
Understanding different sources of investment income
Many Canadians rely on their investments to provide them with income, especially when they’re retired. However, it’s important to know that there are several sources of investment income, and there is a difference between what each one pays out and what you get to keep.
One of the key benefits of investing is that you (usually) receive some sort of investment income. Most people will eventually move from growing their investments to drawing from them, so they’ll need those investments to provide them with income.
In general, there are five main types of investment income:
- Interest income.
- Dividend income.
- Capital gains.
- Return of capital.
- Rental income.
In this article, we’ll take a close look at each type of investment income and how they’re taxed. There can be a significant difference in the taxation rate of different investment income sources, so it’s important to understand how much each investment type is likely to provide in the way of after-tax income.
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