’Tis the season for tax-loss selling in Canada + MORE Dec 8th

Kyle Prevost, creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course, shares financial headlines and offers context for Canadian investors.

Interest rates stay the same—bank accounts, not so much

As was widely anticipated, the Bank of Canada (BoC) chose to keep the key interest rate at 5% this week.

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Taxes are an inescapable fact of life in Canada. Despite this, many of us don’t think too hard about the specific federal and provincial tax brackets that govern our taxable income. Nonetheless, understanding what bracket we fall into is key to accurately estimating the amount of tax we owe on our 2023 earnings. This knowledge is particularly valuable if you are self-employed or engaged in a side gig where you’re responsible for figuring out your own tax payments. (You wouldn’t want to accidentally get on the wrong side of the Canada Revenue Agency, would you?)

An understanding of the provincial and federal tax brackets can also help you decide if you should increase your registered retirement savings plan (RRSP) contributions. Doing so could help you reduce any outstanding balance on your notice of assessment (NOA) to zero or, if you’re lucky, get a refund.

How do tax brackets work in Canada?

Tax brackets outline the proportion of income tax that we need to pay based on annual earnings…

In its 2023 Fall Economic Statement, the federal government announced the Canadian Mortgage Charter. It’s a new initiative intended to address the housing affordability issues caused by rising interest rates, low housing supply and more. The charter, which sets out expectations for lenders, is the latest step in a series of affordability measures put forward by the government in recent months, many of which focus on banking and borrowing.

How do interest rates relate to affordability?

In an effort to subdue runaway inflation, the Bank of Canada (BoC) has raised the benchmark interest rate several times over the last 24 months. This rate affects the interest rates of other financial products. The interest offered on guaranteed investment certificates (GICs) is far higher than usual, for example. This is because the benchmark rate is higher.

Unfortunately for home owners in Canada, the benchmark rate also affects mortgage interest rates. Home owners with variable-rate mortgages, whose interest rates fluctuate with the benchmark rate, have grappled with sharp increases to their mortgage payments over the past few years…

With 2023’s year-end fast approaching, late December is a critical period for Canadian investors and their money managers. Now that we’re in the fourth quarter, this is the time to take inventory of your investments—and specifically taxable non-registered investment accounts—with an eye to minimizing tax before it’s too late.

For Canadian investors who have achieved significant taxable capital gains, now is the time to implement a tax-loss selling strategy—the most effective way to find tax savings.

What is tax-loss selling in Canada?

Tax-loss selling is an investing strategy designed to offset taxable capital gains and reduce your tax bill. It involves selling investments to trigger a capital loss and claiming them against capital gains.

Definition of tax-loss harvesting
Tax-loss harvesting, or tax-loss selling, is a strategy for reducing tax in non-registered accounts. Investors sell money-losing investments, triggering capital losses they can use to offset capital gains incurred the same year…

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