Being a DIY investor is easy when all your accounts are tax-deferred. As the April 30 tax deadline approaches, pretty much all you need to do is gather your RRSP contribution slips. But if you have nonregistered accounts, things are more complicated, even if you’re a Couch Potato who uses ETFs and index funds.
To begin with, you need to report any income you received during the year. This part is relatively easy: in February or March you should receive a T3 slip that includes a breakdown of the type of income you’ve received from your mutual funds or ETFs: dividends, reinvested distributions, and interest income. Just enter these amounts in the appropriate boxes on your tax return and your software—or your accountant—does the rest.
If you hold US-listed ETFs, you’ll receive a T5 slip from your brokerage: Box 15 contains the amount of foreign dividends you receive, and Box 16 will indicate the amount of foreign tax paid. Dividends from US and international companies are fully taxable as income, but you can recover the withholding tax by claiming the foreign tax credit on your return.
But there’s more to the story than simply reporting income.