I am not talking about Tax-Free Savings Accounts (TFSAs) here. As you already know from browsing our Boring Definitions, all dividends, interest and capital gains earned inside a TFSA are yours to keep in your TFSA , OR withdraw from your TFSA , tax-free.
I am talking about something in addition to tax-free TFSA money.
In Canada, we benefit from the dividend tax credit (DTC), which is a little complicated, but in a nutshell, the DTC shields the first $50,000 of dividends from publicly traded Canadian corporations you earn per year in your non-registered investment account from tax. Again, this is in addition to your TFSA!
The best way to illustrate this for you is to visit SimpleTax Software Inc.
Go to SimpleTax Software Inc.
Select the Province or Territory you live in – let's say Ontario for now.
Insert $0 for Employment Income – (you may well have a job today, but humour me).
Insert $0 for Self Employment and $0 for Capital Gains.
Now, insert $50,000 into "Eligible Dividends" (note that Eligible Dividends are typically what you receive from big public companies that trade on the Toronto Stock Exchange).
Insert $0 for "Ineligible Dividends" (note that these are dividends you receive from private companies).
Insert $0 for Other.
According to SimpleTax, you'll owe about $0 in tax: $0 in federal tax and $0 in provincial tax.
Now, this benefit is per person, so if you are shacked up with someone, that is $50,000 each, or $100,000 per couple tax free per year!
And again, this is in addition to your tax free earnings in your TFSA!