RE:RE:RE:RE:RE:RE:RE:Take profit? Or hold..The Dividend Tax Credit is not a tax break, it is an acknowledgement of the fact that taxes have been paid at the corporate level. By holding eligible dividend paying stocks in your RRSP you are not deferring taxes at all, but agreeing to pay taxes twice, albeit perhaps at a preferable rate. Pay now
and pay later.
When it comes to capital gains one must decide if the deferal and change in marginal tax rate are worth forgoing the current 50% inclusion rate. I would suggest that for many (most?) that would not be the case.
micromike wrote: RRSP is just a tax deferral program. In theory you are at a higher tax bracket when you are working so it makes sense to use it. It’s also an insurance policy if by chance you lose your job and are not working for a year or two. You can dip into it.
On the downside
If tax rates keep going up then are you really saving taxes?
When you retire and your income is just as high as or higher then it’s a bad idea.
So in these two situations, there is no tax benefit but you can’t predict the future.
You get no tax break for dividends or 50% break on capital gain inside an RRSP. When you go to withdraw it. The tax man holds back 10% for under $5K and 20% over $5K. It adds directly to your income with no tax breaks. It just like interest on your money. At the end of the day. The government wants money so pay now or pay later.
That’s why I call it a tax deferral.