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Email this5:55 pm
January 3, 2013
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Hi
Happy 2025 to all your Gurus!
My daughter makes around $300 average monthly. I opened an ITF (Informal Trust Fund) account for her in Questrade. The issue is, this is her money not mine and I don't want her to have to pay tax on the principle investment (dividend, distribution, etc). Is there anyway around it?
Next question, any better idea than investing in XEQT?
Thank you.
6:07 pm
December 18, 2024
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While not legal.
Use her money and buy a TFSA in your name with her as the beneficiary. Then at age 18…..give it to her to invest.
6:22 pm
January 3, 2013
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TFSA, RRSP, RESP all max'ed. LOL
7:05 pm
December 18, 2024
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From Turbo Tax.
Taxes on the Investments in Your Child’s Name
Investments you make in your child’s name receive different treatments depending on the type of investment and the child’s age.
Children under 18 years old
The money you contribute to an investment account in your child’s name that gives out interest or dividends will be accredited back to you. You will have to report this as income.
If the investment gives a capital gain income, then it’s considered the child’s income. Therefore, your child will report the amount on their tax return.
If you invest your child’s Canada Child Benefit in any type of investment, this will be considered income for your child since this benefit was meant for them.
How bad would it be if the child does report on their own income tax forms? And how does that impact on the parent?
8:58 pm
April 6, 2013
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Save2Retire@55 said
My daughter makes around $300 average monthly. I opened an ITF (Informal Trust Fund) account for her in Questrade. The issue is, this is her money not mine and I don't want her to have to pay tax on the principle investment (dividend, distribution, etc). Is there anyway around it?
If the money is money she earned, then she needs to report any gains from investing the money on her tax return. It isn't relevant that you are holding her money in trust for her in an informal trust account in your name because she is too young to have an account in her own name.
If her investment gains each year are more than her basic personal amount of $15,000 and she has income taxes to pay, then we're talking about a portfolio of maybe $200,000 or more! With that much money, maybe some advice from an chartered accountant?
3:22 am
November 5, 2022
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In Canada, you start paying taxes–and you’re required to file taxes–once you earn more than the basic personal amount, which in 2023 is $15,000.
https://turbotax.intuit.ca/tips/how-to-file-taxes-as-teenagers-and-young-adults-15818#:~:text=There%20is%20no%20specific%20age,which%20in%202023%20is%20%2415%2C000.
8:06 am
April 6, 2013
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One can still be required to file a return, even if one doesn't have any income taxes payable.
For example, disposing of capital property, like selling units of an ETF or having a bond that matures, needs to be reported in a tax return:
Capital property – This includes depreciable property, and any property which, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory. Some common types of capital property include:
- cottages
- securities, such as stocks, bonds and units of a mutual fund trust
- land, buildings and equipment you use in a business or a rental operation
…
When do you report a capital gain or loss?
Report the disposition of capital property in the calendar year (January to December) you sell, or are considered to have sold, the property.
Note Regardless of whether or not the sale of a capital property results in a capital gain or loss, you have to file an income tax and benefit return to report the transaction (even if you do not have to pay tax). This rule also applies when you report the taxable part of any capital gains reserve you deducted in 2022.
11:52 am
November 5, 2022
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But as teenager, according to what is written, if they earn under the basic personal amount, they don't have to file.
1:07 pm
September 11, 2013
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Here's the government's info re who has to file, as of 2023 return:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/you-have-file-a-return.html
1:44 pm
January 3, 2013
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GIC-Fanatic said
From Turbo Tax.Taxes on the Investments in Your Child’s Name
Investments you make in your child’s name receive different treatments depending on the type of investment and the child’s age.
That's the issue. The contribution is her own money, she made this money herself from her work with proper invoice, etc. It wasn't a handover from parents, or what not. So, I don't want to pay tax.
1:49 pm
January 3, 2013
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She doesn't earn anywhere close to the basic income. For now, as I mentioned, it is averaging $300/month so give or take below $4000 annually. Filing income tax would be good for RRSP and CPP but she won't pay any tax.
On the other side, the principle is hers not mine. It is unfair that she will have to pay taxes cause the account is a trunst account and I honestly don't feel calling or requesting review from CRA and RQ when they come and say, why didn't you pay tax on this. Questrade will report the T3 under my name. If we sell capital gain, Questrade generates a second T3 under her name. So complex and unnecessary.
2:26 pm
April 6, 2013
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InterestThis said
But as teenager, according to what is written, if they earn under the basic personal amount, they don't have to file.
That's not what it says.
It says you both (1) start paying taxes and (2) are required to file tax returns when you earn more than the basic personal amount ($15,000). That doesn't mean you don't need to do (2), file tax returns, when you don't need to do (1), pay taxes.
The CRA page Bill mentioned lists situations in which one is required to file a tax return. These are two of the listed situations:
- The Canada revenue agency (CRA) sent you a request to file a return
- You disposed of capital property (which could be a principal residence) or realized a taxable capital gain in the year
4:03 pm
September 11, 2013
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If you make $4K in a year and didn't dispose of capital property or realize a capital gain in that year (plus none of the other listed situations occurred) you don't have to file an income tax return for that year unless requested to by CRA.
On the other hand if you did dispose of capital property or realize a capital gain in that year you do have to file a federal tax return.
Is my understanding.
10:30 pm
April 6, 2013
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Save2Retire@55 said
She doesn't earn anywhere close to the basic income. For now, as I mentioned, it is averaging $300/month so give or take below $4000 annually. Filing income tax would be good for RRSP and CPP but she won't pay any tax.
What is the issue with her filing tax returns then?
On the other side, the principle is hers not mine. It is unfair that she will have to pay taxes cause the account is a trunst account and I honestly don't feel calling or requesting review from CRA and RQ when they come and say, why didn't you pay tax on this. Questrade will report the T3 under my name. If we sell capital gain, Questrade generates a second T3 under her name. So complex and unnecessary.
That doesn't sound right. According to the informal trust account application from Scotia iTRADE, income and capital gains will be repored to CRA as income and capital gains of the trustee, not the beneficiary:
Before establishing an Informal Trust account you should consult with your own tax and legal advisors. As this account is an Informal Trust, Scotia Capital will report the income and capital gains of the account to Canada Revenue Agency as income and capital gains of the Trustee and designated Co-Trustee and for that purpose the Social Insurance Number of each of the Trustee and Co-Trustee is required.
That's the correct reporting for a trust account. The trustees will then file trust returns for the trust and, if needed, issue T3 slips to further allocate the income and capital gains appropriately. Unallocated income and capital gains will be taxed in the trust.
8:12 am
November 5, 2022
Offline10:57 pm
October 21, 2013
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Could an RESP be useful for some or all of this money?
I am not up on them, but am throwing it out for possible consideration. You get a bump up from govt, but have to be careful about which plan you sign up for.
A trust seems so complicated.
Alternatively, why not just put it in the ETF you want, let it grow, add another 4k or more every year through high school. In only a few years she'll be at CEGEP and legal to manage her money. There are tax credits for students which would minimize or eliminate cap gains. In Ontario at least, as far as I recall, very low income people pay negative tax on dividends. (Check taxtips.ca)
I may be well off base as I have no experience with this, but these are the ideas that occurred to me.
8:12 am
April 6, 2013
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Adding an RESP is not going to eliminate the trust.
She is too young to enter into a contract with an RESP promoter as the RESP's subscriber. So, the parent has to enter into the contract as the subscriber, in trust for her. She then provides the money and the parent contributes it to the RESP again in trust for her.
RESP's are intended to invest someone else's money so that the investment gains are taxable in the child's hands. RESP's are not intended to invest a child's own money. Investment gains on the child's own money are taxable in the child's hands anyways.
It looks like the in-trust-for account and tax reporting are not set up correctly. They seem to be for a trust where a parent is the settlor (the source of the trust assets) and trustee with the 13 year old as the beneficiary. Should be set up so that the 13 year old is the settlor, the parent is the trustee, and the 13 year old is the beneficiary.
Please write your comments in the forum.