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Next year I'm going to be starting to do contract work up in North Alberta (much higher pay)... I'm gonna be paying myself a weekly salary but that will only end up being 1/3-1/2 the money my company is taking in. I'm hoping to use a quarter or so of the other money to start buying up rental properties in either Edmonton or Calgary (high rent for places that arent that expensive). I want to try to avoid using my own money since then I'm paying income tax on it. I would rather only be paying corporate tax. I was talking to a friend and he is telling me to keep the rental properties and my "job" separate which would mean starting two companies. Can my main company basically invest in my other company or would I end up being fucked if I got audited?
Wondering if anyone has any experience with something like this? Gonna make sure I'm running this past an accountant and/or lawyer. Just want to sorta start putting a plan together.
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The harder I lift and the more I eat, the better my genetics seem to get.
When trying to separate entities for tax efficiency, always consult a professional. There are many things and regulations that might be in place for one case and not for the other.
Prepare a plan of things you can foresee in 20yr and cut it into pieces of 5yrs apart. Bring the entire thing to accountants (multiple, because you always want to hear a different opinion. I went through 4 accountants before deciding the structure for my companies) and see what they would suggest. Then consider the cost of each of the 5yrs part separately, this way, you can see more clearly what fits you best.
Sounds like a personal service corp, which u can't do (get tax benefit from)
Also "high rent rental property" - you have joined the bandwagon about 10 yrs too late...
Everything u've said I hear from every taxi cab driver around - if a taxi cab driver is looking to invest in 'high rent north Alberta real estate', that ship has sailed
P.s. stop reading rich dad poor dad, good principles, doesn't work in today's economy - Robert kiyosaki has never proven any wealth before that book... Interesting, no?
For full disclosure, I do own multiple rental properties... And trust me, too many ppl love to talk about doing it and getting rich from it, few do or can follow through and even fewer 'Great deals' exist
Pay yourself dividends, they can be monthly, quarterly, etc. The first 32k will be tax exempt, only 50% of the remaining income will be taxed in accordance with capital gains reg's.
Pull all the money out of the company, no point in leaving it in there and paying corp tax, buy the properties with your personal funds and then don't claim any of the income, nobody needs to know you have renters, it might just be your "second" or "third" home.
I have been contractor for the last 4 years in Alberta (Extra-provincially registered in BC), as a Ltd company, and very familiar with making the most of it. PM if you prefer, I can also suggest an accountant if you do not already have one.
__________________
Quote:
Originally Posted by jasonturbo
Follow me on Instagram @jasonturtle if you want to feel better about your life
Pull all the money out of the company, no point in leaving it in there and paying corp tax, buy the properties with your personal funds and then don't claim any of the income, nobody needs to know you have renters, it might just be your "second" or "third" home.
It's all fun and games until one day you get a letter from the CRA. Unless the renters are somehow paying you in cash I strongly recommend declaring all income.
Pay yourself dividends, they can be monthly, quarterly, etc. The first 32k will be tax exempt, only 50% of the remaining income will be taxed in accordance with capital gains reg's.
Pull all the money out of the company, no point in leaving it in there and paying corp tax, buy the properties with your personal funds and then don't claim any of the income, nobody needs to know you have renters, it might just be your "second" or "third" home.
I
First off, dividends taxed as cap gains? Dividends are dividends
Secondly - fuck you for telling people to illegally avoid tax, it's people like you that make me pay 40 plus percent tax on my marginal earnings
I really hope you get a CRA audit and get fucked over. It's one thing to be aggressive with tax law, but you know you are doing wrong, and that's the worst
First off, dividends taxed as cap gains? Dividends are dividends
Secondly - fuck you for telling people to illegally avoid tax, it's people like you that make me pay 40 plus percent tax on my marginal earnings
I really hope you get a CRA audit and get fucked over. It's one thing to be aggressive with tax law, but you know you are doing wrong, and that's the worst
That's not very nice, why would you want me to get fucked over by the CRA? I have been through an audit already and came out virtually unscathed, had to pay just shy of 5k, boo hoo, half a weeks pay.
If I was to pay myself a salary where I was victim to typical tax rates, was forced to contribute to EI and CPP... the Gov would likely be getting 120k+ from me each year as opposed to the 25k they currently get. (EI which i have never used, and CPP which will probably be bankrupt long before I can ever cash in on it)
I'm sorry but I don't see how anyone can justify to me that I should see nearly 50% of my income disappear in the form of taxes.. and that's before the 14% HST I have to pay on EVERYTHING.
This all goes back to the "Have vs have-not", part of the reason wealthy people are so wealthy is because they can afford to use the tax system to their advantage, sadly the people who need tax breaks the most get the shittiest deal - middle class salary employees, sadly I can't help these people.
My last year as a salary employee I made 165k and paid over 70k in taxes, it was at that time I made the decision to incorporate.
It's not people like me that make you pay a 40% tax rate, it's the Govt spending too much and their cushy ass jobs (One I will pursue in a matter of years - thanks NEB!), people who are a burden to social services, people who will go their entire lives without contributing to taxes what I did by the age of 24, etc.
You need to accept that our society is fiscally disturbed and beautiful bureaucracy is to blame, I deal with Govt Regulators all the time for work and I can tell you that they hemorrhage money the way things are done.
If they ever find a way to force us "contractor" types to pay standard tax rates I will close the company, go union, and work 1/3rd of the year and collect EI the rest of the year like most of the people who work under me.
There is nothing you can say that would make me feel bad about paying the least amount of tax possible, you get made because I avoid taxes, I get mad because other people will systematically abuse EI their entire lives... seasonal work my ass...
Good luck in politics, you dirty socialist Sorry I hurt your feelings
Below is a nice post I made about EI abuse a while back...
Spoiler!
For those of you that have never done the math... tax rates by province.
(These tax rates reflect Federal and Provincial Income Taxes combined with Federal and Provincial Sales Taxes, based on the high possible tax bracket, and based on paying only that maximum rate applicable, as doing the math for each and every level of taxation would require me to establish some sort of fixed income level for all provinces and spend more time screwing around with a calculator.)
For an average national rate of 54.69% if you're making big money.
Don't forget other taxes the governement collects, such as fuel tax, recycling taxes etc.
And some of you support paying MORE taxes???
So take NS for instance, let's play the tax game:
Income tax rates are as follows:
So let's say Johnny Fisherman grosses 59180$
- Fed/Prov Income Tax $14,830
- CPP $2,306.70 (Taxes)
- EI Premiums $839.97 (More taxes)
Leaving Johnny with $41203.33
- PST @10% $4120.33
- GST @5% $2060.16
Leaving poor Johnny with $35022.84, he gets to keep just over 59% of his gross income.. and again that's before any other taxes or public services he has to pay for.
Now to really put this in perspective,
Let's say Johnny doesn't want to work, cause he's a lazy drunk. So Johnny bucks the EI system as many people do... Let's base this on Johnny working 19 weeks of the year.
Based on the yearly income above, he makes about 1138$/week, so 19 weeks (760 hours) = $21623.46.
He would qualify for the maximum rate of 485$/week, for 22 weeks.
Johnny's revised gross income is as follows:
Income earned: $21623.46
EI Income: $10670
Deductions are as follows:
- CPP $897.11 (EI income exempt)
- EI Premiums $384.90 (EI income exempt)
- Fedeal/Provincial Income Tax $5625.13
Leaving Johnny with 25386.32
- PST @10% $2538.63
- GST @5% $1269.31
Leaving poor Johnny with 21578.38$, he gets to keep almost 67% of his taxable income this time, though 33% of that income was courtesy of the EI program... which also happens to be almost exactly what he paid in taxes.
So Johnny has two options:
Option 1:
Work 2080 hours
Take home $35022.84 of "true income" (Based on the PST/GST being an absolute tax)
Option 2:
Work 760 hours
Take home $21578.38 of "true income"
So now for the best part
Johnny could work 36.53% of a standard calendar year and take home 61.61% of the pay.
Another way to look at this would be to say his net hourly wage working the whole year is $16.84/hr, and bucking the system it would be $28.39/hr... jeez only a 68% increase.
Yeah, socialism is great.
Disclaimer: I am not an accountant, if there is small errors here and there I don't care, feel free to point them out though if it makes you feel better.
__________________
Quote:
Originally Posted by jasonturbo
Follow me on Instagram @jasonturtle if you want to feel better about your life
Gentlemen no need to name call each other, we all have above-average financial acumen and experiences (Rare in RS!)
I too hate seeing my income tax/EI/CPP go towards useless spendings, seeing a bum passed out on the street, seeing losers abuse EI, or even on this forum look how many people try to milk their ICBC crash lottery so I deduct as much as I can and side with jasonturbo.
But theres a fine line between tax avoidance and tax evasion. In OP's case it probably won't matter as rental income would not be high enough for the penalty by the CRA. But when you're pulling in high six-figures/million in revenue, better follow the book. I recommend using a tax lawyer to help you instead of an accountant.
My dad told me once
"if you are salary employee, Canada is one of the worst countries to live in. However if you are a dividend employer, Canada is one of the best"
That's not very nice, why would you want me to get fucked over by the CRA? I have been through an audit already and came out virtually unscathed, had to pay just shy of 5k, boo hoo, half a weeks pay.
If I was to pay myself a salary where I was victim to typical tax rates, was forced to contribute to EI and CPP... the Gov would likely be getting 120k+ from me each year as opposed to the 25k they currently get. (EI which i have never used, and CPP which will probably be bankrupt long before I can ever cash in on it)
I'm sorry but I don't see how anyone can justify to me that I should see nearly 50% of my income disappear in the form of taxes.. and that's before the 14% HST I have to pay on EVERYTHING.
This all goes back to the "Have vs have-not", part of the reason wealthy people are so wealthy is because they can afford to use the tax system to their advantage, sadly the people who need tax breaks the most get the shittiest deal - middle class salary employees, sadly I can't help these people.
My last year as a salary employee I made 165k and paid over 70k in taxes, it was at that time I made the decision to incorporate.
It's not people like me that make you pay a 40% tax rate, it's the Govt spending too much and their cushy ass jobs (One I will pursue in a matter of years - thanks NEB!), people who are a burden to social services, people who will go their entire lives without contributing to taxes what I did by the age of 24, etc.
You need to accept that our society is fiscally disturbed and beautiful bureaucracy is to blame, I deal with Govt Regulators all the time for work and I can tell you that they hemorrhage money the way things are done.
If they ever find a way to force us "contractor" types to pay standard tax rates I will close the company, go union, and work 1/3rd of the year and collect EI the rest of the year like most of the people who work under me.
There is nothing you can say that would make me feel bad about paying the least amount of tax possible, you get made because I avoid taxes, I get mad because other people will systematically abuse EI their entire lives... seasonal work my ass...
Good luck in politics, you dirty socialist Sorry I hurt your feelings
Below is a nice post I made about EI abuse a while back...
Spoiler!
For those of you that have never done the math... tax rates by province.
(These tax rates reflect Federal and Provincial Income Taxes combined with Federal and Provincial Sales Taxes, based on the high possible tax bracket, and based on paying only that maximum rate applicable, as doing the math for each and every level of taxation would require me to establish some sort of fixed income level for all provinces and spend more time screwing around with a calculator.)
For an average national rate of 54.69% if you're making big money.
Don't forget other taxes the governement collects, such as fuel tax, recycling taxes etc.
And some of you support paying MORE taxes???
So take NS for instance, let's play the tax game:
Income tax rates are as follows:
So let's say Johnny Fisherman grosses 59180$
- Fed/Prov Income Tax $14,830
- CPP $2,306.70 (Taxes)
- EI Premiums $839.97 (More taxes)
Leaving Johnny with $41203.33
- PST @10% $4120.33
- GST @5% $2060.16
Leaving poor Johnny with $35022.84, he gets to keep just over 59% of his gross income.. and again that's before any other taxes or public services he has to pay for.
Now to really put this in perspective,
Let's say Johnny doesn't want to work, cause he's a lazy drunk. So Johnny bucks the EI system as many people do... Let's base this on Johnny working 19 weeks of the year.
Based on the yearly income above, he makes about 1138$/week, so 19 weeks (760 hours) = $21623.46.
He would qualify for the maximum rate of 485$/week, for 22 weeks.
Johnny's revised gross income is as follows:
Income earned: $21623.46
EI Income: $10670
Deductions are as follows:
- CPP $897.11 (EI income exempt)
- EI Premiums $384.90 (EI income exempt)
- Fedeal/Provincial Income Tax $5625.13
Leaving Johnny with 25386.32
- PST @10% $2538.63
- GST @5% $1269.31
Leaving poor Johnny with 21578.38$, he gets to keep almost 67% of his taxable income this time, though 33% of that income was courtesy of the EI program... which also happens to be almost exactly what he paid in taxes.
So Johnny has two options:
Option 1:
Work 2080 hours
Take home $35022.84 of "true income" (Based on the PST/GST being an absolute tax)
Option 2:
Work 760 hours
Take home $21578.38 of "true income"
So now for the best part
Johnny could work 36.53% of a standard calendar year and take home 61.61% of the pay.
Another way to look at this would be to say his net hourly wage working the whole year is $16.84/hr, and bucking the system it would be $28.39/hr... jeez only a 68% increase.
Yeah, socialism is great.
Disclaimer: I am not an accountant, if there is small errors here and there I don't care, feel free to point them out though if it makes you feel better.
Tl, dr
No problem with you arranging ur affairs to minize tax - avoiding tax by not declaring income is illegal and immoral.
You're not the only 6 figure earner here, I hate paying tax too and am aggressive in my returns, I also do everything I can to minimize my taxes, within the laws, rules and regulations
To tell ppl not to declare rental income is illegal and also stupid, because if you have half a brain, you would pay no tax as you can find enough write offs to cover the income (mortgage interest, depreciation of the building) - I own numerous properties - never pay tax on any of them, all legal, right, and above board
Again - no problem in minimizing ur taxes, but what you said to do is offensive
I'm no socialist - quite the opposite, but if we all do our part in paying our rightful taxes, we all benefit - not in a socialist way, just a legal way
Hey guys, sorry for hijacking the thread but I don't think it was necessary to create a new one.
I have some property in Saskatchewan that I bought in 2008. What I actually bought is shares in a large development so does that technically mean it's property that I own?
The reason I ask: would it be worth it/smart to create a company and be taxed at a lower rate when the property is developed and sold? Is this even possible since it's just shares?
Any insight would be appreciated.
You are currently viewing our boards as a guest which gives you limited access to view most discussions and access our other features. By joining our free community you will have access to post topics, communicate privately with other members (PM), respond to polls, upload content and access many other special features. Registration is fast, simple and absolutely free so please, join our community today!
The banners on the left side and below do not show for registered users!
Sorry I hurt your feelings 
