ASK AN EXPERT TAXES

Ask an expert: What taxes do I have to pay on my Mylo investments?

Taxes might feel overwhelming, but they don’t have to be. To help you conquer tax season, let’s bust the three most common tax myths that I hear from Mylo users.

Myth #1: I will have to pay penalty taxes if I invest over a certain limit.

Definitely not. Perhaps you think this is true because of the contribution limits that exist on registered accounts, such as RRSPs and TFSAs. These limits don’t exist on your Mylo investment account because it is a non-registered account.  

What is the difference between registered and non-registered investment accounts?

Registered investment accounts like RRSPs were set up by the government to provide certain tax advantages as incentives to save and invest. The income you generate from investments in an RRSP account is not taxable until it is withdrawn from that account. You can also face serious financial penalties if you exceed that contribution limit I mentioned.

Your Mylo account is a non-registered investment account. This means you’ll only ever pay taxes on the income you make on your investments. Non-registered accounts also come with two key advantages:

1. Flexibility. You can access your money when you need it most without cost.

2. There’s no limit to how much you can invest without penalty.

Myth #1 Busted:
For non-registered accounts, like your Mylo investment account, there is no limit to how much you can save and invest. You can round up and boost your account as much as you want toward your financial goals!

Myth #2: My taxes will be calculated on the total value in my investment account.

False. You only pay taxes on the income you make from your investments.

What kind of income do your investments generate?

The three types of income you can make on your investments are dividends, interest and capital gain. All three are taxable in a non-registered account.

1. 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.

2. Interest is money paid regularly at a particular rate as compensation for lending a company money (ie: buying bonds). In the case of your Mylo account, interest may be paid out from bonds and money market securities.

3. 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 Mylo account, as in either case, investments may be sold in your account.

Myth #2 Busted:
You are taxed on your investment income generated from your Mylo account rather than on the total value of your investments.

This brings us to the last and most popular myth that I hear from Mylo users.

Myth #3: I pay a penalty or higher taxes when I withdraw money from my Mylo account.

Nope! You can withdraw money from your Mylo account anytime without penalty. Withdrawals are not specifically taxable, but capital gains that may be created by that withdrawal are.

What’s that about a capital gain?

Here’s an example of how capital gain is taxed: 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 will only be taxed on the $5 gain.

Myth #3 Busted:
There are no penalties for withdrawing funds from your Mylo account, and you are only liable for taxes related to capital gains that are generated by liquidating your investments in order to withdraw your funds or as the result of a change of investment model.

Takeaway: Only the income you make on investments in your Mylo investment account is taxable, and nothing else. Non-registered accounts can be a great choice for many investors because you can invest as much as you want, and you’ll still have the flexibility to withdraw money without penalty whenever you need it!

What other questions do you want your portfolio manager to answer? Send us an email at support@mylo.ai.

Dave Fortin is a Chartered Financial Analyst and a portfolio manager for Mylo users with Tactex Asset Management, a wholly owned subsidiary of Mylo Financial Technologies.