Tax-efficient cash in trying times

The Tax Blog for Smart Canadians

Tips and tricks for Canadian tax filers at every stage of life from UFile's tax expert Gerry Vittoratos



Tax-efficient cash in trying times

by UFile Team Équipe ImpôtExpert | Apr 14, 2021   Comments:

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With the COVID-19 pandemic raging on, many have been adversely affected, especially financially. Are there tax-efficient ways to raise cash in these trying times? Read on…

Pulling out of your TFSA

By far, the quickest and most tax-efficient way to raise cash is to withdraw from a tax-free savings account (TFSA). Any withdrawals made from the account are tax-free. The icing on the cake is that in the year following your withdrawal, your limit increases by the amount of the withdrawal. You can therefore catch up on your contributions later on. Any gains you make within the account are also tax-free.

Selling personal use assets

The sale of personal use items like furniture, electronics, vehicles, etc. is usually not taxable on your tax return. This is because you are likely to sell these items for a loss since they have lost value over time. The catch, however, is that because they are depreciable assets, any loss from the sale of these items is not considered a capital loss.

Selling shares from non-registered accounts

If you own shares in a non-registered account (i.e. NOT in an RRSP or a TFSA), only half of the profits made from the sale of those shares are taxable as a capital gain. This means that you get to pocket the other half free of tax.

Selling your personal home

Selling your personal home might sound drastic, but it is one of the more tax-efficient ways to raise cash. The reason for this is that any profit you make from the sale of your personal home can be exempt from tax if you designate it as a principal residence for all the years you lived in it. The designation of your home as a principal residence is done by producing the T2091 form with your tax return.

Applying for scholarships as a student

If you are a student in a post-secondary school (college, technical school, university), there are scholarships available to help pay for your tuition while you are studying. As long as you are/were a full-time student in the last three years, scholarship income is exempt from taxation.