Canadians unsure how their investments are taxed
(Darren Brown/QMI Agency Photo Illustration)
Nearly half of Canadians do their own taxes, but most of them don't know how their investments are taxed, according to a survey released Wednesday.
Even though most respondents said they are confident they can take advantage of all the deductions, credits and other tax savings available to them in their tax returns, the BMO Nesbitt Burns study found that 58% didn't know how capital gains are taxed and 63% didn't know how dividend income is taxed.
That means they're not well-armed to make investment decisions and not aware of ways to reduce the tax they pay, such as catching up on unused RRSP room, deferring taxes on gains to the following year or investing in shares that are taxed at a lower rate.
Another finding with serious implications is that only 20% of respondents understood the tax ramifications associated with transferring wealth after someone dies. Canada's aging population and imminent shift in wealth from one generation to the next makes this an important issue.
The survey found 42% of respondents prepare their own tax returns; 38% hire a professional; and 18% have a friend or relative do it for them.
The online survey was conducted March 26-29, with a sample of 1,500 Canadians. A probability sample of the same size would yield a margin of error of 2.5 percentage points, 19 times out of 20.