Tax Saving Options for Fixed Income Professional


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OneIsACrowd   
Member since: Oct 04
Posts: 95
Location: Toronto, Canada

Post ID: #PID Posted on: 06-09-07 12:53:13

Quote:
Originally posted by morning_rain
you didnt ask for opinions on your tax situation but when I read your question my thought was that $18,000 per year income tax (I assume you mean both federal and provincial combined) is still very low for a $100,000 salary.

You are not being 'screwed' but are really doing very well!

The $18,000 tax is mostly the result of maxing out RRSP limits.
Anyhow, my main intent is to explore ways of saving taxes.
The 2 options that I listed are the only ones I personally know of, and I'm looking for suggestions for other options.

Esp. when I look around me and find folks are able to simply incorporate a home-based business and write off a lot of regular expenses, including mortgage, I feel cheated.

In fact, my neighbor across the street makes well over 100K a year, however, he has incorporated a Primerica business from home and is able to write of a lot.
His taxable income in $14,000 a year, although he probably makes $114,000.
This entitles him (and people like him) to tax credits such as GST credit, higher CCTB and many other benefits.

In effect, my hard-earned tax dollars are paying for the credits and subsidies to folks like them.

I am trying to improve my situation such that I'm not working 14 hr. days to fund the luxurious lifestlye of non tax payers.

Hope you understand and can provide suggestions.

:cheers:



freakoutguy   
Member since: Sep 06
Posts: 666
Location: GTA

Post ID: #PID Posted on: 06-09-07 13:20:21

Quote:
Originally posted by OneIsACrowd

In fact, my neighbor across the street makes well over 100K a year, however, he has incorporated a Primerica business from home and is able to write of a lot.
His taxable income in $14,000 a year, although he probably makes $114,000.
This entitles him (and people like him) to tax credits such as GST credit, higher CCTB and many other benefits.





One thing that anybody should heep in mind that they SHOULD pay SOME tax to Revenue Canada, to avoid being audited. Even if people are establishing home businesses and writing off expenses, they have to do so within reasonable limits. For example, you cannot write off your entire mortgage payment because you use your residence as a home office, but if you write off 10%, that is reasonable. Also, you have to show an intent of doing business and earning income. So you cannot continue showing losses of tens of thousands of dollars and writing that off against your salary for years together.

I don't know what your neighbour is doing to write off almost 100K in income. If he is a salaried employed and is being taxed at source, that information will almost certainly be available to RC. He may get away for one or two years, but once his file turns up for audit, he is screwed.



OneIsACrowd   
Member since: Oct 04
Posts: 95
Location: Toronto, Canada

Post ID: #PID Posted on: 06-09-07 13:36:21

Quote:
Originally posted by freakoutguy
One thing that anybody should heep in mind that they SHOULD pay SOME tax to Revenue Canada, to avoid being audited. Even if people are establishing home businesses and writing off expenses, they have to do so within reasonable limits.

Sure, I understand that.
And I'm not trying to cheat the system or evade taxes - just legal ways of tax savings is what I am after.
Quote:
I don't know what your neighbour is doing to write off almost 100K in income. If he is a salaried employed and is being taxed at source, that information will almost certainly be available to RC. He may get away for one or two years, but once his file turns up for audit, he is screwed.
I don't think he's doing anything illegal.
He has actually shown me his tax return and after all write-offs, his net income is $14,000.
I don't think he's writing off his entire mortgage either.
And the home business is genuine enough - Primerica financial.

So other than these flow-through shares (which I will research on), are there any other ideas/options?

:cheers:



chandresh   
Member since: Mar 03
Posts: 2606
Location: Toronto

Post ID: #PID Posted on: 06-09-07 13:41:27

Quote:
Originally posted by OneIsACrowd

Hello all,

I am a fixed-salary professional with a taxable income of $100K/annum.

2. Assuming my income increases in the future and at some point, my spouse enters the workforce, are we royally screwed for the remaining duration of our working lives (at least 30 more years)?

Any help/advice appreciated.



Do you want to imply that getting a higher salary is going to be more painful for you than compared to today???

That is a feeling which I have found with many people - they are not happy about getting the extra money - but worried about losing some from that extra income.

I once worked for a person who taught me a lesson which I try to apply in all aspects of my life. He said, if one spends time in trying to find ways and means to increase income rather than spending the same time in trying to reduce taxes he will eventually be happier. Simple reason being that you cannot reduce your taxes beyond a limit (and that limit can be reducing it to zero theoratically) - but income can be compounded exponentially (theoratically).


-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!


chandresh   
Member since: Mar 03
Posts: 2606
Location: Toronto

Post ID: #PID Posted on: 06-09-07 13:44:28

Quote:
Originally posted by OneIsACrowd

Hello all,



Essentially, I am getting screwed on income taxes.

I need to find tax deductions that can improve my situation significantly.

There are only two scenarios that I can personally think of that can save large amounts of taxes -

((2) incorporate a home business and write off mortgage and other expenses.




Can you explain how would that help in reducing your personal income taxes (or expenses)? The maximum you can deduct is upto your incorporated business income and being a salaried person, you cannot transfer your salary to your inc.


-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!


OneIsACrowd   
Member since: Oct 04
Posts: 95
Location: Toronto, Canada

Post ID: #PID Posted on: 06-09-07 14:01:05

Quote:
Originally posted by chandresh
Can you explain how would that help in reducing your personal income taxes (or expenses)? The maximum you can deduct is upto your incorporated business income and being a salaried person, you cannot transfer your salary to your inc.

What happens in case of losses in the business?
What can you deduct then?

I think you can also deduct part of your utilities, car maintenance expenses, business meals, business trips, etc.

I'm sure you know tax laws betteer than I do, maybe you can explain how people who register home based businesses are able to pay such low taxes.



chandresh   
Member since: Mar 03
Posts: 2606
Location: Toronto

Post ID: #PID Posted on: 06-09-07 14:09:44

Quote:
Originally posted by OneIsACrowd

Quote:
Originally posted by chandresh
Can you explain how would that help in reducing your personal income taxes (or expenses)? The maximum you can deduct is upto your incorporated business income and being a salaried person, you cannot transfer your salary to your inc.

What happens in case of losses in the business?
What can you deduct then?

I think you can also deduct part of your utilities, car maintenance expenses, business meals, business trips, etc.

I'm sure you know tax laws betteer than I do, maybe you can explain how people who register home based businesses are able to pay such low taxes.



You want to deduct expenses - deduct from what? Think about it and you get the answer.

You can deduct only from the income - and where does the income in the business come from?


-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!




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