Chapter 25

Question 1

What are the three types of income generated by ‘investments’?

Answer 1

1. Intrest
2. Dividends
3. Capital Gains + Losses :(

Question 2

What is a rule of thumb discussed about these in accordance with tax?

Answer 2

Each is taxed differently by CRA

Question 3

What are marginal tax rates?

Answer 3

In Canada depending on the amount of income, people are taxed differently based on employment income

Question 4

How is ‘intrest income’ taxed?

Answer 4

This is taxable income (as this is income earned from an investment) so its part of the income you get taxed on by zaddy truedau

Question 5

What is the taxable amount referred to as for ‘intrest income’

Answer 5

Its taxed the same way as our marginal tax rate (which is the rate of our employment income)

Question 6

What are dividends

Answer 6

Cash payments received on investments

Question 7

How are dividends taxed in this country?

Answer 7

1. Calculate the taxable amount for returns on your dividend: Lets say you got $150 in dividends you multiply this by 38% (150*1+38%) = 207
2. Calculate the tax credit:
   207*25% = 51.25
3. Find what tax bracket you’re in multiply the rate to the dividend tax credit:

207*48% -51.2= 47.61 (this is the tax you will pay to the government)

To see how much you py in taxes: 47.61/150 = 31.7% on the dividends

Question 8

What are capital gains and when do we get taxed on this

Answer 8

1. We only get atxed on a capital gain when we sell the investment
2. Capital gain is the difference between what we had paid and how much it grew to

Question 9

Are ‘capital gains’ taxable income?

Answer 9

Yes however for it to be taxed you need to sell the investment and get the capital gain

Question 10

What is a fact about capital gains/losses?

Answer 10

you only get taxed on 50% of the capital gains/losses

Question 11

Example on capital gain: “you genrate a capital gain in 2023 of $2000” and you are in the 26% tax bracket?

Answer 11

$2,000 * 50% = $1,000 is included in income

If you are in the 26% tax bracket, your Federal tax on the capital gain is $1,000 * 26% = $260

The effective tax rate on the capital gain is 13%!

Question 11

What is efficent taxable income sources?

Answer 11

Its when we choose our source of income that would produce the lowest effective tax rate

Question 11

What should you know for taxes Hannan? (interest income)

Answer 11

1. The ‘taxable amount’ is the entire thing
2. No tax credits for interest income
3. To find the effective tax owed rate : divide this amount by the income you had at beginning

Question 12

What should you know about taxes Hannan? (capital gains + losses income)

Answer 12

1. Taxable income is 50% of the income you had received
2. No tax credit

Question 12

What should you know for taxes Hannan? (dividend income)

Answer 12

1. your taxable income is grossed up by 38%
2. You have a tax credit based on the taxable amount t of 25%
3. To calculate tax owed its the taxable income - tax credit

Question 12

What is a non-registered plan/account

Answer 12

1. Typical investment account
2. Threes no max on how much should be deposited
3. The tax you pay is dependent on the type of income earned from the investment (interest, dividends, capital gains + losses )

Question 13

What is an RPP (registered pension plan) or an RRSP (registered retirement savings plan)

Answer 13

Helps save for retirement

Question 14

What are some perks of an RRSP or RPP

Answer 14

1. There are tax reductions that reduce taxable income leading to potential tax savings.
2. You only get taxed when you withdraw the amount at retirement

Question 15

How do you contribute to RRSP

Answer 15

The max you can contribute is 18% of income and up

Question 16

What is TFSA

Answer 16

helps us teens save

Question 17

Whats the most we can contribute?

Answer 17

7000

Question 18

What are pros and cons of TFSA

Answer 18

1. Deposits are not tax deductible
2. Investment income inside TFSA is not taxed
3. Withdarwls from TFSA are not taxed

Question 19

What are first home savings accounts

Answer 19

1. Buying a home for the first time
   2, must be used for home purchase in next 15 years
2. Max contribution is 8000 and life is 40,000

Question 20

What are pros and cons of FHSA

Answer 20

1. deposits are tax deductible
2. Investment income are not taxed
3. Withdrawls not taxed

Question 21

What are some key things you should know for an investment account

Answer 21

1. Are they tax deductible = no
2. Do you get taxed on investment returns = yes
3. is it open to buy a home = no

Question 22

What are some key things you should know for an RRSP

Answer 22

1.. Are they tax deductible = yes
2. Are withdrawals taxed = yes
2. Do you get taxed on investment returns = no
3. is it open to buy a home = no

Question 23

What does tax deductible mean?

Answer 23

Reduces taxes owed to the government