Capital gains and dividend income are treated differently than other types.
2010 MARGINAL TAX RATES (for various types of investments)
Non-
Other Capital Eligible Eligible
Income Gains Dividends Dividends
20.06% 10.03% -12.59% 4.16% first $35,859.00
22.70% 11.35% -8.79% 7.46% $35,859.00 – 40,970.00
29.70% 14.85% 1.29% 16.21% $40,970.00 – 71,719.00
32.50% 16.25% 5.32% 19.71% $71,719.00 – 81,941.00
36.50% 18.25% 11.08% 24.71% $81,941.00 – 82,342.00
38.29% 19.15% 13.66% 26.95% $82,342.00 – 99,987.00
40.70% 20.35% 17.13% 29.96% $99,987.00 – 127,021.00
43.70% 21.85% 21.45% 33.71% over $127,021.00
TAX LOSS SELLING
If you will realize capital gains in 2010, or reported capital gains in any of the last 3 years, you may consider selling securities that have gone down in values and are held in a non-registered account. You can then apply the realized capital loss firstly against any capital gains realized in 2010. If you have capital losses that cannot be used to offset gains in the current year, you can carry the loss back to offset net gains in any of the three previous years for a possible refund. Capital losses can be carried forward indefinitely.
Ask your broker – what your year-to-date gains/losses are.
Tell your broker – net capital gains for 2007, 2008 and 2009
All tax loss trades must settle in 2010, so must be done prior to Dec 24th
DIVIDEND INCOME AND LOWER INCOME EARNERS
Eligible Dividend income may not be suitable for low income seniors. The Dividend Tax Credit is wasted. Also the grossed-up income might reduce benefits and increase the cost of prescriptions and public cares services.
CARRYING CHARGES
- Accounting fees
- Investment Counsel Fees
- Interest Paid (look at supplementary info that comes with your T5s)
- Safety deposit box rental fee (see your January bank statement)
INCOME TAX INSTALMENTS
You will be asked to make quarterly income tax instalments when you owe more than $3,000.00 in tax.
Consider having tax withheld from your CPP or OAS cheque (there are special forms)