5 Ways To Reduce Taxes In Canada And Protect Your Wealth
What You Will Learn
The income tax system and the banking system are designed to work together against you, but knowing the architecture of each system gives you the ability to navigate it. This conversation between Richard Canfield and CPA Henry walks through five tactical strategies Canadians can use to legally keep more of what they earn and move their money out of systems that are not working for them.
Key Moments in This Session
- Defer: how using time to spread income across multiple years rather than receiving it all at once keeps you out of the highest tax brackets, and why the RRSP is a useful short-term deferral tool but requires careful management to avoid paying more tax at withdrawal than was saved going in.
- Design: how the structure through which you receive income, whether as a T4 employee, self-employed contractor, or incorporated business owner, determines your tax rate, and why moving from personal income to a corporate structure can reduce the effective tax rate from around 50% to as low as 12%.
- Define: how the type of income you receive, whether employment, business, eligible dividends, ineligible dividends, capital dividends, or capital gains, determines how it is taxed, and why capital dividends from a Canadian private corporation are one of the most powerful and least understood tools available.
- Divide: how splitting income between yourself, your spouse, your children, or your corporation reduces the amount subject to the highest marginal rates, and why the 2017 Tax on Split Income legislation makes working with an experienced professional essential before implementing this strategy.
- Disconnect: why both the income tax system and the banking system are intertwined and how moving your savings from a bank account where you are an unsecured creditor into a properly designed participating whole life policy with a mutual company places your growing cash values outside the definition of income in the Income Tax Act entirely, creating the foundation for tax-free retirement income across generations.