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• Earn 5% interest on a GIC, get taxed at 46%, after tax you earn 2.7%.

• Earn 5% in dividends on BCE stock, get taxed at 29.5%, after tax you earn 3.5%.

• Earn 5% from a capital gain on the price growth of a stock, get taxed at 23%, after tax you earn 3.8%

On the same 5% investment gain, you can keep an extra 1% if the gains are in a mixture of capital growth and Canadian dividends than if they come from interest income. Of interest, the extra 1% happens almost regardless of your income and the province you live in.

Let’s take a look at Royal Bank. You could invest in several ways related to Royal Bank. Let’s take $100,000 and put in a one year GIC at Royal Bank in a taxable account. You will get a rate of about 1.30% for a 1-year locked-in GIC. You will end up with $101,300 when it comes due. But then the taxman will take almost half, leaving you with $100,697.

You weren’t too happy with those numbers, so instead you decided to put it all in Royal Bank stock on Jan. 1, 2013. It was a good year for the stock, rising 19.25% in price and roughly another 4% from dividends for a total gain of 23.25%. Unfortunately, you have to pay taxes here too. If we assume that the stock was sold at the end of the year, you would have to pay capital gains tax on the 19.25% price gain, and regardless of a sale, you would have to pay dividend tax on the 4% in dividends earned. After tax, the 23.25% gains end up at 17.6%. About a quarter of the gains get charged to taxes. Still a very good return, sitting at $117,600.