Tax Efficient Income

Understanding how your registered and non-registered accounts are taxed will better help in creating an efficient financial plan. When choosing investments it is important to consider how these investments will be taxed. Creating a tax-efficient portfolio can save you thousands of dollars. Interest income is taxed at your full marginal tax rate, and therefore the least efficient investment income. The taxation of dividends is a somewhat more complicated issue. Eligible dividends are grossed to produce a taxable income total, which will then be taxed at the individual's marginal rate. Once the basic tax is calculated, it is reduced by the federal dividend tax credit. Capital gains taxes are also calculated according to a person's marginal tax rate, with the crucial difference that the investor is taxed on only 50% of the gain on an investment.