It’s not very often that the CRA rolls out a totally new tax credit for Canadians. The current tax system offers a number of deductions and credits, covering most expenses the federal government deems important enough to lower your taxes. Every now and then, a new one is introduced, but for the most part, new credits are rare.
Last year, however, Justin Trudeau’s government announced a totally new tax credit for all Canadian taxpayers. This relatively novel tax break was intended to provide a financial incentive for tax payers to consume Canadian media. If you have any paid news subscriptions, this credit could save you money come tax time. It could also prove surprisingly beneficial if you’re an investor.
The digital news tax credit
The digital news tax credit is a 15% non-refundable tax credit on qualifying digital media subscriptions. It was revealed last year and can be used from this year until 2025.
The digital news tax credit can be applied on up to $500 worth of subscription fees. While the maximum tax savings from this credit ($75) are small, every little bit helps. More to the point, it provides you with an extra incentive to get information that can benefit you financially.
How it can help you as an investor
The digital news tax credit makes it cheaper to access information that can help you invest better.
The more information you have, the better your outcomes are likely to be. That goes for virtually any area of your life: your career, interpersonal relationships, and, of course, your investments. The more complicated a given activity is, the more crucial it is that you have up-to-date information. Investing is a notoriously complex activity, requiring that you keep on top of economic trends, financial news, and industry-specific developments.
Put simply: the more financial news you consume, the more informed your investments will be. Over time, this could result in superior returns.
This is especially true if you’re investing in individual stocks. While your average index fund investor probably doesn’t need mountains of news to invest successfully, it’s absolutely crucial if you’re going to be holding individual equities. This is because when you hold individual stocks, you need to know what’s going on with the company you own to make informed buying and selling decisions.
This fact can be illustrated by looking at one particular Canadian tech stock: Shopify (TSX:SHOP)(NYSE:SHOP).
Shopify is an e-commerce company whose returns have been absolutely phenomenal over the last five years. Since going public, it has risen more than 3,400% in the markets. That might sound tempting to you as an individual investor.
But when we dig deeper, we can see that the stock is extremely expensive. According to Thomson Reuters, it costs 1,700 times its projected earnings for the next 12 months. That means that in order to justify its current price, Shopify will need to grow its profits by extremely high percentages for an extremely long time.
Will that actually happen? Ultimately, nobody can say for sure. What is certain is that with up-to-date news and information on the stock, you stand a better chance of knowing whether it is performing well. That alone could justify a digital media subscription; the fact that you could save come tax time is just an added bonus.
