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Stock of Your Taxable IncomeBy Debbie Patterson - Odessey Business Services - Mar/Apr 04 A very important tax preparation step many people do not even know they are responsible for is the organization of all transactions that took place regarding the buying and selling of stocks. Many people consider their stock accounts as nothing to be concerned about. If, over the years, you are breaking even, whose business is it anyways? If you deal with a brokerage firm (someone who takes care of the trading of your stocks), they send a yearly statement to Revenue Canada as well as to you for tax purposes. All transactions on the stock market are well monitored by the government and they know if you are having an up or down year. You should know, too! Capital gains sound more confusing than they are. If you buy a stock and sell it for more than it was purchased for, you have made a capital gain. Only 50% of the gains you made are taxed at your current tax bracket. This makes for a favourable way to earn income. If you buy a stock and sell it for less than you paid for it, you incur a capital loss. This loss can be used against other gains you made that year, carried back to a year when you had gains, or carried forward to use against future gains. The taxing of capital gains has gone through some changes in the past few years and is expected to go through more in the future. In 2000, capital gains were taxed at three different levels. Before Feb 2000, we had to pay tax on 75% of the gains. Between March and October of 2000, we paid tax on 66% of the gains. From November 2000 and onwards, we have been paying tax on only 50% of the gains. Last year, when many people lost money on stocks, selling low and taking capital losses was a great way to get money back on gains from 2000 when they paid tax on 75% of their gain. Although it is fun to have stocks and watch them go up and down, if there is a sale at all during the year, tax must be paid on the gains if there are some. Revenue Canada knows when tax is due, and now with their ‘No Tolerance’ attitude, they are cracking down on people who have not filed any information about their capital gains. Keep in mind, an adjustment can be filed anytime, so go back and correctly file an older return. Debbie Patterson is the owner operator of Odessey Business Services, specializing in income tax. Visit her at www.odesseybusiness.com for more tax tips or contact her directly at 403.816.5098 |