The following post is written by Brian So, a financial advisor and blogger at www.aafsinsurance.com. Image credit: magcom / 123RF Stock Photo While my previous posts focused on the impact of withholding tax on dividends paid from the US and foreign companies, I realize that most people have a high concentration of their portfolio in the Canadian market. Therefore, to wrap up my mini-series on dividends, the last topic will be on dividends paid by Canadian companies. Don’t worry, there won’t be any complex withholding tax rules discussed in this post. Dividends are payments made by corporations to their shareholders. Because dividends are paid out of after-tax profits of corporations, the individual shareholder receives preferential tax treatment to offset double taxation. This comes in the form of the gross-up and non-refundable dividend tax credit. At first glance, the gross-up may seem disadvantageous because it appears you are paying tax on money you didn’t receive. But tax relief ...

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The following post is written by Brian So, a financial advisor and blogger at www.aafsinsurance.com. Since my last post generated a lot of interesting discussion on which account to hold US stocks and ETFs, I’ll follow it up with a post on the impact of withholding taxes of holding international (non US) dividend stocks in different accounts. Canada does not just have tax treaties with the US with respect to dividends paid to Canadians from US stocks. We also have tax treaties with 89 other countries in force and treaties signed but not in force with about a dozen other countries. What this means is that dividends received from shares of companies in these countries will also be subject to withholding tax, depending on which account you hold these shares in. You would be able to claim the foreign tax credit (FTC) to recover the amount withheld, but only in non-registered accounts. By far the most common amount withheld is 15% of the gross dividend paid out, although there are a few exceptions, ...

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The following post is written by Brian So, a financial advisor and blogger at www.aafsinsurance.com. courtesy www.financialpost.ca Hi everyone, this is my first of hopefully many posts on the Dividend Ninja. Allow me to introduce myself. My name is Brian So and I have been working with my dad in the financial industry for about 2 years, and helping people with their financial goals. I’ve found my work to be very rewarding and I want to share some of my knowledge with more people. What better way to do this than to guest post on the Dividend Ninja with such a loyal and dedicated following. Now that the intro is out of the way, let me get into the topic on hand: the implications of having US dividend stocks in your RRSP and TFSA. First off, because there are plenty of posts on the internet about what RRSPs and TFSAs are and how to use them, I am going in another direction with my posts to try to delve a bit deeper into the lesser known facts of these savings vehicles. Generally, the ...

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According to a recent post by Garth Turner, the gift, only 4 in 10 Canadians have a TFSA (Tax Free Savings Account). Of those only half actually do anything with it. In addition 80% of people with a TFSA have it sitting in high interest savings accounts. Garth writes: “Despite being able to shelter all this money from any kind of tax, most don’t. Only four in ten people have a TFSA, even five years after it was created. Of those only half actually contribute to them. And (are you sitting?) eighty per cent of people with a tax-free savings accounts have the money in savings. Yup. High-interest savings accounts paying 1.5% or maybe two.” Currently, Canadians are allowed to contribute a maximum of $25,500 to their TFSA. That’s $5,000 per year from 2009 to 2012, and $5,500 for 2013. However for all the benefits of the TFSA, the majority of Canadians are not contributing. That’s a shame, because the TFSA makes an excellent retirement investment account, and the best tax-sheltered deal ...

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[adsenseTopPost] It’s that time of the year again – RRSP Season. Canadians will be lining up at the bank to either contribute to their RRSP (Registered Retirement Savings Plan), or borrowing for an RRSP loan. For most Canadians, that net benefit will be a tax-refund. What many Canadians don’t realize however, is the refund from contributing to their RRSP is not a gift. It has to be paid back later with taxes. That’s because any money withdrawn from your RRSP is considered income and is fully taxable. This makes the RRSP nothing more than a tax-deferral plan. Any money withdrawn from your RRSP (or RRIF) is considered income and is fully taxable. This makes the RRSP nothing more than a tax-deferral plan.  Many high-income Canadians can get a net-benefit from contributing to their RRSP, especially if it places them in a lower tax bracket. However for most Canadians, maximizing their TFSA (Tax Free Savings Account) makes more sense. The key is to avoid looking at the short-term ...

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