tax-efficient investing for canadiens hockey
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Chipre Forex Brokers - Bienvenidos a nuestra extensa lista de corredores de Forex regulados por Chipre. Hay ciertos riesgos asociados con el comercio de divisas, y si tiene alguna duda, debe tomar el asesoramiento de un asesor financiero independiente. Los errores y las omisiones pueden ocurrir en declaraciones hechas por, o opiniones expresadas por, autores individuales, y usted debe observar que FXHQ no y no ha verificado la exactitud o de otra manera de tales opiniones o declaraciones. Estoy realmente impresionado de sus habilidades educativas, ya que tienen sound mind investing promotion code manera eficaz pelaburan forex 2012 ford impartir conocimientos. Lee mas. Sin embargo, siempre quise ser parte de un equipo de la divisa con una buena estrategia para aumentar equidad. Lee mas ''.

Tax-efficient investing for canadiens hockey forex company website

Tax-efficient investing for canadiens hockey

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If you are considering using this strategy twist to the Smith Manoeuvre, make sure that you are comfortable with the maximum leverage applied to your portfolio. Now what? Besides jumping up and down in celebration, there are a few options once the non-deductible mortgage is paid off:. Pay off the investment loan completely over time.

The opposite of the above is to start paying off the investment loan once the non-deductible mortgage is wiped out. The tax deduction would still apply, however at a reduced amount every year as the HELOC balance reduces. Pay off a portion of the investment loan. This is a hybrid of the above strategy where the investor would pay down the investment loan to a point where they are comfortable with the monthly payments.

The investor can decide how much per month they can afford to pay indefinitely and pay down the balance accordingly. Of course, the investor would have to account for higher inflation years as it would affect his or her monthly line of credit servicing costs. The process of saving and investing can be a rewarding experience.

However, when it comes to taxes and reporting your investment returns to the CRA, the experience can be frustrating. If you have used the Smith Manoeuvre to exchange your non-deductible mortgage interest for tax-deductible investment loan interest, you may be wondering how to report that interest expense on your tax return.

When it comes to personal finance, proper record keeping ensures that you can track progress towards your goals. When it comes to income tax, proper record keeping can help avoid the denial of a deduction and incur interest and penalties. When you file your tax returns, you are not required to submit any documentation to the CRA to prove your claim for interest expenses. However, you must keep adequate records to support your claim in case the CRA asks to see them.

You must be able to show that the funds withdrawn from your line of credit were used to purchase investments. You can show this link by attaching a cancelled cheque from your line of credit to your brokerage statement or attach your bank statement showing the funds transfer from your line of credit to your brokerage account. You also need to support your interest expense calculations. Attach copies of your line of credit statements along with a cover sheet showing your calculations to your income tax return.

If you begin using that HELOC account to fund other purchases, the record-keeping can get easily muddled. Maintaining proper records will ensure that you can quickly access your records and prove your claim at any time. When you borrow to invest in income producing properties, the interest you pay is tax deductible. However, interest used for personal purposes is not tax deductible.

It is important to ensure that when you use your line of credit to invest, that you avoid using it for personal purchases. Using your line of credit for personal purchases could result in your deduction being denied unless you can conclusively link the proportion of the line of credit to your investments.

It can be difficult to determine the proper proportion if there are a number of personal purchases on your line of credit. There is also a greater possibility for error. It is advisable that you use a second line of credit for personal purchases…or better yet, use cash! So, you have assembled your bank statements and calculated your interest expense and now you are ready to claim the deductions on your tax return.

If you are unsure of what you can claim or what you can deduct, it is advisable that you speak with a tax professional. This is probably amongst the biggest concerns people have had, as the borrower will be responsible for BOTH payments while implementing the Smith Manoeuvre.

Seems a bit steep, hey? If you capitalize the interest, you will never make the extra interest payments out of your own pocket while your primary mortgage exists. So as you can see, using the Smith Manoeuvre, you will always have a payment. It never goes away. However, the payments are now tax deductible. When you are a couple, what is the best strategy for getting the best tax return from the interest paid on the HELOC used to buy investments? Typically, whoever funds the investment account is responsible for the taxation on the account.

However, investment loans are different. With that said, providing that you purchase tax efficient investments, it would be optimal to keep the investments in the name of the higher-income spouse. It makes sense to claim the investment income under both spouses if both spouses are in the same tax bracket. This would help in future years when income splitting is a concern.

According to Ed Rempel, although you can have both names under one investment account, you can choose who to charge the investment income. As mentioned above, if the HELOC is jointly owned, you can put the money into an investment account of either spouse, or a joint account. The owner of the account investing the money, is the owner of the tax deduction and tax liability.

Be sure to claim the investment loan under the spouse with the highest income. If both spouses have similar rates, then invest under both names. Please remember that I am not a tax professional, so consult an accountant before following any taxation advice you find here. We received a reader question about the strategy of borrowing to invest in an RRSP instead of a non-registered portfolio like the Smith Manoeuvre :.

Then get my tax refund back, put that on the mortgage, withdraw the equity on the other side again, and continue that process? Now I realize that in the scenario I just layed out, I would not receive the interest deduction that you would receive for a non-registered investment, but instead would receive the normal return that an RRSP would receive. As far as I can figure, the effect would be receiving a large tax refund in the present by using RRSP and smaller in the future, versus a normal Smith Manoeuvre where you receive a very small refund at first, and larger in the future on a continual basis I realize until the loan is paid.

Having explained the tax rules, our Smith Manoeuvre Calculator can be used to compare both strategies. This is the scenario and conclusions that we arrived at:. Instead of borrowing home equity as it accumulates to invest in a non-registered portfolio, borrow to invest in an RRSP, and apply the full refund to the mortgage.

This uses a readvanceable mortgage so there is a lot of flexibility to do this as each payment is applied. If, however, your MTR is lower when you cash out e. That is based on these facts:. Alternatively, what you could do is invest in Canadian companies that do a lot of business in the USA or around the world. For example TD bank generates more than a third of its revenue from the US market. Using these companies to broaden your geographical risk profile — while maintaining your dividends in tax-friendly Canadian Dollars — makes a lot of sense.

Below is an archived article from this blog which was written during the financial crisis. Think of it as a way to test yourself to see if you have the right temperament for the Smith Manoeuvre. There has been much concern over the viability of the Smith Manoeuvre or a leveraged investment strategy during this recent bear market. The main concerns are due to a couple of reasons:. The truth of the matter is that leveraged investing is risky in the short term.

My investment account is facing the relatively risky equity market along with building interest on the capital that supports it. The opportunity for the account to grow at an accelerated rate is great, but so is the opportunity for values to drop. With the possibility of HELOC home equity line of credit rates, which are traditionally at prime, to increase above prime, it will make this strategy even more expensive. However, with a slow economy, the prime lending rates will most likely decrease even further, which will hopefully even out any increases.

With that said, the Smith Manoeuvre strategy is still a valid option, just with one less readvanceable mortgage available along with the potential with higher HELOC rates. What am I doing with my leveraged portfolio during this correction? Even with the extreme fear in the streets, I have my eye on the big picture and my long investment timeline.

If one had read this and taken it to heart during the pandemic that we went through in and the accompanying market panic then they would have perfectly positioned themselves to capitalize on a market that needlessly penalized high-quality dividend paying companies.

I personally was able to add many shares of Enbridge at price points that proved to be ridiculous. I did a ton of research and just could not understand why people were so worried about the pandemic overly affecting this midstream utility. Once the market panic subsided, and people began looking at balance sheets instead of news headlines again, Enbridge has subsequently bounced back. I enjoyed snagging the stock at price levels that netted me a 7.

Dividend yields are a major stabilizer as you navigate those choppy waters. As we head forward into late and we see a rising interest rate environment that will only make the Smith Maneuver more attractive. Rising interest rates means increased tax deductions, and also much more profitable bank stocks of which I am a major dividend-focused investor.

I figured that if I could get through that time, I could weather any storm. Because so many readers have written to thank me for the detailed Smith Manoeuvre information over the years, we will keep this article throughout any beyond so if you have any questions make sure to toss them our way!

This site uses Akismet to reduce spam. Learn how your comment data is processed. Couple of questions. I have a question regarding capitalizing the interest. Why not just have the HELOC make the interest-only payment, rather than using a dedicated chequing account as intermediary to pay and be repaid monthly interest? Thanks for the detailed walkthrough! One thing I am trying to wrap my head around is the recommendation to sell existing non-registered investments before you start the Smith Manoeuvre, to pay down your mortgage, then re-borrow under the HELOC and re-purchase the stocks again.

Based on my math this is only beneficial in certain situations. For example, in my situation where my mortgage rate is 1. Current borrowing cost is 1. You would definitely be better off from a money-going-to-pay-interest perspective. Congrats on the mortgage rate btw! There is no problem with simply starting the SM at a lower leverage rate btw! Thanks Kyle for the reply.

If your mortgage rate is much lower than the HELOC rate, I think you are better off keeping your investments where they are. That makes sense to me Ivan — it would depend on the tax considerations as well right? What is your marginal tax rate? However, my non-deductible mortgage interest costs me 1. If we see a 25bps Prime rate increase, my mortgage interest will be 1. If we see a 50 bps Prime rate increase, my mortgage interest will be 1.

So I think that is all to say that the debt swap accelerator only works in certain situations. I have a paid off house and consider refinancing it by taking a cash-out variable rate mortgage that I invest to my taxable account. Would the interest portion of the payments be tax deductible? Hi MDJ, thank you for putting together this great resource!

I have a question regarding how to deal with the proceeds of a stock sale. Unfortunately, when I set up my leveraged portfolio, I made a mistake and purchased one ETF, which is only a small holding in my portfolio of Canadian dividend paying stocks. Or should I keep the initial investment amount book cost in the leveraged account and re-invest it, while taking out the capital gain?

Hi Mike, thanks for this thorough review. I am in the process of refinancing my mortgage so I can implement smith Manoeuvre. Also I understand from your post that ETFs can complicate taxes but is it again a non-no or just that it can cause some complication but remains an option for investors implementing Smith Manoeuvre. Question about the Plain Jane and Singleton Shuffle strategy. It has been a 1. I would then re-invest the same portion back into the non-registered investment account.

I would not tax deduct the portion I used to pay the mortgage portion but would resume once I have re-invested. My goal is to take advantage of the max pre-payment amount for scotia and quickly convert the mortgage portion to the heloc portion so that it is tax deductible. For VDY, almost all of the distribution is in form of income, which is not preferred from a taxation perspective. Question on tax strategy Smith Maneuver: Should we invested under joint or high tax spouse or low tax spouse in the following scenario.

I would also like some clarification on this as well, based on the author of this article it suggested to have this highest earning claim the tax deductions but the math shows you save a lot more from the dividend tax if the lower earning spouse claim the deductions. Ultimate Smith Manoeuvre Guide Canada. Share on Facebook Facebook. Share on Email Email. Share on Twitter Twitter. Share on Print Print.

Does it matter whose name the investments are purchased under or should they be under both names? If the HELOC is under both names, does the tax deduction for the interest paid get split between the two people? Enter Your Name Here Please enter your name. This applies only to players who are earning an endorsement contract. All of that marketing income can run through your business. If you have any questions about that please ask. They live in Manitoba and are filing taxes as a Manitoba resident.

Half of your money goes straight to the government. Right away you can see the difference. There are a few things to consider. If you want to pull this to your personal side and withdraw from your corporation, that will create taxable income personally. The benefit of having this corporation is you can defer that until a later time in your life when your personal income is lower.

You could use some of that cash and the retained earnings within that corporation to pay yourself a more consistent income stream in retirement. This is a very oversimplified example. What I wanted to show you is that you have the opportunity to incorporate your personal brand, by doing so you could shelter some of the taxes in the short term and create a steadier income stream in retirement once your income goes down.

At the end of the day, this idea is something that could net you more money in your pocket down the road. Tailoring my financial advising practice toward pro hockey players has allowed me to stay involved in the game in a way I would never have imagined ten years ago. Skip to content. February 15, Benefits of Corporation Today I want to show the benefits of having your endorsement income inside your corporation.

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But the value of your TFSA can quickly exceed your contribution limit. That's because capital gains and dividends increase the value of your TFSA but that growth doesn't count toward your contribution room. That last sentence is worth repeating: any growth in your TFSA does not count toward your contribution room.

Now, before we move on, a note of caution: it's true that when you experience a capital gain in your TFSA, your total room grows. But the reverse is also true: when you experience a capital loss, your TFSA room shrinks. Only buy assets with high growth potential and therefore higher volatility if you have a long enough time horizon to hold on without selling during the inevitable downturns.

If you treat your TFSA as your emergency fund, then keep low volatility assets in it instead. You're a saving superstar. Got a spouse? Congrats, your family's tax-sheltered room just doubled roughly — your RRSP room won't be exactly the same. Got kids? Now, if you've taken full advantage of all the registered tax-sheltered accounts available to you, you'll need a non-registered taxable account.

You'll then want to arrange your assets across your registered and non-registered accounts so that you owe as little tax as possible. Assets held in a taxable account are, as the name suggests, taxable. However, you can optimize the location of your assets across taxable and tax-sheltered accounts for tax efficiency. Here are the types of tax that apply to different asset classes:.

This is the least tax efficient way to earn income, so avoid owing tax on it by putting these assets in tax-sheltered accounts. Canadian REITs: Real estate investment trusts pay out rental income that gets taxed like regular income, much like the interest received from bonds and GICs. Keep them where you keep your bonds: in tax-sheltered accounts. Do not put them in your TFSA.

International dividends: Foreign dividends are taxed at your marginal top tax rate. Put international equities into TFSAs, then RRSPs, then your non-registered account because you're expecting equities to be high growth, but their dividends don't qualify for the dividend tax credit. It's important to know that when you buy a Canadian ETF or mutual fund that holds foreign dividend-paying equities, you'll still be taxed the foreign dividend tax rate. Canadian eligible dividends: The Canadian government wants to incentivize Canadians to invest in Canadian companies so Canadian dividends are more favourably taxed than foreign dividends.

O Canada! There are two types of Canadian dividends: those eligible for the advanced dividend tax credit and those that aren't. Note that as your income goes up, Canadian dividends become less tax-efficient. If your TFSA is full with international equities, then shift Canadian equities to your non-registered account because Canadian dividends are favourably taxed. Leave your RRSP room for bonds and US equities, because you'd get hit with a bigger tax bill if these were in your non-registered account.

Canadian preferred shares: These pay dividends that are tax-efficient, so if you have no space left in your TFSA or RRSP, they'll do just fine in your non-registered account with your Canadian equities. Note that you pay tax on dividends in the year you earned them, not the year you withdraw them. So even if you were to reinvest dividends say through a dividend reinvestment plan or DRIP , you would still have to pay the tax that year.

Capital gains: An increase in the value of your investment is called a capital gain. Capital gains are taxable when the investment is sold. There are a variety of ways to legally reduce the amount of tax you owe on capital gains. Return of capital: When an investor's original investment is repaid, it is not a taxable event. Why is tax efficiency so important? Because every extra dollar that stays in your portfolio contributes to compounding and grows your nest egg.

And once you're retired, you can influence how much you pay in taxes based on where you draw your income — note that different types of income are taxed at different rates depending on which tax bracket you fall into! That'd be a whole article on its own but the link above has clear illustrations that show tax rates after age 65 and how income from different assets affects government benefits like GIS and OAS. While it's important to consider ways you can reduce the amount of tax you owe, don't put the cart before the horse: tax considerations should come after you've decided on an asset allocation that is in line with your personal risk tolerance and time horizon.

For example, if the money in your TFSA is pegged for something like a down payment or car purchase in two years, then keeping that money in bonds or GICs is perfect for your financial goals. Keep your goals front of mind and use them to inform your investment and tax strategies. More important, the Advantaged ETFs have considerably higher costs than plain-vanilla index funds, which will lower their pre-tax returns. Those added costs offset some of the tax savings, and may even wipe out the advantage altogether.

To enter the draw, leave a comment below or tweet this post to your followers before midnight EST on Sunday, January Well written article to address the tax efficiency issue of the couch potato portfolio. I hope you can add a new tax efficiency section in your model portfolio section to include the after-tax return of the potato with different tax scenario. I may add a tax-friendly model portfolio at some point, though it would be impossible to calculate the after-tax return, because this would be different for each individual.

Interesting post. In Europe I understand there is a move to better regulate derivative based ETFs that use techniques such as swaps as described above. It is more of a concern there because of the current fragility, potential instability and undercapitalization of the banks which might put the swap agreements into question should anything bad start happening. I do not consider it a problem here from reading the prospectuses of the swap ETFs given the capitalization levels of our banks and other indicators of stability.

Andrew: I agree with you that the swap structure seems to be very low risk in Canada, where the collateral requirements are quite strict. In Europe, not so much. I look forward the tax-friendly couch potato model portfolio. Although tax situation is different for each individual, still, it helps your readers to get an overall picture of how to assemble tax-efficient portfolios outside RRSP and TFSA.

For many people, the size of registered portfolio is small because of lack of capital, or deferred contribution to a later time for a better result. I am interested to know how the income replication by forward contracts is affected in response to interest rate change, which is not mentioned in their articles. Stock spot price and dividend is affected by many factors, but the forward price is directly affected by risk-free interest rate per pricing formula. The other asset classes and ETF choices in that portfolio are all quite tax-efficient.

But the explanation for the CAB Return of Capital raises some questions in my mind, likely due to my incomplete understanding of Bond Index Fund accounting. I initially thought that interest in ordinary Bond funds was captured tax-free somehow and reflected as an increase in the price of the Fund. I see I may have got that wrong; interest is interest and is taxable. Bond Interest from a fund is fully taxable in the year it is paid out? It is not kept within the fund and tax protected?

Then X is fully taxable at marginal rate, and Y is capital gains taxed on the portion that got sold. First, and most important, interest and dividends, for that matter is always taxable in the year it is paid out. Previous ROC payments will lower your adjusted cost base, which will raise your capital gains. However, this is preferable to receiving the income as interest, since cap gains are taxed at only half the rate of interest income.

If you hold XBB, you will also pay capital gains on any portion sold at a profit, and any interest payments are fully taxable. Sometimes funds incur capital gains from selling securities, and they must pass these gains along to you. The fund has a choice of either passing along the capital gain to you in cash, or reinvesting the proceeds and simply sending you the bill at tax time: you get a capital gain recorded on your T3 slip.

CAB makes absolutely no sense in a tax-sheltered account: the additional costs are never worth it unless you can get a significant tax savings. In fact, with yields so low these days, you pretty much have to be in the highest tax bracket for it to be obviously superior. HXT has no additional fee for the swap, so the 8 bps MER is all you pay, which makes it a great choice in a tax-sheltered account. It might still be a good choice in a tax-sheltered account because of the constant reinvestment of dividends.

CCP Thanks for the prompt reply, which was densely packed with thoughtful answers to all my questions. Assuming so, I wonder if HXS would be such a good deal after all. The 0. The expense might be associated with the hedging of the Canadian Dollar, which I believe you have mentioned before is not necessarily a good strategy. I guess evaluating the benefit of HXS in a taxable account has to take into consideration how much foreign dividend would be expected to be paid annually in a conventional US index fund; I have no idea — I was only focussed on the expected long-term capital appreciation.

What is the usual amount? Depending on the amount of US dividend expected annually, HXS may be a reasonable choice in a large taxable account of a high income Canadian, until a cheaper MER, non-hedged version came around. I would agree that HXS is not necessarily a great choice for a tax-sheltered account: its structure is primarily designed for its tax benefit. The one exception is if you want to trade in Canadian dollars, you want hedging, and you happen to use a brokerage that offers HXS for zero commissions.

That would more than offset its higher cost. Of course, if you are in a lower tax bracket, the savings are smaller. I am trying to track down this document, and I will send it to you. I imagine there will be some soon, once dividend tax rates jump for US investors in January. That would make a good option for Canadians looking for an unhedged alternative to HXS.

Of course, I would worry more about who the counterparties are as I have less faith in US banks. I imagine it will be common to spread the counterparty risk around, as the above ETF seems to do. Your principal as well the interest gained in the initial step prior to the swap is still retained by you.

At least that is my understanding of the risk see CCP post June 8, Seems to me the individual investor would still hold on to his original investment principal plus accrued interest, as in the scenario of the failed bank when the ETF underlying value increased.

It seems unlikely that the counterparty bank would fail during a time of a rip-roaring positive equity returns. If the counterparty failed during a widespread market meltdown like , it seems likely that the index itself would also be way down.

And, therefore, the cash collateral held by the ETF sponsor could actually exceed the value of the index. Horizons actually explained this in my interview with them. Which observation are you agreeing with? Actually I made one observation to Andrew F and a conjecture to you.

You agreed with me that in that scenario…. So then what? Oldie: Sorry if I misunderstood. However, in practice, it seems likely that the counterparty would only fail during a period when equities crashed. I doubt they would have a claim to any excess return, however. If you still have concerns, you can always email Horizons directly. They will answer any specific question you have about these products.

His actual words were:. I think I knew from earlier discussions that NB was the counterparty for these two funds.