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Winnipeg Free Press
4 days ago
- Business
- Winnipeg Free Press
Paying off your mortgage is a game-changer. Think hard about what comes next
Buying a house is the largest purchase most Canadians will ever make and finally paying off the mortgage is likely to be a game changer. But before the temptation to splurge on a pricey new car or a luxury vacation takes hold, experts say it's important to review your financial plan for this next chapter to ensure you're on track for wherever you want to go. Nancie Taylor, an investment adviser with Meridian Credit Union in Fonthill, Ont., says repaying your mortgage opens up opportunity for all kinds of things. 'My job isn't to tell them, you should do this and this and this,' she said of her clients. 'It's more about, OK, this is how you looked today. So where do you want to go tomorrow? And it's interesting where the conversation leads.' For some, it might be early retirement, for others it might mean more travel, or helping children or grandchildren financially. But while a mortgage payment can make up the largest part of the cost of home ownership, it isn't the only expense, so Taylor says the first step is to figure out just how much cash is being freed up. 'Oftentimes people have their property taxes and their life insurance kind of all built into the payment,' says Taylor, so that means the monthly savings may be less than you were thinking. In addition, utilities and the cost of maintenance and upkeep can add up. Appliances break down or wear out and things like roofs and windows need to be replaced periodically, not to mention any desire to update and upgrade your bathroom or kitchen. Taylor says if you have other debt, especially high-interest debt such as credit card balances, now is the time to address that with your additional cash flow. If you've been neglecting RRSP, TFSA or RESP contributions, now is also the time to catch up. 'If you've not maxed out your RRSPs every year and you have a significant amount of carry forward room, then redirecting some of that cash flow will actually give you more in your pocket today,' she said. Repaying your mortgage can also be a time to review other parts of your financial plan such as life insurance to ensure your coverage is still appropriate now that you don't have the large outstanding debt hanging over your head. 'If you're debt-free, then maybe you are over-insured now. So it's a really good time to bring that into light and maybe start looking at other kinds of insurance like long-term care insurance,' Taylor said. Becoming mortgage free may also be a good time to review your will and estate planning to ensure everything is up to date now that your largest debt is repaid. Sumaiya Bhula, a senior manager at TD, said there is no one-size-fits-all solution, so it's important to build a plan that works for you at this key juncture. Monday Mornings The latest local business news and a lookahead to the coming week. 'The reality is, if you want to continue to build upon your portfolio and your wealth, you need to really look at holistically what your long-term objectives are,' she said. 'That's where, you know, the plan really comes into place where you look at your cash flow and what should be allocated where and then how much do you still have remaining for X, Y and Z.' Taylor says having a plan for the money is key because you don't want to miss the opportunity to use the additional cash flow to get closer to your financial goals. 'I just think in your 50s, that's the critical age of making sure that you redirect that money to work as hard as it can for you,' she says. This report by The Canadian Press was first published Aug. 7, 2025.
Yahoo
05-07-2025
- Business
- Yahoo
CRA wins case against taxpayer who said he made honest mistake on RRSP
You may be the most honest taxpayer, with a perfect record of tax compliance, diligently filing each year's tax return, on time, for decades, and never owing the Canada Revenue Agency (CRA) a cent. But all that counts for bubkes should you make 'an honest error' when contributing to your registered retirement savings plan (RRSP), as one taxpayer recently found out. But before delving into the details of this latest case, let's review the RRSP overcontribution rules and how to expediently remove any overcontribution. The penalty for overcontributing to an RRSP is one per cent per month for each month the overcontribution (beyond a $2,000 allowable overage) remains in your account. The fastest, easiest way to correct an overcontribution situation is to simply request a withdrawal of the amount overcontributed from your RRSP issuer. This amount will be subject to withholding tax, which can be recovered later when you file your tax return. You will need to complete CRA's Form T746, Calculating Your Deduction for Refund of Undeducted RRSP Contributions which will allow you to claim an offsetting deduction to counter the RRSP income inclusion for the withdrawn amount when you file your return. Alternatively, to avoid the initial withholding tax and the opportunity cost of not having the use of those funds throughout the year, you can apply to the CRA using Form T3012A, Tax Deduction Waiver on a Refund of Your Undeducted RRSP Contributions. You complete Parts 1 and 2 and mail it to your tax centre. Once the CRA reviews and approves Part 3, it will be returned to you. You then fill in Part 4 and present it to your RRSP issuer in order to withdraw the overcontributed amount without withholding tax. This process can take some time during which the monthly penalty tax is accruing. So it may make sense in some cases, such as with large overcontributions, to bypass the T3012A process and simply withdraw the overcontribution, pay the withholding tax, and get that back when you file your return. Should you get hit with overcontribution tax, the CRA has the ability to cancel that tax if the excess contribution occurred because of a 'reasonable error' as long as 'reasonable steps' were taken to eliminate the excess. Taxpayers who are hit with the penalty tax can apply, in writing, to the CRA for a waiver of the tax if they can demonstrate that the above two conditions have been met. Ideally, any application for a waiver should include proof that the excess contributions were withdrawn, along with any other correspondence that shows the excess contributions were due to a reasonable error. If the CRA refuses to cancel the tax, then a taxpayer has the right to seek a judicial review of the CRA's decision in Federal Court, which is what happened in this most recent case. The taxpayer's troubles began back in April 2021 when he contributed $22,118 to his RRSP which exceeded his 2021 limit of $9,504, as shown in his 2021 Notice of Assessment. About a year later, in April 2022, the taxpayer realized his error and requested a tax-free withdrawal from his RRSP for the excess contribution by completing Form T3012A. In August 2022, the CRA approved Form T3012A to withdraw the $12,614 excess amount. It also advised the taxpayer that he needed to file the T1-OVP Return for the 2021 tax year to calculate and pay the overcontribution tax. The taxpayer asked the CRA to file the T1-OVP Return on his behalf, which the agency did. It then sent the taxpayer a T1-OVP notice of assessment for 2021 requiring him to pay $955.26 in net federal taxes (representing the one per cent monthly overcontribution tax), $85.97 in penalties, and $27.37 in arrears interest. In September 2022, the taxpayer wrote to the CRA requesting that it waive the overcontribution tax and penalties. This request was denied in May 2023. In June 2023, he submitted a further request, explaining that, to determine his available contribution room, he mistakenly took the amount from his 2019 Notice of Assessment instead of the 2020 one. He added that he received 'no benefit' from his mistaken overcontribution. The CRA officer denied his second request for relief, concluding that the taxpayer's misinterpretation of his RRSP deduction limit statement did not constitute a 'reasonable error … as he was provided with the information required to contribute the correct amount to his RRSP.' Having been twice denied relief, the taxpayer sought a review in federal court, where the role of the judge in such cases is to determine whether the CRA's decision not to waive the overcontribution tax was reasonable. At trial, the taxpayer raised five reasons in support of his claim that the CRA's decision was unreasonable: it was unreasonable to expect no errors after 40 years of tax submissions; his overcontribution was an honest error and no gains were realized; the CRA abused its power in making the decision; the CRA's decision was not consistent with the intent of the Income Tax Act and the penalties provided by the Act are 'irrational and abusive.' While the judge did not dispute that the taxpayer's overcontribution to his RRSP may have been an honest mistake, he found that the taxpayer's other arguments 'are without any merit, as the (CRA) was simply applying the law as enacted by Parliament and no evidence was provided by (the taxpayer) to support his claims of abuse of power and inconsistency with the (Tax Act's) intent.' Jamie Golombek: Everything you need to know about the new Canada Disability Benefit Jamie Golombek: July brings a greater opportunity for income splitting As the judge noted, 'Misinterpreting an RRSP contribution limit statement is not in and of itself a reasonable error, since it is the taxpayer's duty and responsibility to ensure the accuracy of statements made in their income tax returns.' As a result, the judge dismissed the taxpayer's application for judicial review and found that the CRA reasonably concluded that discretionary relief was not warranted in this case. 'While I recognize that (the taxpayer) made an honest mistake when determining his contribution limit, there are no grounds for the Court to intervene,' concluded the judge. Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. If you liked this story, in the FP Investor newsletter.
Refinery29
16-06-2025
- Business
- Refinery29
A Week In A British Columbia Border Town On A $130,000 Salary
Welcome to Money Diaries where we are tackling the ever-present taboo that is money. We're asking real people how they spend their hard-earned money during a seven-day period — and we're tracking every last dollar. Today: a counsellor who makes $130,000 per year and who spends some of her money this week on a blanket from The Bay. If you'd like to submit your own Money Diary, you can do so via our online form. We pay $150 for each published diary. Apologies but we're not able to reply to every email. Occupation: Counsellor Industry: Education Age: 36 Location: British Columbia border town Salary: $118,000 base salary, plus approximately $12,000 in private practice. Assets: RRSP: $68,000; TFSA: $57,000; emergency fund: $10,000; short-term savings (sinking funds for Christmas presents, car maintenance and insurance, travel): $3,000. Debt: $0 Paycheck Amount (biweekly): $2,865.17 (base salary); approximately $ 1,000/month for private practice work. Pronouns: She/her Monthly Expenses Housing Costs: $1,930 (rent). Loan Payments: $0 Renter's Insurance: $34.59 BCAA: $10.94 Netflix: $8.95 Cell Phone: $81.54 Life Insurance: $127.58 Disability Insurance: $138.51 Internet: $99.40 Spotify: $20.04 for a couple's membership that I share with my ex (this is working out surprisingly well — we are friends, but it feels like we'll share this membership forever, which I'm okay with). Donation: $50 (to a reproductive health clinic). Savings: $500 to retirement savings; $500 to tax-free savings account; $300 to emergency fund; and $450 to sinking saving funds ($100 to travel; $100 to car maintenance; $100 to car insurance; $100 to new car fund; and $50 to Christmas presents). Hydro: ~$80 (bimonthly; varies a little bit) Annual Expenses Professional Dues: $436 Costco: $130 Car Insurance: $1724 Was there an expectation for you to attend higher education? Did you participate in any form of higher education? If yes, how did you pay for it? Yes, from my parents and myself. I did an International Baccalaureate program in high school and every one of my classmates went on to university. As a kid, I wanted to be an actress or a hairstylist but my mum told me that my dad would not allow it and wanted me to go to university. (I still contemplate being a hairstylist). Growing up, what kind of conversations did you have about money? Did your parent(s)/guardian(s) educate you about finances? My dad was a chartered accountant but we didn't talk about money. I was generally a saver and would lend money to my mum, which continued into adulthood at different points. Both of my parents struggled with managing money effectively. What was your first job and why did you get it? I worked as a grocery store cashier when I was 15 and enjoyed it a lot! I still remember some of the PLU codes for fruits and veggies. Did you worry about money growing up? Yes, constantly. I worried about what would happen if my dad lost his job and whether there would be enough money for school. This never happened, but I worried constantly. Do you worry about money now? Yes, I still worry a lot. I live in a high cost of living area and although I make a good income and save as much as I can, I still feel behind. I identify as queer and have a female partner, so I think about the cost of fertility treatments if I have biological children (and I am currently on a waitlist to freeze my eggs). At what age did you become financially responsible for yourself and do you have a financial safety net? 22 (when I graduated from university). Currently, I do not think my parents would be able to provide much financial support if I found myself in a situation where this was needed — and I would not want to ask. In a worst case scenario, I would cash out savings or draw from a line of credit. This was a big motivation behind purchasing disability insurance in addition to what I have available through my work. Do you or have you ever received passive or inherited income? If yes, please explain. Yes, I received substantial support from my parents while attending university for my bachelor's degree (about $12,000 per year for four and a half years). This paid for half of my undergraduate degree. I paid the other half with various part-time jobs. Day One: Wednesday 6:50 a.m. — I wake up to the sound of my beloved cat, L., meowing for breakfast. We (cough, me) recently started portioning out her food because the vet says she is overweight. She does not like this and has been demanding breakfast earlier each day. After feeding my queen, I lay in bed on my phone for about an hour before dragging myself out of bed. I put on my 'Hold on, let me overthink this' shirt and a pair of black Zara jeans. Brush teeth quickly, wash face, deodorant and out the door. 9:30 a.m. — Arrive at a work meeting to discuss a challenging team situation from yesterday. A lot of people are still feeling it, including myself. I started a new job in December and I've been struggling with it. I've never made this much money before, but the work itself is slow and the emotional cost of the situation is getting higher. 12:30 p.m. — Leave the meeting site, which is conveniently near Costco. I go in with the immediate task of securing a hot dog ($1.56, thank you Costco for the affordable lunch). I walk around browsing and snapping up samples (most yummy is chocolate mini-eggs). I buy Japanese BBQ sauce that I've been looking for and a bag of Sour Patch bunnies, which will be a gift for someone, most likely my sister ($21.88). $23.44 1:30 p.m. — Arrive home for WFH afternoon. I set myself up outside on the patio and my chatty L. meows all of her feelings to the neighbours. I consider whether we need to find an animal communicator. We go inside for quiet time. 3:30 p.m. — My dad calls for a chat. He lives in a retirement home in another province and had to go into a care facility at a younger age (63) for significant physical health and mobility concerns. Cognitively, he is sharp as a tack and wants to talk politics, sprinkled with jokes about his day-to-day life at the retirement home. L. meows to say hi while I talk to him. After the call, we are back to emails. 5 p.m. — I shower off the day, and commence a Netflix marathon viewing of Temptation Island. Hello, reminder from my childhood glory days of reality TV. I think about how different it is now — no waiting a week for the next episode — and I think about how this impedes delayed gratification. 10 p.m. — I make a late-night Girl Dinner of a fried egg, toast, and apple with peanut butter. Dessert is nacho chips and salsa. Daily Total: $23.44 Day Two: Thursday 8:30 a.m. — Rise and shine from the couch (where I fell asleep watching Temptation Island). L. also slept in. Eat nacho chips and salsa for breakfast. Catch up on emails and messages. Work from home this morning and get distracted by cleaning the oven and microwave (for the first time since I cannot remember when). I try this cleaning product recipe (baking soda, dish soap, and hydrogen peroxide) and it is okay, but I don't think I'll make it again. 12:30 p.m. — Arrive at a coffee shop to meet my coworker for a meeting — except I arrive at the wrong location. Drive to the right coffee shop and arrive 15 minutes late with a huge line. No coffee, no cookie, but could this be a sign it's a zero spend day? (Yes, is the answer.) 1:30 p.m. — We check out one of our new office spaces and it has been beautifully decorated by the staff onsite. I am blown away by the shift in energy! 3 p.m. — I arrive home and am ready for lunch. I make two fried eggs, two toasts, stir-fry veggies and fries, plus a spinach, raspberry and banana smoothie. I am a better person after eating. 3:30 p.m. — See a message from my realtor that we can go look at a listing I'm interested in tonight at 6:30 p.m. Exciting! I continue messaging my coworkers and planning things for the week. 4:30 p.m. — The work day is done and I watch Miracles From Heaven on Netflix. So many feels. My sister texts that she is struggling and needs help (she is in another province with my nearly three-year-old niece). We FaceTime and chat through my niece's evening routine. We brush our teeth together and sing a song over the phone. I tell my niece to give my sis 'squeezes' (hugs) and I think this helps her feel better. 6:30 p.m. — Walk to the listing (an apartment down the street). The cherry blossoms are in full bloom! I like the unit and it's lovely in a lot of ways, but there is this feeling 'not quite' as I walk home. I will spend my life savings another day. 7:30 p.m. — Barbecue flavour chips seems like a responsible dinner. Yum. Take a bath, catch up on texts, and book a rental car for my visit to see family later in the month. 9 p.m. — Time for a 'proper' dinner: salami sandwich with mayo on sourdough bread. I start reading a new book (my goal is one book a month): Love At First Spite. Stave off urges to go get a McFlurry. Barely. Daily Total: $0 Day Three: Friday 7 a.m. — Wake up early because I have my last session of training this morning (EMDR — amazing training but emotionally activating). Brush teeth and run out the door. My coworker picks me up and I revel in being a passenger princess. We finish the training around 11 a.m. and drive to work. 12:30 p.m. — Lunch for a colleague's birthday. We eat sushi, takoyaki, and birthday cake. Big chat with my coworkers and then my coworker drives me home. 3 p.m. — I'm finished for the day and I take a nap to celebrate Friday. Wake up around 4:30 p.m. and go to the grocery store for lemonade, a pepperoni cheese stick, ice cream, and popcorn twists. I am a beacon of health for dinner. $19.33 7 p.m. — In Canada, our oldest department store, The Bay, is closing down. A friend's girlfriend was able to get two of their logo wool blankets at cost since she works for a supplier. There are three of us and two blankets, so a random draw is suggested. I am not chosen but my friend offers for me to take her blanket to save money. Initially I am excited but then I start reading about the colonial history of The Bay. I went to an Indigenous training recently and I feel ignorant at my lack of ability to make connections. The fact that it is a blanket makes me feel extra sick. I message my friends my concern and offer to pay for the blanket but let them know that I don't feel comfortable keeping it. We reach an agreement that I will buy it for now with the option of my friend to pay me back when her finances settle or I will resell it. I call my girlfriend J. for support and ask her if we can get bubble tea tomorrow if my friends now hate me. She says we can get it either way. $165.27 Daily Total: $184.60 Day Four: Saturday 7 a.m. — Wake up early (this happens to me a lot when I perceive conflict or feel like I've let people down). My friend chat is quiet and I'm convinced they hate me. I force myself to go for a walk to return my library books before heading into work at the private practice clinic. I run into one of my coworkers on my walk and she gives me a hug which is really sweet. 9:30 a.m. — I feel better temporarily after the walk. But on my drive to work, I continue overthinking, wishing I had stayed quiet about my feelings and then dealt with the blanket on my own. My last message to the chat was a bid for reassurance that hasn't come yet and I know the person I really need reassurance from is myself. I get a gruyère sandwich from an Italian grocery store near my work ($9.40, but I have a gift card). I have several client appointments in a row so this will function as brunch for me and allow me to take my medication earlier in the day. Zoloft + therapy has been so helpful for my anxiety. $9.40 (Expensed) 1 p.m. — My friends are sweet and remind me I'm not hated. I feel better but also because I had three reasonably good sessions. My new job has been super slow and it has been dispiriting to not have enough work to do. Having private practice on the side has been a really big help. I have a break between my third and fourth sessions and look at mistint paints (I want to find one to paint wooden deck furniture). No luck at the store, but I do leave with ideas. Go back to work and lay on a beanbag chair until my last client comes. 4:30 p.m. — Get gas on my way home because it is 20 cents cheaper a litre (gas has been varying so much here). Usually I am a fill-it-up-when-it's-almost-empty girl, which my friends justifiably tease me for, but this feels so adult. $45.46 6 p.m. — J. comes over. I make us a vegan dinner of sweet Korean lentils, okra, and rice. J. is vegan and it was easier than expected to learn how to cook for her. It's my first-ever relationship that has felt healthy and secure. We both had hard weeks, so our evening is really simple. After dinner, we walk to get bubble tea. J. treats since I treated last weekend. She gets oat milk tea with pearls and I get a taro slush with pearls (it is phenomenal and J. seems really into mine, too). When we get home, J. traces my back with her fingers for a looong time (one of my fave things and I feel so taken care of when she does it) and then it's her turn. This leads to sex and then we fall asleep snuggled up for a little bit. At midnight, J. goes home and I go back to bed. Daily Total: $45.46 Day Five: Sunday 6:50 a.m. — Wake up to my cat's demands for breakfast. Feed her and struggle to go back to bed. Look up cat auto-feeders, then read erotica for about an hour and before falling back to sleep. 11:25 a.m. — Wake up for good and realize the time — wild for me, but nice. Respond to messages and buy a ticket to my friend M.'s comedy open mic show which is later in the week. Start reading Let Them by Mel Robbins (aptly timed for me). Stay inside too long but eventually get out for a short walk. $17.31 4 p.m. — Order a super belated birthday gift for my friend M. It is a notebook with raccoons that says 'Trashy Thoughts', and a multicolour click pen with dogs. We do small gifts and I think she will like these. $17.90 6:30 p.m. — Meet friends for hotpot. There are five of us and it takes a while to get a table. This restaurant serves individual hotpot bowls. I order the veggie bowl and it is just okay for me. But I am glad to see everyone and catch up. My friend B. orders a very spicy hotpot and lets me try his broth. I immediately start coughing and this seems to cheer him up. $25 8:45 p.m. — Drop by J.'s place to chat (I asked her if I could come chat about my feelings and she is very gracious to make time for me). She had a hard day and I find out that she experienced a family loss. We talk and then hold each other. I love her a lot and she is a gem. But I worry that I will overthink things in a misperceiving way or self-sabotage (this is probably down to past bad relationships experiences and a tad too much relational anxiety). Daily Total: $60.21 Day Six: Monday 6 a.m. — I wake up to my cat's readiness for breakfast. Feed her and go back to sleep until 7:30 a.m. Wake up with a zest for cleaning (where did this come from?) and tackle the bathroom and the mountain of clean clothes on the floor. 10 a.m. — Meeting in person with colleagues until 1 p.m. I get McDonald's afterwards (McDouble, small fries, small iced tea) and it is delicious ($6.22). I get Timbits for dessert ($3.19). $9.41 2 p.m. — I was supposed to meet up with my friend and her daughters, but she loses her phone and doesn't reply back in time. I catch up on emails before seeing a private client at 4:30 p.m. I listen to a webinar on my way home from work called The Case for Taking Sides in Couples Therapy and I wonder if I am the problem in my relationship. I still feel unsettled, even though J. is amazing. I asked my best friend K. if we can do a call tomorrow and we confirm a time. 7 p.m. — On my drive home, I stock up on snacks from the dollar store (three flavours of chips). Today feels extra unhealthy. Then I find out that a friend of mine has moved five hours away without the chance to say goodbye. Her husband was in police training so I knew this was coming, but I didn't know exactly when. I adore her baby boy and I feel sad I couldn't say goodbye to them. I debate saying something to her, but decide not to and find peace in that. I know she had to move super quickly after her husband's grad and think that maybe I can visit her in the summer. Mercury was supposed to come out of retrograde today, but the residual yuck still feels there. $6.04 8 p.m. — I force myself to make dinner, which is spaghetti and meatballs. I clean my kitchen and journal. I play ball with L. and she demonstrates her athletic prowess. I think she was a soccer player in a previous life. 10 p.m. — Phone call with J. for about an hour and then a night-time walk. I check my mail (I love mail!) and realize something for another person down the street was delivered to me. I walk down to the correct building to deliver it. Give L. extra food as a deterrent to a 6 a.m. wake up call — let's hope! Daily Total: $15.45 Day Seven: Tuesday 8 a.m. — Wake up and today will be a WFH day. L. wants to play ball again, so we do. My first meeting is at 9:15 a.m. for about an hour. Today is really quiet without anything else scheduled after. I have readings I can do and catching up on emails, etc., but I am struggling with the lack of work right now. I ask my colleague who lives nearby if she wants to take a walk. 11 a.m. — Meet with my colleague to check out a nearby fundraiser book sale. She brings me soup made by her husband. It's the last day of the book sale and it's $10 for a bag of books. We each get a bag and lunch (the yummiest egg and cheese sandwich ever; $8 including tip). On my way out, I buy three 50/50 tickets ($10). $28 1:15 — Phone call with my best friend K., who is validating and supportive. She listens to me and we do a quick catchup, but will connect later in the week for a Zoom book club (we meet with another friend and are working through a workbook called Be Kind to Yourself). 4 p.m. — Take a nap. Be lazy and spend a lot of time on the couch this evening. I definitely need to up my activity levels. 9 p.m. — Heat up the soup from my coworker's husband — his food is magical, too — such a good food day! It's a lentil veggie soup and I eat it with buttered sourdough toast. I am craving chocolate so I walk to the store to get mini eggs which is the perfect end to the day. $2.63 Daily Total: $30.63 The Breakdown Conclusion 'It was really interesting to track my spending this week and made me more aware — not only of money, but also what I eat, my activity levels and mental wellbeing. I don't feel great about the blanket but I see it as a good learning moment to become more aware of what I buy and how sneaky colonialism can be (in many different forms). I've decided that when I get it from my friend, I will re-sell it and donate the proceeds to a local Indigenous organization, and that feels right for me. Reviewing the week makes me feel so grateful for the people in my life, who are so special to me, and for all that I have.' Money Diaries are meant to reflect an individual's experience and do not necessarily reflect Refinery29's point of view. Refinery29 in no way encourages illegal activity or harmful behavior. The first step to getting your financial life in order is tracking what you spend — to try on your own, check out our guide to managing your money every day. For more Money Diaries, click here. Do you have a Money Diary you'd like to share? Submit it with us here. here or email us here.
The Market Online
13-06-2025
- Business
- The Market Online
A short guide to taxes and investing in Canada
Investing in stocks as a Canadian, as is the case with any country, will bind you to a specific set of rules about how your gains and losses should be treated for tax purposes. Far from a tedious, sleep-inducing bore, investment taxation in Canada is relatively simple to learn and enforce, allowing you to minimize the hard-earned dollars you hand over to Canada Revenue Agency, take full advantage of compound interest and grow your portfolio towards funding your financial goals. There are only three main investment accounts you need to know about: The Tax-Free Savings Account, or TFSA, in which investments grow tax free. The Registered Retirement Savings Plan, in which investments grow tax deferred. The Taxable or Non-Registered Account, in which taxes must be paid on investment income and profitable sales. Become familiar with the tax implications of all three accounts, and you will be ready to optimize the dollars that end up in your pocket once it's time to liquidate an investment. Let's begin with the most generous among this trio of accounts, the TFSA. Taxes and investing in the TFSA As the name makes clear, all investment gains within a TFSA are yours to keep, with no taxes applicable to them at any time. Unsurprisingly, such an attractive benefit has a limit, with total contribution room rising by only a few thousand dollars every year – currently capped at C$102,000 as of 2025 – leaving little room for error in terms of security selection. It stands to reason that you should hold your highest-potential stocks in your TFSA to ensure maximum profits. This may include a diversified portfolio of small and micro-cap stocks for their added leverage compared to large-cap counterparts, value plays underpricing long-term potential, or wherever your due diligence takes you in search of differentiated returns. Taxes and investing in the RRSP When it comes to the RRSP, taxes can get slightly more complicated, but are no cause for concern, so long as you stay true to your personal financial situation. Here are three essential points to consider: Every dollar you contribute to your RRSP, subject to a limit tied to your yearly income, can be deducted from your taxable income in the current year, or any future year, should you decide to wait. In other words, for any year with contributions, you may be able to decrease your income into a lower tax bracket. Though investments grow tax-deferred in the RRSP, every dollar you withdraw is taxed as income, requiring careful tax considerations depending on how you're making a living at that time. The third and perhaps most crucial point Canadian investors need to know about RRSPs is that you can't access your money with the same freedom as a TFSA: To make a withdrawal without penalty, you will have to convert your RRSP into a Registered Retirement Income Fund (RRIF), which will draw your account down on an escalating pre-determined scale over the next 20-25 years. This conversion must happen, whether you like it or not, in the year you turn 71. A withdrawal without an RRIF conversion will be hit with a withholding tax, also on a pre-determined scale, designed to pay the government back for the deferred tax benefit you are eschewing. The key takeaway when it comes to RRSPs is this: Since your funds will ultimately be taxed as income, you must be aware of how withdrawals will affect your income over the course of your life and plan accordingly, making sure to time your RRIF conversion in line with your needs at that time. Taxes and investing in the brokerage or non-registered account Should you be lucky enough to run out of contribution room in your TFSA and RRSP, you may want to allocate any leftover funds into a brokerage or non-registered account, in which you must pay taxes on dividends or profitable stock sales. Arguably the most complex account for Canadians to master from a taxation perspective, the brokerage account still provides a valuable service, allowing you to build long-term wealth on a diminished scale compared to tax-advantaged accounts, but wealth nonetheless, with the benefit on unlimited contributions. You really only need to know these two things: When it comes to paying taxes on dividends, investors must calculate what they owe by grossing up their payments depending on whether or not they qualify for the federal dividend tax credit. Companies will make this clear in related press releases by referring to the dividend as eligible or non-eligible. When it comes to selling a stock at a capital gain, the Canadian government expects you to add half of this gain to your taxable income, with the remaining half being yours to keep in its entirety. On the flipside, should you choose to lock in a loss, you can apply it to reducing your taxable income in the year of the sale, in any year up to three years in the past, or in any future year of your choosing. Many investors, especially those intent on retiring early, consider a brokerage account to be a bridge between initial retirement years and the planned draw-down periods for their RRSPs and TFSAs. Others use them for tax diversification purposes, granting them some flexibility should new legislation about RRSPs and TFSAs force them to change their financial plans. Whatever the reason that compels you to open a brokerage account, take care to keep detailed files on every trade you make – including time, number of shares, total dollar amount and currency conversion rates if applicable – all of which you'll need to substantiate claims for capital gains or losses on your tax return. A few taxation tips for the road Now that you have a grasp on how stocks are taxed in Canada, you can focus on what really matters, namely, making regular contributions to your investments, giving them the best chance at compounding into the funds you need to make your long-term goals a reality. To help you along in this journey, here's a handful of tips to ensure your experience with taxes and investing is as smooth as possible: Sign up online for My Account with the Canada Revenue Agency, offering you access to all of your tax-related information in one place. Do not hesitate to seek the assistance of a certified tax professional should your financial situation evolve into more complex assets, such as options or private companies, where experienced eyes can make a tangible difference in terms of avoiding penalties and maximizing available benefits. Keep a trusted list of financial news sources to not miss out on any changes in Canadian tax legislation, which may include MoneySense, The Globe and Mail or BNN Bloomberg, to name just a few. Specify buying and selling strategies for each of your stocks or stock funds to clarify long-term portfolio planning. Overlapping these suggestions is the fact that investing is not useful in itself, it's a means to an end, leaving it up to you to dream up purposes worthy of saving money for a decade or two before they can come to pass. There's no wrong answer, so long as you keep happiness and your values front-and-center as you put money to work and build your stake in the global economy. What are those purposes for you? And how are you investing and navigating taxes to best achieve them? Join the discussion on Stockhouse's stock forums and message boards. The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
Yahoo
06-06-2025
- Business
- Yahoo
Is Fortis Stock a Buy Now?
Written by Andrew Walker at The Motley Fool Canada Fortis (TSX:FTS) is up nearly 18% in the past year. Investors who missed the rally are wondering if FTS stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns. Fortis trades near $65.50 at the time of writing. The stock has been on an upward trend for most of the past 12 months, spurred by cuts to interest rates in Canada and the United States. The rebound occurred after the stock had fallen from near $65 in the spring of 2022 to as low as $50 in October that year as the central banks ramped up rate hikes to cool off a hot economy and get inflation under control. Utility companies use a lot of debt to fund large capital projects that can cost billions of dollars and take years to complete. As such, they are sensitive to changes in interest rates. Higher rates drive up borrowing expenses, which puts pressure on profits and can reduce cash available for distribution to shareholders. Elevated debt costs can also force companies to shelve some projects. The U.S. Federal Reserve and the Bank of Canada cut rates over the past year, but are currently on hold as they wait to see how tariffs will impact the economy and inflation. If inflation jumps in the coming months, the central banks will have a tough time justifying additional rate cuts. In fact, rate hikes might be needed. In that scenario, Fortis could face new headwinds. That being said, analysts widely expect economic weakness to push the central banks to cut rates again before the end of the year, even if inflation drifts higher. Falling rates would be positive for Fortis and other utility stocks. Fortis is working on a $26 billion capital program that will raise the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, Fortis expects earnings to rise enough to support annual dividend increases of 4% to 6% over the five years. Fortis raised the dividend in each of the past 51 years, so investors should feel comfortable with the guidance. At the time of writing, the stock provides a dividend yield of 3.8%. Management has other projects under consideration that could get added to the development plan. Fortis also has a strong track record of making strategic acquisitions. Falling interest rates could spur a wave of consolidation in the utility sector. Near-term volatility should be expected until there is more clarity on a trade agreement between Canada and the United States, as well as between the U.S. and its other major trading partners. Fortis is down, however, from the recent high around $69, so investors now have a chance to buy the stock on a nice dip. Acquiring FTS stock on pullbacks has historically proven to be a savvy move for patient investors focused on passive income and long-term capital gains. The post Is Fortis Stock a Buy Now? appeared first on The Motley Fool Canada. Before you buy stock in Fortis, consider this: The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fortis wasn't one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years. Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the 'eBay of Latin America' at the time of our recommendation, you'd have $21,345.77!* Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*. See the Top Stocks * Returns as of 4/21/25 More reading Made in Canada: 5 Homegrown Stocks Ready for the 'Buy Local' Revolution [PREMIUM PICKS] Market Volatility Toolkit Best Canadian Stocks to Buy in 2025 Beginner Investors: 4 Top Canadian Stocks to Buy for 2025 5 Years From Now, You'll Probably Wish You Grabbed These Stocks Subscribe to Motley Fool Canada on YouTube Fool contributor Andrew Walker has no position in any stock mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy. 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
