 

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