5 Tax-Efficient Investing Tips : Keep More of What You Earn

5 Tax-Efficient Investing Tips : Keep More of What You Earn        

3 min read

You’ve worked hard to build your investments, but are you doing enough to keep more of what you earn? With a few simple, tax-efficient strategies, you can maximize your returns and reduce the amount you lose to taxes. It’s not just about making money—it’s about keeping it. Here are 5 tips to help you stay on track. 🤑

1. Use Tax-Advantaged Accounts  

Let your investments grow tax-free or tax-deferred. Maximize your contributions to Tax-Free Savings Accounts (TFSA), Registered Retirement Savings Plans (RRSP), and the new First Home Savings Account (FHSA).In a TFSA, your investments grow tax-free, and withdrawals aren’t taxed.In an RRSP, contributions are tax-deductible, helping you save on taxes today, and your investments grow tax-deferred until withdrawal in retirement.The FHSA combines the benefits of a TFSA and RRSP, letting you save up to $40,000 tax-free toward your first home. Contributions are tax-deductible, and withdrawals for a qualifying home purchase are tax-free.Take advantage of these powerful tools to grow your wealth efficiently!

2. Be Smart About Capital Gains  

In Canada, 50% of any capital gain is taxable, so timing your sales strategically can help you reduce your tax bill. For example, if you’ve realized significant gains this year, you might consider deferring additional sales to the next tax year to spread out your taxable income. Alternatively, if you have investments that are currently at a loss, selling them before year-end can offset your gains through tax-loss harvesting. Real-Life Strategy:

Let’s say you sold an investment in July with a $20,000 gain. If you have another investment that’s down $10,000, you can sell it before December 31 to offset half of the gain, reducing the taxable amount from $10,000 to $5,000. This way, you lower your overall tax burden while rebalancing your portfolio.Timing your trades with a clear tax strategy can make a significant difference!

3. Dividends vs. Interest   

Not all income is taxed equally. Dividends from Canadian companies are taxed at a lower rate than interest income. If you have a choice between earning dividends or interest, dividends could be the better option for your taxable accounts. Save the interest-bearing investments for your RRSP, TFSA or FHSA where taxes don’t come into play.  

4. Make the Most of Spousal Accounts 

Sharing the wealth and cutting taxes. If you have a spouse in a lower tax bracket, consider using spousal RRSPs. This lets you contribute on their behalf, which can lower your combined tax burden when you’re both ready to withdraw. It’s a smart way to reduce the family’s overall tax bill while building up retirement savings.

5. Invest for the Long Term  

Patience pays off. Short-term trading may seem exciting, but it often leads to higher taxes. Investing with a long-term mindset helps you avoid unnecessary taxes on frequent trades and lets your money compound more efficiently.  Quick Tip: Think long-term. The fewer moves you make, the less tax you’ll owe. Simple.  

Why It Matters

A tax-efficient investment strategy doesn’t just boost your returns—it helps you keep more of the wealth you’ve worked so hard to build. By taking advantage of tax-advantaged accounts, managing capital gains, and making smart decisions with dividends and interest, you’ll give yourself a real edge in growing and protecting your wealth.  

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