TORONTO, ONTARIO -- (Marketwire) -- 03/22/13 -- As Canadians prepare their 2012 personal income tax returns, BMO Nesbitt Burns encourages them to review carefully the tax implications on income generated by their investments, including adopting strategies on how to save on investment taxes paid.

According to a BMO Nesbitt Burns study, many Canadians are not familiar with the tax implications of earning investment income, including:

--  How capital gains are taxed (58 per cent) 
--  How dividend income is taxed (63 per cent)

"It's important not only to think about how your investments will fit with your financial goals, but also how they will affect your taxes," said John Waters, Vice President, Head of Tax & Estate Planning, Wealth Planning Group, BMO Nesbitt Burns. "The taxation of investment income can have an impact on net returns. However there are a variety of tax-saving strategies that can help Canadians save money now and down the road. Be sure to investigate the options and plan accordingly."

BMO Nesbitt Burns offers the following strategies to save taxes on investments and capital gains:

--  Offset capital gains with capital losses: If an investor realizes
    capital losses in the same taxation year that a significant capital gain
    is triggered, the tax liability on the capital gain can be reduced.
    Therefore, it is important to review your portfolio to consider the sale
    of certain investments with accrued losses to offset capital gains
    realized earlier in the year, provided a sale makes sense from an
    investment perspective. 
    
--  Donate appreciated securities: When you make a qualifying charitable
    donation of publicly-traded securities, the capital gains tax that
    usually applies to the sale of a security can be eliminated. Investors
    will also receive a tax receipt for the fair market value of the
    securities at the time of the donation. 
    
--  Contribute to an RRSP: Contributions to a Registered Retirement Savings
    Plan (RRSP) are tax deductible, and the income earned in an RRSP is not
    taxed until it is withdrawn. This means savings grow faster than those
    held outside of an RRSP. Optimize your RRSP by maximizing your annual
    contribution limit or contributing to a spousal RRSP. 
    
--  Invest in a TFSA: The Tax-Free Savings Account (TFSA) is a tax-efficient
    vehicle that combines the benefits of tax-sheltered savings with the
    advantage of compounding, allowing your savings to grow.  
    
--  Spot tax deductions: For some investors, the possibility of claiming
    other tax deductions to offset increased income may lessen the tax
    liability created by the realization of capital gains in a non-
    registered portfolio. For example, the extra cash flow from the sale of
    an investment could be directed towards a larger RRSP contribution,
    especially if you have significant unused contribution room carried over
    from prior years. 
    
--  Consider a tax-deferred roll-over: Many corporate takeovers allow
    disposing shareholders to exchange all or a portion of their shares for
    shares of the acquiring corporation. This option generally provides
    Canadian shareholders with the opportunity to defer tax on accrued gains
    on the old shares by filing the necessary tax election forms prior to
    the prescribed deadlines. 
    
--  Defer a portion of the gains to next tax year: If proceeds of
    disposition from a sale triggering a capital gain are not all receivable
    in the year of the sale, it may be possible to defer a reasonable
    portion of the gain from taxation until the year when the proceeds
    become receivable. 
    
--  Consider income splitting: Income splitting allows you to spread income
    amongst family members who are taxed at a lower rate (subject to
    possible attribution rules). Some valid income-splitting strategies
    include: pension splitting between spouses or common law partners; an
    interest-bearing loan to family members in a lower tax bracket; and
    gifts to adult family members (such as a parent or adult child).

For more information on BMO Nesbitt Burns and investing, please visit: www.bmo.com/nesbittburns.

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