Nice work, your taxes are filed, any payments required are made, and if you are owed any money, it is on the way. Life is good, you are not on Canada Revenue Agency radar for any reason. Let’s review a bit further and see if things can be better and you can fine-tune your situation.
If you have any OAS benefits being clawed back, there are ways to mitigate the loss of benefits; this depends in part on your risk tolerance. If you are a 100% no risk investor and all of your funds are in GICs (Guaranteed Investment Certificates), the taxation treatment of the interest you receive offers no tax-advantaged benefits, and you pay tax at your full marginal rate; 100% of the interest is added to your income. If you invest in a mixture of GICs and mutual funds or stocks, you have some control over the tax treatment of monies that you receive. Some mutual funds pay out dividends, same as individual stocks – although dividend income is tax advantageous to interest income, the dividend is ‘grossed up’, which means a larger amount added to your income, which could result in a benefit clawback. Capital gains are the most tax advantageous of the three types of income discussed, only one half of the capital gain is taxed. An often misunderstood, and very tax advantageous source of income is ROC (return of capital). Keep in mind you are, in essence, receiving your principal back in regular payments, but that does not mean you are not earning money, and better yet, keeping more of your hard-earned dollars. Ask your advisor for the details and if you are suited for this strategy. Please contact me if you have any questions or with a topic you would like addressed in a future article.