Invesco Canada blog

Insights, commentary and investing expertise

Still not sure about RRSP vs. TFSA? Here’s how to use both

February 19, 2020
Subject | Tax & Estate

Learn how to maximize long-term tax benefits using tax-sheltered or tax-deferred registered plans.
One of the biggest benefits of registered plans in Canada is the tax-deferral opportunity on the compound growth inside the plans. In other words, registered plans generally allow investors to avoid the periodic tax on investment income generated; non-registered plans, in contrast, expose investors to annual taxation of income distributions. Without the annual “tax-drag,” investments in registered plans can grow faster than investments in non-registered plans. Given that, which registered plan is best to use? Here are key factors to consider when deciding whether to invest in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).
RRSP contributions are deductible against income, and RRSP redemptions are 100% taxable as income. TFSA contributions are made with after-tax money, and TFSA withdrawals are tax-free. Funds grow inside both plans on a tax-deferred basis.
RRSPs and TFSAs are, in fact, designed to be tax neutral, assuming a constant marginal tax rate (MTR). When an investor has a constant MTR throughout his or her working and retirement years, there should be no difference between an RRSP and a TFSA in net after-tax income.


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Resulting Trusts & Joint Accounts

January 16, 2020
Subject | Tax & Estate

One way of classifying trusts is to divide them into express trusts and trusts arising by operation of law. An express trust is created with the settlor’s intention – for example, when a parent creates a trust for a child to provide ongoing financial support into the child’s adulthood. The intention can be clearly expressed by the settlor or implied by his or her words and conduct, although the latter is a question of fact and may require sufficient evidence to prove the intention. On the other hand, a trust arising by operation of law is not established with intention, but is found by a court to exist even if the settlor did not intend to create it.


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‘Tis the season for tax-loss selling

December 5, 2018
Subject | ETFs | Invesco | Tax & Estate

As the year-end approaches, many investors with taxable accounts may be seeking to dispose of securities that have lost money. The strategy of tax-loss selling allows the investor to claim a capital loss, which offsets capital gains for the current year. Any unused net capital losses can then be applied against taxable capital gains in any of the three preceding years, or carried forward indefinitely to future years. To realize capital gains and losses in 2018, trades must be executed by Thursday, December 27 to ensure settlement by Monday, December 31, the last business day of 2018.


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Canadian small business tax reform, the road until now

October 27, 2017
Subject | Tax & Estate

On July 18, 2017, the Department of Finance Canada released a consultation paper and draft legislation on the use of various tax-planning strategies through private corporations (otherwise referred to as Canadian small businesses). During the consultation period, which ended on October 2, 2017, the public was given the opportunity to comment on the proposed changes. The Government received an astounding 21,000 submissions during this period. Further changes to the proposals were announced in October 2017 (see below) through to the Fall Economic Statement released on October 24, 2017. Below is an updated summary of the proposals.


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