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Dale Jackson

Personal Finance Columnist, Payback Time


There are whispers the Federal government is considering taking a bigger chunk of the gains made on stocks and other equity investments.

Right now half of all capital gains are taxed, but there was a time in our past when 75 per cent of equity gains were taxed.

Naturally, big institutional investors are livid. But the capital gains tax has become less of an issue for the retail investor with the introduction of the tax-free savings account. Equities held within a TFSA are never taxed.

The contribution limit for TFSAs this year is $5,500 and it is expected to increase by the same amount, plus inflation, in future years. If you were 18 years or older when it was launched in 2009 your total contribution limit is now $52,000.

The capital gains tax also does not apply to registered retirement savings plans. Equity gains can grow tax-free until they are withdrawn in retirement when they are fully taxed as income.

The 2017 RRSP contribution limit is 18 per cent of the previous year’s income or $26,010 – whichever is lowest. The RRSP contribution limit is also tied to inflation.   

The fact is, only a tiny fraction of Canadian investors max out their TFSAs and RRSPs – making the capital gains tax a non-issue for them.   

If the Federal government is intent on raising the capital gains tax and really wants to help the small investor, it can also raise the TFSA contribution limit.