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Many Canadians will receive an income tax refund from the Canada Revenue Agency (the “CRA”) or Revenu Québec (“RQ”), for those who also file taxes in Quebec. If you receive a tax refund based on your 2024 income tax return, it may be worthwhile meeting with your BMO Private Wealth professional to discuss how you can maximize using these funds, such as repaying non-deductible debt, or catching up on your Registered Retirement Savings Plan (“RRSP”), Tax-Free Savings Account (“TFSA”), First Home Savings Account (“FHSA”), or Registered Education Savings Plan (“RESP”) contributions.

Towards the end of the year, many investors review their investment portfolios to determine the anticipated tax impact of any capital gains and losses realized during the year. For investors who have realized significant capital gains in their non-registered account(s), this article examines various strategies to help reduce the impact of a potential tax liability of these gains, regardless of whether they were the result of a voluntary or involuntary sale.

Each year, fluctuations in the stock markets leave investors with plenty to think about. Does my portfolio need repositioning? If so, which stocks do I keep and which do I sell? When investments are held in non-registered accounts, these decisions can have immediate tax implications. For example, if you’ve decided to sell a security that has an accrued gain, you’ve increased your taxable income. When you sell a security that has an accrued loss, the capital loss will reduce your capital gains for the particular tax year. And, when losses exceed gains in a given year, there is no further reduction to your current taxable income; however, a net capital loss may be used to reduce your capital gains in other tax years.

Many individuals hold investment portfolios in a personal holding company. It’s important for these investors to keep current and fully understand all the tax implications of earning investment income through a holding company. Tax implications can be quite different from owning investments personally, because a corporate structure introduces a number of other considerations.

For 2023, business owners can use the Capital Gains Deduction to shelter up to $971,190 of capital gains on the sale of shares of a qualifying small business corporation. Due to the potential tax savings from accessing this deduction, it represents one of the most compelling tax planning opportunities for Canadian business owners. As the rules are complex, only a general discussion is provided here. As with all tax planning, professional advice is critical to understanding the specific implications in your situation.

The pension income-splitting rules provide an effective, yet simple, strategy to lower family taxes. Being able to split pension income provides an opportunity for couples to reduce their overall family tax bill by taking advantage of a spouse’s or common-law partner’s lower marginal tax rate where retirement incomes are disproportionate.

It’s one of those perfect days at the cottage – the summertime retreat has been in your family for years. You are sitting on the dock in your favourite deck chair with a cool refreshing drink and a bestseller to read. The sky is clear and the gentle breeze keeps the heat from the sun at bay. It doesn’t get any better than this. You love the cottage and hope it will stay in your family for generations to come.

If you receive the surplus capital in the form of a taxable dividend, the entire amount will be subject to tax at your marginal tax rate. If you leave it in the corporation, the investment income will be taxed at the highest corporate tax rate, which, in some cases, can be higher than your personal income tax rate (active business income is eligible for tax breaks). The strategic use of life insurance could significantly reduce the tax cost of passing on your private company shares.

If you are a retired couple, you may be depending on your non-registered investments to supplement your registered accounts and pensions to provide you with a comfortable retirement income. As you know, the income from non-registered investments is fully taxable annually, and upon your death the assets may be subject to a probate tax (except in Quebec) as part of your estate.

BMO’s outlook on the equity markets featuring Brent Joyce, Chief Investment Strategist and Managing Director, to help you prepare for the coming year.

Understanding your unique needs and circumstances is at the heart of BMO’s wealth management approach.