Wednesday, March 12, 2008

A Couple of Things I Learnt this Tax Season

I’ve been working two years and maybe investing a year and half. So this newbie is still learning. I’m learning. Here are two things news things I learnt about taxes.

RRSP Employer Match: I knew that my employer RRSP match counts towards my contribution limit, but I was puzzled when it didn’t come up anywhere in my 2006 tax returns. I called the tax help line and turns out it was just in a form I did not recognize.

On my T4 there is a section under Pension. That is my employer match, which should be reported on 2006’s return and would show up on my Notice of Assessment as Pension Adjustment. This adjustment will then lower my RRSP contribution limit for 2007.

Good to know. Would have been better if I had known it earlier, but good thing I did not max out my RRSP 2007 contributions (I was anticipating something like this).

Dividends: I learnt earlier that dividend income is better than interest income because they are not taxed at the full rate (interest is). However, what I didn’t realize is that this only applies to dividends from Canadian companies.

Well, it’s a learning process. Now I know. It probably won’t change how I invest very much but it’s another thing to consider when looking at stocks.