Author Topic: For Canadians Only - Beautiful Dividends  (Read 5243 times)

Ottawa

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For Canadians Only - Beautiful Dividends
« on: October 11, 2012, 12:04:30 PM »
I'm not going to say much - other than direct you to a very interesting article about Dividends.  As a Mustachian who can get by on an income of less than 35K - invested properly - you will pay NO TAX on an eligible Dividend portfolio.  Just read the article found here:

http://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/dividend-investing/you-do-the-math-almost-50000-in-earned-dividends-0-in-tax/article4599950/

I use only ETF's for investing instruments and hold CDZ and XDV in my non-registered portfolio.  I hold some XSB and XRE in my TFSA and RRSP portfolios.  Thus; at FI I should be able to pay ZERO tax on my dividend harvesting (since it will be my only source of income for about 12 years prior to age 60). 

totoro

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Re: For Canadians Only - Beautiful Dividends
« Reply #1 on: October 11, 2012, 12:10:12 PM »
Thanks - interesting.

Norman Johnson

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Re: For Canadians Only - Beautiful Dividends
« Reply #2 on: October 11, 2012, 12:17:18 PM »
Yeah, I noticed that too. There is also a huge difference in provincial tax exemptions and rates between the provinces if you are still subject to paying taxes. It could be well worth moving from a strickly financial point of view.

totoro

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Re: For Canadians Only - Beautiful Dividends
« Reply #3 on: October 11, 2012, 12:26:36 PM »
the table is here that compares the provinces:

http://www.taxtips.ca/dtc/enhanceddtc/amt.htm

BC does okay because the rate exceeds the federal rate.

I Love Cake

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Re: For Canadians Only - Beautiful Dividends
« Reply #4 on: October 12, 2012, 08:12:03 PM »
wow, I just asked about dividends in another post. thanks for this!

MooreBonds

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Re: For Canadians Only - Beautiful Dividends
« Reply #5 on: October 13, 2012, 10:32:18 AM »
I'm not going to say much - other than direct you to a very interesting article about Dividends.  As a Mustachian who can get by on an income of less than 35K - invested properly - you will pay NO TAX on an eligible Dividend portfolio.  Just read the article found here:

A question for Ottawa - or any other Mustachian that knows:

I've been looking around the net and haven't really found the precise answer to my question, but have a general idea - if a US citizen ends up moving to Canada, I realize that there is a tax treaty that will help reduce/eliminate double taxation...but what happens if that US Citizen living in Canada continues to hold US companies that pay dividends? Does the US Citizen pay the US Income taxes based on the US dividends, and then (if the total dividends received exceeds 35k), the Canadian taxes owed would still be eliminated by the tax treaty?

Or would the US Citizen pay the US taxes on the US company dividends, and then also have to pay the appropriate Canadian federal/provincial taxes?

And if the US Citizen bought Canadian stocks in addition to their US stocks, would they also owe US income taxes on the dividends paid by the Canadian companies (while they lived in Canada)?

I realize that taxes are complex and have other factors, but just looking at dividends, what is the situation the US citizen would be in?

skyrefuge

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Re: For Canadians Only - Beautiful Dividends
« Reply #6 on: October 13, 2012, 02:21:36 PM »
At the moment at least, this thread seems just as applicable to Americans as Canadians.  A single person in the US can receive up to $44,000 in dividends without paying any federal tax, while a married couple can receive up to $88,000.

Ottawa

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Re: For Canadians Only - Beautiful Dividends
« Reply #7 on: October 14, 2012, 09:59:35 AM »
@MooreBonds
You'll have to ask another Mustachian!  I have no idea about cross - border technicalities...sorry!

jd

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Re: For Canadians Only - Beautiful Dividends
« Reply #8 on: October 14, 2012, 10:28:15 AM »
Yup, dividend income is great, just watch out for the gross-up calculation.  The increased 'taxable income' created by dividends can affect benefits like OAS, CCTB, GST rebates, waiver of health care premiums, etc.

fiveoh

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Re: For Canadians Only - Beautiful Dividends
« Reply #9 on: October 15, 2012, 07:22:09 AM »
At the moment at least, this thread seems just as applicable to Americans as Canadians.  A single person in the US can receive up to $44,000 in dividends without paying any federal tax, while a married couple can receive up to $88,000.

Can you point me to some literature/links explaining this please?  THanks.

skyrefuge

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Re: For Canadians Only - Beautiful Dividends
« Reply #10 on: October 15, 2012, 11:17:50 AM »
Can you point me to some literature/links explaining this please?  THanks.

http://www.smartmoney.com/taxes/income/last-chance-to-pay-0-tax-rate-on-gains-1345471152089/ (looks like the cutoffs are even a bit higher than I initially wrote, for Tax Year 2012)
http://www.irs.gov/publications/p17/ch08.html#en_US_2011_publink1000171584

Note that this is not an argument in favor of a dividend-obsessed investment strategy (which I think is pretty dumb), since capital gains currently get the same tax treatment as dividends, and in the future, will likely get better treatment.

Silverbird

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Re: For Canadians Only - Beautiful Dividends
« Reply #11 on: October 16, 2012, 02:34:11 PM »
2 Things to keep in mind - The dividend treatment that article discusses only applies to Eligible Canadian Dividends.

What this means:

1) everything in your RRSP is taxed at your full marginal rate when withdrawn. (No dividend credit or cap gains treatment)

2) dividends from US & Int'l companies are not eligible and will be taxed at your full rate as well.  Witholding taxes can be recovered as foreign tax credits, unless you hold these in a TFSA (In which case the witholding taxes are never recovered)