this is a conceptual question, and occurred to me amid discussions of tax benefits associated with (for instance) holding dividend paying stocks in a non-reg account.
i understand that in a non-reg account, income derived from dividend stocks is taxed more favourably than working income. prior to the TFSA, it would be beneficial to hold the dividend stocks in a non-reg account to take advantage of the lower tax rate, as opposed to keeping it in an RRSP, in which case you are not taxed more favourably, you are simply taxed at a later date (i.e. retirement).
but with the introduction of the TFSA, since you contribute with after-tax dollars, and you don't pay any tax on dividend income held in the TFSA, it is preferable to put dividend stocks in the TFSA before a non-reg account.
so while it was previously better to put dividend stocks in a non-reg account, than in an RRSP. now, it is better to put dividend stocks in a TFSA than a non-reg account. moreover, you would only really put dividend stocks into a non-reg account if you've maxed out the TFSA.
am i understanding this correctly?
thanks!
i understand that in a non-reg account, income derived from dividend stocks is taxed more favourably than working income. prior to the TFSA, it would be beneficial to hold the dividend stocks in a non-reg account to take advantage of the lower tax rate, as opposed to keeping it in an RRSP, in which case you are not taxed more favourably, you are simply taxed at a later date (i.e. retirement).
but with the introduction of the TFSA, since you contribute with after-tax dollars, and you don't pay any tax on dividend income held in the TFSA, it is preferable to put dividend stocks in the TFSA before a non-reg account.
so while it was previously better to put dividend stocks in a non-reg account, than in an RRSP. now, it is better to put dividend stocks in a TFSA than a non-reg account. moreover, you would only really put dividend stocks into a non-reg account if you've maxed out the TFSA.
am i understanding this correctly?
thanks!