Capital gains tax in Canada, explained + MORE Jun 16th

Capital gains tax highlights
Only 50% of a capital gain is taxable in Canada, and the taxable portion is added to your income for the year. With Canada’s current income tax rates, no one pays more than 27% in capital gains tax. You can reduce the amount of capital gains tax you owe by holding your investments in registered accounts, reporting capital losses and claiming the principal residence exemption.

Selling your high-performing stocks or your cottage with a view can reap significant profits, and those moments are worth celebrating. But while you’re enjoying the spoils of your investments, keep in mind that you’ll eventually have to pay tax on them. In Canada, most gains on capital assets are taxed. Let’s look at strategies to avoid paying more taxes than you need to come tax time. 

What are capital gains?

You have a capital gain when you sell an asset or investment for more than it cost you to acquire it. If you purchased $100 worth of stock and then sold those shares for $150 two years later, for example, you would have a capital gain of $50…

A tax-free savings account (TFSA) is a fantastic way to earn money on your savings, without having to pay tax on those earnings. Registered by the federal government, TFSAs are available to Canadians aged 18 and older. Unlike a registered retirement savings plan (RRSP), you cannot deduct contributions to your TFSA from your income tax, so you will have to pay income tax on that initial money. But as long as you adhere to TFSA guidelines, you won’t pay taxes on any earnings made within the TFSA, not even when you withdraw it. Plus, you can withdraw as much as you want at any time.

There’s a specified limit to how much money you can put inside a TFSA. For 2023, the annual TFSA contribution limit is $6,500, and there is a lifetime maximum of $88,000 for those who were 18 or older as of 2009. The good part is that any unused contribution space and any amount that you withdraw from your TFSA becomes available to you as contribution room in the next calendar year.

Even though the word ‘‘savings” is in the name, it’s actually better to think of TFSAs as investment accounts, rather than simply a savings account…

Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, shares financial headlines and offers context for Canadian investors.

The U.S. Fed pauses rate hikes—for now

On Wednesday, the U.S. Federal Reserve decided to pause raising interest rates after 10 consecutive months of hikes and increased pain for borrowers. This decision came on the heels of May’s consumer price index (CPI) report from the Labor Department on Tuesday.

The report revealed the annualized inflation rate now stands at 4%, edging closer to the U.S. Fed’s 2% target, and providing substantial evidence that tighter monetary policy is working. That said, the core inflation measure (which strips out food and energy price movements) was still at a worrisome 5.3%.  

Source: CNBC

Gasoline, health insurance, airline fees, appliances and vehicle prices were all down substantially from a year ago. Whereas food, services and shelter were the main drivers for inflation…

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