Whether you’re trying to build savings during your working years or access those savings later in retirement, tax-smart solutions are an important part of your financial plan.
When it comes to non-registered investing, tax efficiency is half of the equation. The other half is investment quality.
At Fidelity, we don’t make you choose one over the other.
What is corporate class?
During the years leading up to retirement, you’ll want to make sure your savings have good growth potential. Fidelity Corporate Class offers tax-deferred growth through the potential for reduced taxable distributions, which means more money staying in your account to grow.
How does it work?
- Class funds are held inside a mutual fund corporation and treated as a single entity for tax purposes, providing additional tax benefits for investors. Because corporate class funds can’t distribute higher taxed interest or foreign income, taxes are minimized or deferred, leaving more money to benefit from compound growth.
Who is it for?
- Individual investors with non-registered investments, including those who have used up their RRSP and TFSA contribution room and seek a steady stream of cash flow in the future or in retirement (using T-Class).
- Retirees needing tax-efficient cash flow and to reduce the Old Age Security (OAS) clawback.
- Owner-managed corporations seeking a tax-efficient option for after-tax profits.
- Charitable giving with Fidelity Tax-Smart CashFlow™ allows philanthropists to receive cash flow payments from investments while donating to a worthy cause in a tax-efficient way.
- Those wanting to create trust accounts for children or grandchildren.
Fidelity Tax-Smart CashFlow™
What is Fidelity Tax-Smart CashFlow™?
When you’re ready to start reaping the benefits of your investments, you’ll need to consider the tax implications around accessing your non-registered savings. Tax-Smart CashFlow can be combined with corporate class to offer even greater tax efficiency (T-Class).
How does it work?
- T-Class provides cash flow by returning an investor’s original investment principal in a return of capital (ROC). This amount is not taxable, because the investor already paid tax on it before the investment was made.
- A return of capital will reduce the adjusted cost base (ACB) of class fund shares held. Once all of an investor’s capital has been returned, the subsequent cash flows will be treated as capital gains and taxed at a lower rate than other sources of income.
- Investors can receive tax-efficient monthly cash flow without having to sell investments, meanwhile deferring capital gains.
Who is it for?
- Tax-Smart CashFlow and T-Class offer the flexibility to develop customizable and sustainable solutions by generating tax-efficient cash flow for those in their retirement and wealth preservation years.
With Tax-Smart CashFlow and T-Class, you can
- receive tax-efficient monthly cash flow, and customize cash flow payout rate or amount (up to 8%) without triggering capital gains tax
- turn cash flow on or off, or adjust it according to your needs
- reinvest cash flow, shifting asset allocation over time without triggering capital gains
- transfer wealth to a charity in a tax-smart way
- Brochure: Fidelity Tax-Smart Solutions™
- Tax-Smart CashFlow payout rates
- Questions about Tax-Smart CashFlow
Enhancing the tax efficiency of charitable giving
Donations to a charity are a great way to give back. The value of a donation (whether cash or “in-kind”) is used to determine a tax credit, saving taxes for the donor.
Charitable giving with Tax-Smart CashFlow allows you to receive tax-deferred cash flow payments from your investments and donate to a worthy cause in a tax-efficient way.
Learn more about charitable giving strategies
Fidelity Tax-Smart CashFlow™ calculator
Check how much monthly cash flow you could receive from your Tax-Smart CashFlow investment, and estimate your current tax bill.
Fidelity tax calculator
Estimate your year-end tax balance based on your total income and total deductions.