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BMO Nesbitt Burns

March 31, 2014 06:00 ET

Annual BMO Nesbitt Burns Tax Study: Ninety Per Cent of Canadians Feel Confident That Their 2013 Tax Return Maximizes Their Tax Savings

- One-quarter of all Canadians have already filed their tax returns

- Canadians feel very knowledgeable about how their income is taxed, but much less knowledgeable about how specific types of investment income, such as capital gains and dividend income are taxed

- Of those expecting a refund for the 2013 tax year, 37 per cent plan to use the money to pay household bills and/or reduce their overall debt load

TORONTO, ONTARIO--(Marketwired - March 31, 2014) - BMO Nesbitt Burns today announced the results of its fourth annual national tax study, which found that the overwhelming majority of Canadians are feeling confident that their 2013 tax returns will take advantage of all the tax deductions, tax credits and other tax savings that may be available to them. Moreover, over two-thirds (70 per cent) of Canadians plan to file their taxes before the April 30 deadline, with one-quarter (25 per cent) having already filed.

The study also found that when Canadians were asked how knowledgeable they felt about a list of issues related to their tax returns, they felt the most aware of how their income is taxed generally (77 per cent) and the tax implications of contributing to a Registered Retirement Savings Plan (75 per cent).

However, they are less confident of their understanding how investments are taxed, with only 41 per cent reporting that they are familiar with how capital gains and dividend income are treated from a tax perspective.

"It's encouraging to see that such a large percentage of Canadians are feeling upbeat about the job they are doing in preparing their tax returns," said John Waters, Vice-President, Head of Tax & Estate Planning, BMO Nesbitt Burns. "However, understanding how investments are taxed is an important part of good financial planning. If you want to derive the maximum return from your investment portfolio, then it's critical that you be tax smart and understand the potential tax implications that could arise when you make an investing decision."

Mr. Waters stressed that a financial professional can play a critical role in making an investment portfolio more tax efficient. For example, BMO Nesbitt Burns' investment advisors work with clients to determine investment solutions that best fit their specific needs and goals. This may include considering tax implications when investing and when transitioning assets to the next generation.

What are Canadians planning to do with their tax refunds this year?

The study also examined what those who expect a tax refund plan to do with the money:

  • Thirty-seven per cent will cover household bills and/or reduce their debt load (credit card balances and debt other than mortgage).
  • Twenty-eight per cent will save or invest.
  • Thirteen per cent will fund vacations or purchase leisure items.
  • Eleven per cent will do home renovations.
  • Just under 10 per cent have decided to pay down their mortgages.
  • Three per cent will donate to charitable causes.

"Canadians' financial priorities and situations differ depending on their unique needs and goals, but it's great to see that the majority of those who are expecting a tax refund will use the money to cover basic expenses, reduce their overall debt and/or save and invest for the future," concluded Mr. Waters.

Regional Breakdown:
Region % who plan to file their taxes before the April 30 deadline (in addition to the 25% who've already filed) % who feel confident that their completed tax return takes advantage of all the tax deductions, tax credits or other tax savings that may be available to them % who plan to use their tax return to pay household bills and/or reduce their overall debt load
National 70 90 37
Atlantic 68 88 50
Quebec 63 90 32
Ontario 76 91 37
Prairies 66 89 40
Alberta 71 91 33
B.C. 68 86 38

The survey was conducted by Pollara between March 14th and March 17th, 2014 with an online sample of 1,007 Canadians. The margin of error for a probability sample of this size is ± 3.1%, 19 times out of 20.

For more information on tax efficient investing and planning locate a BMO Nesbitt Burns Investment Advisor at www.bmo.com/nesbittburns.

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