GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Tax-sheltered


Synonyms:refuge, tax haven, tax savings, tax sheltering, taxation, taxation shield
Filed Under: annuities, estate-management, financial-banking, investments, legal-contracts, taxation
Tags: annuity, banking, contract, investment, legal, taxes
 

Definition of tax-sheltered

tax-sheltered
1. A tax shelter is a savings/investment plan which offers significant tax savings. You will not have to pay income tax on money you invest in tax-sheltered investments (e.g., RRSPs) until you do a withdrawal those funds.

Related Terms and Acronyms:

  • alternative minimum tax (AMT)   This tax primarily affects high-income taxpayers who shelter some of their income from tax through certain tax preference items or deductions. It is often referred to in tax publications as AMT and, if your income meets the limit, you have to recalculate your tax due based on the separate alternative minimum tax rates and tables.
      ➥  Form T691.
  • average tax rate   The real rate of taxes you pay after taking into account the various federal tax brackets. There are different tax rates for different levels of income; you pay lower rates on the first part of your income, more on the later earnings. As you pass each income level, the money above that level is taxed at the next higher rate. Therefore, your average tax rate is less than the top rate you pay on a portion of income.
  • Canada Education Savings Grant (CESG)   Program recently introduced by the federal government whereby it will invest, in the form of grants, along-side parents who save for their children's education through RESPs. The government will top up contributions made to an RESP by 20% up to a yearly maximum of $400 per beneficiary.
  • capital gains tax (CGT)   A tax on profits from the sale of real estate or investments.
  • Registered Education Savings Plan (RESP)   An investment vehicle used for a child's post-secondary education.
      ➥  RESPs are offered by most financial institutions in Canada.
  • Registered Retirement Savings Plan (RRSP)   A savings plan introduced by the federal government to encourage Canadians to save money for retirement. The investment and the interest earned on it is sheltered: it will not be taxed as long as it is left in the plan.
      ➥  Tax deferred investment contribution used to reduce income tax.
  • short tax year   A tax period less than 12 months long, resulting from a business start-up or the transition to a tax year ending on a different date.
  • tax sheltered annuity (TSA)   An arrangement where employees are given the option to make tax-deferred contributions to an annuity set up by their employer.
      ➥  See also Tax Deferred Annuity (TDA).

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