Maximizing Your Return on Investment
Wise investors look for opportunities beyond simple gross returns. Because taxes do cut into the final net return, it is important to take investment tax rates into consideration. While most people understand that tax shelters such as RRSPs, RESPs and TFSAs can help, there are other ways to maximize your investment returns. Here are a few tips on how to make the best of your current and future investments.
1. Foreign investments – You may not realize that foreign dividends earned from a TFSA are liable to pay taxes to the respective country. For instance, if you have U.S. stocks in your TFSA, you will need to pay taxes on any earnings. On the other hand, RRSPs aren’t subject to any foreign withholding taxes so they may be more tax-efficient for your investments.
2. Capital gains – If you have non-registered investments, you may want to consider earning capital gains or possibly Canadian dividend income to maximize your returns.
3. REITs and LPs – Real estate investment trusts (REITs) or limited partnerships (LPs) are also good investment choices. Since the earnings might not be taxed immediately if the income is classified as return of capital, REITs and LPs can provide additional investment returns for a taxable account.
4. Rental real estate – If you are a landlord, there are a few tax benefits that work to your advantage. For example, the interest on the property’s mortgage is tax deductible. Also, any depreciation on your rental property can be claimed on your taxes.
5. Life insurance – If you have a universal life insurance policy, you should have a way to allocate your savings fund into different tax-free investment options. For those with whole life insurance policies, some of the premiums are invested on a tax-free basis.
Overall, there are many opportunities to maximize your investments. For the best way to invest your money, it is still wise to seek professional assistance to see the highest returns for your money.