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pamelainswo
Hi! I was hoping I could pick your brain about taxes- the post below about TFSAs got me thinking.
My husband has company stock through his work. From what I can tell when we did our taxes in QuickTax this year, we had to pay $250 in taxes for those stocks (I deleted the entry for his stocks, checked our refund amount, then re-added them in and noticed that our refund had decreased by $250).
We figured that was kind of outrageous so we opened TFSAs for each of us. Our plan was to sell his company stocks a couple times a year, and then turn around and buy the same stocks as part of a TFSA. Would that work? Would we save $250 a year doing that, or is that not how it works? Would we still end up being nailed because his stocks would sit in his company account for part of the year? Or would we pay taxes anyway because it's a company contribution?
I hope that makes sense! Thanks!!
Re: pamelainswo
I'm assuming that your DH doesn't actually buy the stock, they just give it to him. And I can't remember where you live, I assumed Ontario....
So, let's say they give your DH stock valued at $100. He is subject to regular income tax on the $100 (because it is considered part of his wage). If he holds the stock, and it increases in value to $200, when he sells the stock, he pays tax on the $100 gain (if he was in the highest tax bracket, about $23.
The tax on the value of the original stock can't be avoided. If you want to avoid the tax on the gain, you should sell the stock immediately after you receive it....so there would be no gain. Then, immediately repurchase the stock in your TFSA. If the stock then increases in value to $200, the $100 gain is not subject to tax when you sell it.
Any gain on the stock from the time the company gives it to you, to the time that it enters your TFSA will be subject to income tax.
Let me know if that isn't clear.
darn
Thank you, though!