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16- PORT PERRY STAR - Tuesday, March 9, 1999 Education Savings Plans The Smart Way to Save! Talk with Investment Advisor Robert J. Gow CE DOMINION 434-7156 or 1-800-267-1522 SECURITIES 111 Simcoe St. N, Oshawa, ON LIG 454 Personal Wealth Management™ Member CIPF LL SCUGOG FINANCIAL Ri NUNY(6 ES INC. 5.25% 5.35% 5.40% 5.50% 2 YEAR...................... 5.25% 3 YEAR............... peeanse 5.35% 4 YEAR...................... 5.40% 5 YEAR...................... 5. 50%. 30 DAYS casHaBLE $1,000 minimuM cece se 4. 65% | | | . Rates subject to change-without notice "Serving Scugog For Over 15 Years" 250 Queen Street, Port Perry 905-985-3832 (next to Shoppers Drug Mart) SHEPHERD & POWELL _J - CHARTERED ACCOUNTANTS § Accounting, Income Tax, Financial and Estate Planning & Consulting Services INDIVIDUALS e BUSINESSES ¢ FARMS Assistance in filing Government Forms and Returns RETURNS New Business Planning and Startup PREPARED Evening and Weekend Appointments available FREE INITIAL CONSULTATION Personal, Confidential Service DAVID R. POWELL, B.COMM., M.B.A., CA., CFP 250 Queen Street, Port Perry 985-9791 . (next to Shoppers Drug Mart) EE -------- 'E-Filing' at No Extra Charge "Scugog's Community Newspaper of Choice o Taxes... How to figure them out For the average person taxes are hard to figure out and annoying to pay; here's a few tips on how to make your life a little easier It's hard to pay taxes, and it's also hard to pay taxes. No, I didn't just repeat myself. What I mean is that paying taxes is not something that peo- ple generally like to do, and that it's also difficult to calculate how much you owe. So, it's hard in two ways. Our tax system really seems like a maze some- times. Case in point - not all investment income is treated in the same way by Revenue Canada. Income from certain types of investments is taxed at more favourable rates than others. The upshot - investments should be evaluated on an after-tax basis, not a pre-tax basis. Interest Income Revenue Canada treats interest income - such interest from savings accounts - in the same way as most other income. It paying tax on it twice! 'Van Camp & Keller CHARTERED ACCOUNTANTS If you own mutual funds and you automatically reinvest the.income you earn each year, don't forget to take this into account when you sell the fund and calculate your capital gain or loss. For example, if you invested $1,000 in a mutual fund, and then sold it for $2,000, it may appear as "though your capital gain is $1,000. However, if you have reinvested $400 income from the fund, ~ your capital gain is only $600. This is because your total investment is $1,4000 (the original $1,000 plus the reinvested income). You already paid tax on the $400; if you forget about it when calculating your capital gain, you will end up .actually ie Income tax planning and return preparations ® Personal tax returns electronically filed e Financial, estate and retirement planning Personal Tax Returns are being processed now. OFFICE HOURS UNTIL APRIL 30. Monday to Friday 8-6, Saturday 9-1 204 Casimir Street, Port Perry, Ont. LIL 1B7 (905) 985-9725 © Toll Free 1-800-215-3852 is taxable within each tax bracket at the applicable rate. In other words, there is no tax advantage with income from interest. Reporting this sort of income can be tricky. How you report it depends on when the investment was made, and also on what type of investment it is. If the investment was made in 1990 or after, any accrued interest earned must be reported annual- ly. Accrued interest is defined as interest which you have not yet received, but has built up in a par- ticular investment. Income from com- pounding securities - like GICs, strip coupon bonds and Canada Savings Bonds - must be reported by the same: method, called the accrual method. It must be reported every year, even if you don't receive the income in that year. If the investment was made prior to 1990, then you have the option of reporting the income by the accrual method - or when you receive it, with the exception of the secu- rities named above. However, when using this method, you must report interest income every three years, even if you don't receive it. Capital Gains A capital gains occurs ROGER B. MOASE CHARTERED ACCOUNTANT Income Tax Return Preparation Electronic Filing -- FN -- Individuals, Small Business, Farms, Corporations "Personal, Confidential Service... and a Real Person Answers the Phone" 175 North Street, Port Perry (905) 985-8893 Email: rbmoaseca@sympatico.ca interest when you sell an asset. The proceeds from the sale above and beyond the cost base of the asset is con- sidered a capital gain and, yes, it is taxable. The good news? Your net capital gain is taxed at three quarters of the applicable combined federal and provincial tax rate. A net capital gain is described as your total capital gains minus total capital losses. Dividend Income Of the three types of investment income dis- cussed here, dividend income from a Canadian corporation is taxed at the most favourable rate. This is due to the dividend tax credit that is applied to the federal tax payable. ~The tax payable is cal- culated like this: the amount of the actual divi- dend is "grossed-up" by 25 per cent. The federal tax is calculated. Then the dividend tax credit - 16.66 per cent of the actual amount of the dividend - is deducted from the fed- : eral tax. Provincial taxes are calculated based on federal tax payable minus the tax credit. : In the end, you pay sub- stantially less taxes on dividends from a Canadian source than on income, and somewhat less than on capital gains. Investing in companies that pay divi- dends is certainly an attractive option, but it is also important to consider other factors, such as risk, liquidity and the opportu- nity for capital apprecia- tion. By now, you're probably thoroughly confused. But who said paying taxes was easy? Yes, I mean that in two ways. This article is for infor- mation purposes only. Before taking any action based on information in this article, please consult with a professional finan- cial advisor. This article was supplied by RBC Dominion Securities Investment Advisor Robert Gow. For more information, please call (905) 434-7156. RBC Dominion Securities is a member of the Canadian Investor Protection Fund. TA LTT To " - LE a ST | rp