Hate Taxes? Then You’ll Love This New 2020 CRA Tax Cut

The CRA tax cut, even if not significant, is always welcome. But dividend kings like Inovalis stock and Keg Royalties stock are the wealth builders for Canadian taxpayers.

| More on:
edit Balloon shaped as a heart

Image source: Getty Images.

People generally hate taxes but love a tax cut. In Canada, federal tax changes took effect to start the year. The lowering of taxes was an election campaign promise. Hence, the tax-free earnings of most Canadians, including retirees, will increase in the 2020 tax year.

Tax savings

The basic personal amount (BPA) bumps up by $931 such that an individual Canadian taxpayer can earn up to $13,229 before paying any federal income tax. The limit will gradually increase until it reaches $15,000 by 2023.

The rationale behind the BPA increase is to help Canadians cover their basic needs. Nearly 20 million will benefit from lower taxes, and once full implementation is complete, the annual tax savings of individuals would be $300.

The 2020 tax changes might not be significant but could help Canadian taxpayers a little. What could help you more is to maximize the use of your TFSA. This investment account is still the hands-down choice to make the most of your money this year.

Tax-free earnings

Let us assume you have an extra $13,229 for investing. You can purchase shares of dividend kings like Inovalis (TSX:INO.UN) and Keg Royalties (TSX:KEG.UN).

Inovalis is a $305 million real estate investment trust (REIT) and one of Western Europe’s leading privately owned REITs. You can realize tax-free annual earnings of $1,037.15, as the stock pays a high 7.84% dividend.

Since this REIT is European-focused, you gain exposure to the real estate sector abroad. The rental properties it owns and operates are in France and Germany plus a few in Spain. Inovalis rents out and derives rental income from office spaces located in prime and posh areas.

Inovalis has a moneyed institutional backer in France. Some pension fund managers are showing interest in this REIT but are awaiting a European economic recovery. With sizable funding support, Inovalis can pursue expansion to add more top-tier assets to its portfolio.

This REIT is a pure dividend play with minimal capital gain potential. Inovalis can be an investment option too in case you have worries about a housing market crash in Canada.

Keg Royalties is another dividend king. If you love great steaks, you’ll love this royalty stock even more for its juicy dividend. Your $13,229 has the potential to earn $984.24 yearly from Keg’s 7.44% yield.

This $174 million income fund was able to establish a unique position in Canada’s restaurant industry. Its operations as an unincorporated, open-ended limited purpose trust began in 1971. The focus is on the high-end casual dining restaurant segment.

Keg, through The Keg Rights Limited Partnership, operates 105 Keg steakhouse restaurants and bars. All rights to the steak chain like the trade name, trademark, operating procedures, and systems, plus other intellectual property, belong to Keg.

Although the business has little potential for growth, Keg will continue to rake in profits due to stable cash flow every year. The brand has loyal followers, mostly “steak lovers.” Not only is Keg a top-line royalty trust but a “cash register” as well.

Plant the seed

You can start small and plant the seed today by investing in Inovalis and Keg Royalties. Dividend machines like the two companies, not tax cuts, are your vehicles to build wealth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Inovalis REIT.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »