Blog

Taxing Day Traders TFSA’s

If the CRA can latch on to something, they will.tax day

For most of us, the investment income we earn inside our TFSA’s are 100% tax free. However, if you are day trading inside your TFSA, the Canada Revenue Agency may come knocking.

You see, under the Income Tax Act, there is a subtle but highly important distinction between a business and an investor. This distinction is highly important because the TFSA exempts the investor’s income from tax but not a business.

Without boring you with the details suffice to say that a highly active investor placing many trades per day may be considered to be operating a business. The CRA could come knocking and indicate that the trades constitute running a business and apply both income tax as well as the penalty tax on the TFSA itself.

If you are making frequent trades in the TFSA or even your RRSP/RRIF, be cautious that the CRA may consider you to be running a business through your registered accounts.

Tags: , , , ,

Dean Paley

A graduate of Simon Fraser University, Dean started and operated an independent painting company while perusing a degree at SFU. After graduating from Simon Fraser, Dean entered the Certified General Accountants Program of Professional studies where he obtained the professional CGA designation. After a number of successful years as the head of finance for the Canadian operations in a global financial services firm, Dean moved into a marketing role and established and launched a tax, estate and financial planning support department and service to advisors and clients. During this time Dean successfully obtained the Certified Financial Planner (CFP) designation. Dean has been a member of the Canadian Forces Reserve spanning three decades serving in the Royal Westminster Regiment (B.C.), the Military Police and later as a commissioned officer in the Cadet Instructors Cadre in Hamilton Ontario. Dean Paley CGA CFP has been interviewed and quoted in major media such as the National Post, Financial Post, Toronto Star, Canadian Business, Money Sense and Investment Executive. Dean is married to his lovely wife Deborah and has four lovely children.