MLP taxation

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.
Post Reply
nisser
Veteran Contributor
Veteran Contributor
Posts: 2077
Joined: 11 Nov 2007 21:24

MLP taxation

Post by nisser »

I checked the finiki and there's no topic on this (hint, nudge, hint ;))

Does anyone how this works specifically? My current understanding is:

-don't hold it in an RRSP/TFSA
-30-35-39% (it's all over the place on the interent) of the dividend will be withheld (i.e. taxed). How much of that am I able to get back through the foreign tax credit?

What happens when I sell the security itself? Does the IRS take a cut as well at 30-35-39% rate or is it the CRA that does with Canadian tax rules?

Thanks for the insight!
epson600
Contributor
Contributor
Posts: 104
Joined: 26 Jan 2008 11:31
Location: ON

Re: MLP taxation

Post by epson600 »

The dividend is withheld at the highest US federal tax bracket. It was 35% when I looked at a MLP a couple of years ago, I guess its 39.6% now.

You also get a US K1 tax form, which if I remember right gives you the added bonus of having to file a US return.
nisser
Veteran Contributor
Veteran Contributor
Posts: 2077
Joined: 11 Nov 2007 21:24

Re: MLP taxation

Post by nisser »

My understanding is that there's no K1 for Canadian residents/Canadian accounts...
DenisD
Veteran Contributor
Veteran Contributor
Posts: 4080
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: MLP taxation

Post by DenisD »

Beware the tax tribulations of U.S. MLPs by John Heinzl. Free article at GlobeInvestor.
Bottom line: Those juicy MLP yields might not look so tempting after you factor in the tax you’ll have to pay – and the extra work that may be required.
Post Reply