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REPEAT: BMO Nesbitt Burns Offers Tips on How to Save on Taxes Paid

- 63 per cent of Canadians unfamiliar with how dividend income is taxed; 58 per cent unfamiliar on how capital gains are taxed

- Strategies involving charitable donations, RRSPs, and TFSAs are among the many ways Canadians can reduce their overall tax bill

TORONTO, ONTARIO--(Marketwire - March 22, 2013) - As Canadians prepare their 2012 personal income tax returns, BMO Nesbitt Burns encourages them to review carefully the tax implications on income generated by their investments, including adopting strategies on how to save on investment taxes paid.

According to a BMO Nesbitt Burns study, many Canadians are not familiar with the tax implications of earning investment income, including:

  • How capital gains are taxed (58 per cent)
  • How dividend income is taxed (63 per cent)

"It's important not only to think about how your investments will fit with your financial goals, but also how they will affect your taxes," said John Waters, Vice President, Head of Tax & Estate Planning, Wealth Planning Group, BMO Nesbitt Burns. "The taxation of investment income can have an impact on net returns. However there are a variety of tax-saving strategies that can help Canadians save money now and down the road. Be sure to investigate the options and plan accordingly."

BMO Nesbitt Burns offers the following strategies to save taxes on investments and capital gains:

  • Offset capital gains with capital losses: If an investor realizes capital losses in the same taxation year that a significant capital gain is triggered, the tax liability on the capital gain can be reduced. Therefore, it is important to review your portfolio to consider the sale of certain investments with accrued losses to offset capital gains realized earlier in the year, provided a sale makes sense from an investment perspective.

  • Donate appreciated securities: When you make a qualifying charitable donation of publicly-traded securities, the capital gains tax that usually applies to the sale of a security can be eliminated. Investors will also receive a tax receipt for the fair market value of the securities at the time of the donation.

  • Contribute to an RRSP: Contributions to a Registered Retirement Savings Plan (RRSP) are tax deductible, and the income earned in an RRSP is not taxed until it is withdrawn. This means savings grow faster than those held outside of an RRSP. Optimize your RRSP by maximizing your annual contribution limit or contributing to a spousal RRSP.

  • Invest in a TFSA: The Tax-Free Savings Account (TFSA) is a tax-efficient vehicle that combines the benefits of tax-sheltered savings with the advantage of compounding, allowing your savings to grow.

  • Spot tax deductions: For some investors, the possibility of claiming other tax deductions to offset increased income may lessen the tax liability created by the realization of capital gains in a non-registered portfolio. For example, the extra cash flow from the sale of an investment could be directed towards a larger RRSP contribution, especially if you have significant unused contribution room carried over from prior years.

  • Consider a tax-deferred roll-over: Many corporate takeovers allow disposing shareholders to exchange all or a portion of their shares for shares of the acquiring corporation. This option generally provides Canadian shareholders with the opportunity to defer tax on accrued gains on the old shares by filing the necessary tax election forms prior to the prescribed deadlines.

  • Defer a portion of the gains to next tax year: If proceeds of disposition from a sale triggering a capital gain are not all receivable in the year of the sale, it may be possible to defer a reasonable portion of the gain from taxation until the year when the proceeds become receivable.

  • Consider income splitting: Income splitting allows you to spread income amongst family members who are taxed at a lower rate (subject to possible attribution rules). Some valid income-splitting strategies include: pension splitting between spouses or common law partners; an interest-bearing loan to family members in a lower tax bracket; and gifts to adult family members (such as a parent or adult child).

For more information on BMO Nesbitt Burns and investing, please visit: www.bmo.com/nesbittburns.

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For further information:
Media Contacts:
Rachael McKay, Toronto
416-867-3996
rachael.mckay@bmo.com

Valerie Doucet, Montreal
514-877-8224
valerie.doucet@bmo.com

Laurie Grant, Vancouver
604-665-7596
laurie.grant@bmo.com