If you’re suffering a tax hangover after paying a hefty tax bill, here’s what you need to know for next year. - Kerr Financial
Financial Planning
If you’re suffering a tax hangover after paying a hefty tax bill, here’s what you need to know for next year.
Category: Financial Planning, Investment Management Tags: integrated wealth management, investment management, Tax, wealth management

Tax efficiency is an essential component of optimizing your investment returns. Due to the complexities of both tax laws and investing, many high-net-worth individuals don’t fully utilize the opportunities available to them in order to minimize their tax burden. Here are three strategies, beyond simply choosing tax-efficient investments, to consider taking advantage of next tax season to avoid another tax hangover.

Spousal Loan – income tax splitting strategy to lower your families overall tax bill

The notion of one spouse “lending” funds to the other may seem odd – after all you vowed to be together for richer or poorer. Yet for some couples it is a helpful tax strategy. A spousal loan is a method of income splitting that allow couples to lower their overall family tax bill by entering into a prescribed rate loan arrangement. In order for this approach to be beneficial, one spouse must earn significantly more taxable income than the other. That way, investment income on the loaned funds is taxed in the hands of the spouse with the lower marginal rate.

Tax Loss Harvesting – realizing capital losses to offset realized gains.

Losing money is not in any investor’s long-term plan, however a diversified portfolio may contain some investments that are down in value, at least over the short-term. An upside to this situation involves realizing capital losses in order to offset realized gains. By realizing or “harvesting” a loss on an investment that has declined in value, you are able to reduce overall taxes on the capital gains from your winning investments. Please note, however, that you are not able to repurchase the same or a “substantially identical” investment for 30 days.

Reduce your tax bill by gifting shares to charity

If you are looking for a way to reduce your tax bill while meaningfully donating to charity, consider a gifting strategy available to Canadians. Under normal circumstances, when you sell a publicly traded security in your taxable account, you are subject to pay income tax on 50% of the security’s capital gain. However, if you donate this security directly to a registered charity, you will not have to pay tax on any of the gain. This strategy works best for high-net-worth investors with long-held, capital-gains-heavy securities in their portfolios.

Please remember to speak with your advisor to determine whether a spousal loan, tax loss harvesting, or donating securities are in line with your investment objectives, asset allocation and overall investment policy.


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Kerr Financial Group was formed in 1979 for the purpose of assisting individuals to maximize their personal financial resources, alleviate their financial and retirement concerns and simplify the administration of their affairs.

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