The objective of this class is to provide a first preference for annual capital gains dividends.  Capital gains provide income at a low rate of taxation in comparison to other income types. Capital gains are also the only income type that can offset a capital loss that may have been realized previously.

Top Uses:

  1. Utilize Tax Losses

    • Use distributed capital gains income to offset current or historical capital tax losses. Ideal for retirees from professional partnerships who have capital losses due to non-deductible expenses.
  2. Tax Efficient Method of Earning Interest Income 

    • Investors can have underlying exposure to fixed income investments while only paying tax at preferred capital gains rates.
  3. Income Splitting

    • Investors can use capital gains to split income with minor children, capital gains are the only income type not attributable back to parent, grandparent or other donor.
  4. Minimizing OAS Clawbacks

    • Ideal for retirees who wish to maintain withdrawals from registered accounts and/or minimize the impacts of investment income on OAS clawbacks.
  5. Tax Minimization for High Income Earners

    • For individuals in the top marginal tax bracket, capital gains attract the least amount of tax as compared to any other type of taxable investment income.

 

Top Marginal Tax Rates - 2017

 

British Columbia

Alberta

Ontario

Quebec

Capital Gains

23.85%

24.00%

26.76%

26.65%

Ordinary Income

47.70%

48.00%

53.53%

53.31%