Make tax-free investments, not war
Now that I had won myself an appointment at the Paper Shack to fight the much older, bigger kid from Grade 6, I fidgeted nervously for the rest of that afternoon in school. That same day a completely different sixth grader, a gangly boy who had before then been mostly invisible, drew my attention away from impending death. He was protesting a U.S. nuclear bomb test soon to be conducted up the coast in Alaska.
The sign read: “Stop the Amchitka Bomb!” He carried it with him everywhere, and uncharacteristically, the administration allowed him to freely express his dissent. Something was up.
Lower Mainland high school students had been protesting the bomb loudly that fall and then Prime Minister Pierre Trudeau, whose wife was from North Van, had sided (against Nixon) with a group of Vancouver protesters who were sailing toward Alaska on the vessel The Phyllis Cormack.
The protest trip was funded by musicians Joni Mitchell, James Taylor and others. As the Vancouver environmentalists boarded their boat, amidst a media frenzy, somebody shouted: “Peace!” and flashed them the two-finger symbol as a farewell. At this point, one of the environmental protesters quipped, “… and make it a green peace!”
At that moment, a worldwide movement was born just a few miles from my schoolyard. It would be the inaugural voyage of Greenpeace. But at the old green Paper Shack, a micro-war still loomed large.
As the 3 p.m. bell rang, fight rumours were relentless. Consensus: given our relative size and age, the fight was bacon against a fork. But no protesters stood in the way of my consumption.
I had no plan really, as I approached the crowd. Just before the mass parted enough to allow Tony a satisfied smirk toward me, I bent toward the ground, without breaking stride, and picked up a smooth rock, about the size of an egg, and cupped it in my right hand. I became David. Not the godly-confident David, the ruddy sweaty-palmed David.
I stopped about five feet away. He said something about making this quick and painful, but as he motioned toward me, I cocked my pitching arm, and made as if I was about to nail him in the head with the rock. The threat startled him enough to pause his advance, at which point I dodged and zipped past him in to the Paper Shack. He followed, of course… That other annual war impends a different sort of dread. As harsh as the tax authority might be, he seems timid compared to the demons who haunt us to gather up that paperwork and get to it. There’s not a pill for it. Most can’t afford a personal financial sidekick, so on we go. Here’s a few more tips, many of them kind of obvious, some not so much:
TFSA contributions
If you have not yet done so, you can make your TFSA contribution for 2018 (up to $5,500) and catch up on any unused contribution room from 2009-2017.
The TFSA enables you to earn tax-free investment income, including interest, dividends, and capital gains, which may result in greater growth compared to a regular taxable account. You can make tax-free withdrawals at any time, for any reason, and any amount you withdraw is added back to your available contribution room on Jan. 1 of the following year.
If you are thinking of making a withdrawal from your TFSA in the near-term, consider doing so before Dec. 31. This will allow you to recontribute the amount withdrawn as early as Jan. 1, 2019 rather than having to wait until 2020 to recontribute.
RRSP contributions
You have until March 1, 2019 to make a contribution to your RRSP or a spousal RRSP in order to be able to deduct the amount for 2018. However, if you have contribution room, contributing to your RRSP early (i.e., before Dec. 31, 2018) helps to maximize the tax-deferred growth.
RESP contributions
A Registered Education Savings Plan (RESP) is a way to save for a child’s or grandchild’s postsecondary education and can also be used as an income splitting vehicle. The lifetime contribution limit is $50,000 per beneficiary.
By making RESP contributions, you may be eligible to receive the Canada Education Savings Grant (CESG).
The government will match 20 per cent of the first $2,500 in annual contributions to a maximum grant of $500 ($2,500 x 20 per cent) per beneficiary, per year, up to a lifetime maximum grant of $7,200. Consider contributing to the RESP by Dec. 31 to increased tax-sheltered growth, and take advantage of grants.
The income earned on the CESG and the contributions within the RESP can be taxed in your child’s or grandchild’s hands, who likely has a lower marginal tax rate than you.
Capital gains realized in a trust
If a trust is properly structured, capital gains realized by the trust may be allocated to a minor beneficiary and taxed in their hands with little or no taxes payable. Individuals, including minor children, with no other taxable income can realize approximately $22,000 of capital gains taxfree each year due to their basic personal exemption. The amount varies by your province or territory of residence.
Mark Ryan is an investment advisor with RBC Dominion Securities Inc. (Member–Canadian Investor Protection Fund), and these are Mark’s views, and not those of RBC Dominion Securities. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. Mark can be reached at mark. ryan@rbc.com.