1. Canadian dividendsDividends are paid by corporations to their shareholders. Dividends can also be earned through investing in mutual funds. While dividend income is taxable, tax credits are available for both eligible and non-eligible dividends that can reduce your tax burden.
2. Utilize RRSPs, TFSAs, RESPs to the max
Contributions to an RRSP lower your taxable income. You can generally contribute up to 18% of your previous year’s earned income up to an annual maximum ($27,830 for 2021). The investments in the plan can grow tax-free until you withdraw the funds.
3. Long-term capital gains receive favorable tax treatment, but short-term gains do not. If you earn a profit on an investment that you hold for a year or less, it is taxed using the same tax brackets as ordinary income.
If you hold a stock for one year or longer, your gain will be taxed at the long-term capital gains tax rate. But if you hold a stock for less than one year before selling it, your gain will typically be taxed at your ordinary income tax rate.
4. You can deduct interest and carrying charges incurred to earn income from securities, bonds and other Canadian or foreign investments, if they are earning investment income. The requirement of earning income generally means that the investments should be paying interest or dividends.
5. As seen in the chart above, capital gains are the most tax-efficient option of the three, while interest is the least, and Canadian dividends are somewhere in the middle. This is where a strategic portfolio structure with tactical asset allocation can benefit investors.
6. In Canada, 50% of the value of any capital gains are taxable. Should you sell an investment or asset at a higher price than you paid (realized capital gain), you’ll need to add 50% of that capital gain to your income.
7. Tax loss harvesting: In Canada, you can offset capital gains with capital losses.
https://www.td.com/ca/en/investing/direct-investing/articles/capital-gains-tax