You can invest and withdraw as much as you want in a non-registered account. You will only pay taxes on income generated by your investment. There are three different kinds of income to know about.
- Dividends are profits that a company shares with its investors. If you own stock in a company that pays dividends, you earn a certain amount of money for each share of the company that you own.
- Interest is money paid regularly at a particular rate as compensation for lending a company money (i.e. buying bonds). In the case of your Moka account, interest may be paid out from bonds and money market securities.
- Capital gain is the profit you make from selling the holdings in your account. You may see a capital gain or loss following a withdrawal or change of investment model in your Moka account, as in either case, investments may be sold in your account.
There is no penalty for withdrawing from a non-registered investment account, however, please remember you will be taxed on any capital gain arising from this withdrawal. How exactly does that work? Let’s say you deposit $100 in your account. Your money is invested and grows to $105. If you decide to withdraw that $105, you would be taxed on the $5 you made from selling your investment, but only 50% of capital gains count as income.
If you don’t have a non-registered account with Moka, then you have an RRSP or a TFSA. These accounts are registered investment accounts, which means they were set up by the government to provide certain tax advantages as incentives to save and invest. There is a limit to how much you can contribute to TFSAs and RRSPs and there is a different kind of penalty for withdrawing from either account.
For further questions about filing your taxes, we strongly suggest you consult a government website or a licensed tax professional.