Tax planning strategies for high-income earners

Depending on your province of residence, you may be subject to tax at a rate of 50% or higher when your income exceeds a set amount.

Discover several strategies that make for a tax-smart wealth plan.

Tax-Free Savings Accounts

With a Tax-Free Savings Account (TFSA), your investments grow tax-free and you can make tax-free withdrawals at any time, for any reason.

Who can open a TFSA?

  • Any Canadian resident 18 years or older with a Social Insurance Number.
  • The age of majority is 19 for residents of Newfoundland and Labrador, New Brunswick, Nova Scotia and British Columbia which may delay the opening of a TFSA. However, the accumulation of contribution room will start at age 18.

What are the benefits?

  • Tax-free investment income, including interest, dividends and capital gains
  • Any unused contribution room can be used in future years
  • No upper age restriction on contributions, unlike an Registered Retirement Savings Plan (RRSP)
  • Make withdrawals any time for any purpose (e.g. car purchases, vacations, home renovations)
  • Previous year's withdrawals are added back to your unused contribution room
  • Income earned and withdrawals have no impact on federal income-tested benefits or credits (Guaranteed Income Supplement, Child Tax Benefit, Old Age Security, etc.)
  • Canadians can contribute to their spouse's or common-law partner's TFSA subject to available contribution room

What are the considerations?

  • Unlike an RRSP, contributions are not tax deductible
  • Capital losses within the TFSA cannot be used to offset taxable capital gains outside the TFSA
  • Interest on funds borrowed to fund the TFSA is not tax deductible
  • Penalty tax on excess contributions

What investments are qualified for the TFSA?

  • Cash, mutual funds, guaranteed investment certificates (GICs), publicly traded securities, and government and corporate bonds.

For more information, please contact us or visit the Canada Revenue Agency website.

Insights into giving and inheriting wealth across generations

Within a generation, over $400 billion is expected to be passed down to inheritors in Canada. How are Canadian families preparing for one of the largest transfers of wealth in history? And will inheritors be ready?

 

“It’s up to the givers of wealth to proactively prepare the next generation to manage that wealth.”