I just had a meeting with my a tax man at my bank. Of course he is selling product, BUT he informs me that all real-estate investing and management is taxable as passive income in a corporation and TAXABLE @ 45%!!. Having operated small businesses and agriculture up till now, I am definitely not accustomed to this sort of tax bracket. I plan on setting up another company to do handle mangement and expenses, or would it be better to keep this personal? I don`t mind paying my due to live in this great country of ours, but just how much is my do?
45% passive tax
- Thread starter terryaris
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As a corporation you will pay higher taxes than personal.
In my case my lawyer and accountant advised I not form a corporation for that reason.
Each individual may have different circumstances.
I am small time with investment property only worth a 1/2 mil.
In my case my lawyer and accountant advised I not form a corporation for that reason.
Each individual may have different circumstances.
I am small time with investment property only worth a 1/2 mil.
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true, if you flip properties or cannot show a long term hold intention with rental income !
long term holds (with rental income) will be taxed as capital gains, i.e. only 50% of the gain is taxable (at whatever rate is current that year when you sell ..)
long term holds (with rental income) will be taxed as capital gains, i.e. only 50% of the gain is taxable (at whatever rate is current that year when you sell ..)
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It is my understanding that one criteria required for CRA not to consider corporation income as passive income is a minimum of four permanent employees are required.
You will find most accountants will advise against forming personal corporations, while many lawyers will recommend them. Personal corporations have some benefit if you are estate planning, or to protect your assets if you are subject to law suits. But, they are expensive to own and operate with higher taxes and other reporting requirements.
In the end, the decision will be yours to make.
You will find most accountants will advise against forming personal corporations, while many lawyers will recommend them. Personal corporations have some benefit if you are estate planning, or to protect your assets if you are subject to law suits. But, they are expensive to own and operate with higher taxes and other reporting requirements.
In the end, the decision will be yours to make.
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Please do not take tax advise from a banker!! They have little or no training in that regard. It is hard enough to find a licenced accountant that understands the rules.
When I quit work and went to the bank for advise on how to structure my future he promptly told me that my portfolio had a very serious problem. He said I my mix ratios were way out of whack because my real estate was about 95% of my holdings. He suggested I sell about 50% of my property (2006) and buy mutual funds. The taxation would have been crippling... So I said to him "I don`t want to be ignorant but who has more money, me or you." He pointed out that I had quite a bit more than he did and I remembered the words of some smart guy that said "never take financial advise from some one that has less than you do". I think this is good advise! Hire a rich accountant and get better quality information.
When I quit work and went to the bank for advise on how to structure my future he promptly told me that my portfolio had a very serious problem. He said I my mix ratios were way out of whack because my real estate was about 95% of my holdings. He suggested I sell about 50% of my property (2006) and buy mutual funds. The taxation would have been crippling... So I said to him "I don`t want to be ignorant but who has more money, me or you." He pointed out that I had quite a bit more than he did and I remembered the words of some smart guy that said "never take financial advise from some one that has less than you do". I think this is good advise! Hire a rich accountant and get better quality information.
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QUOTE (MikeMcCrae @ Jan 27 2009, 02:11 AM) Please do not take tax advise from a banker!! They have little or no training in that regard. It is hard enough to find a licenced accountant that understands the rules.
When I quit work and went to the bank for advise on how to structure my future he promptly told me that my portfolio had a very serious problem. He said I my mix ratios were way out of whack because my real estate was about 95% of my holdings. He suggested I sell about 50% of my property (2006) and buy mutual funds. The taxation would have been crippling... So I said to him "I don`t want to be ignorant but who has more money, me or you." He pointed out that I had quite a bit more than he did and I remembered the words of some smart guy that said "never take financial advise from some one that has less than you do". I think this is good advise! Hire a rich accountant and get better quality information.
Excellent story, Mike! Another "expert" bit the dust....
I do often wonder why everyone is so concerned about the passive income taxation issue. Believe me, I hate paying taxes as much as the next guy, but if one has to pay taxes it means they`ve also made some money. Would I turn down a $500,000 salary for a $60,000 salary because I`m going to get taxed more on the higher salary? Don`t think so. So while I hate paying more taxes when I make some profit through real estate, I try to remember that I also walked away with more than I did the year before.
When I quit work and went to the bank for advise on how to structure my future he promptly told me that my portfolio had a very serious problem. He said I my mix ratios were way out of whack because my real estate was about 95% of my holdings. He suggested I sell about 50% of my property (2006) and buy mutual funds. The taxation would have been crippling... So I said to him "I don`t want to be ignorant but who has more money, me or you." He pointed out that I had quite a bit more than he did and I remembered the words of some smart guy that said "never take financial advise from some one that has less than you do". I think this is good advise! Hire a rich accountant and get better quality information.
Excellent story, Mike! Another "expert" bit the dust....
I do often wonder why everyone is so concerned about the passive income taxation issue. Believe me, I hate paying taxes as much as the next guy, but if one has to pay taxes it means they`ve also made some money. Would I turn down a $500,000 salary for a $60,000 salary because I`m going to get taxed more on the higher salary? Don`t think so. So while I hate paying more taxes when I make some profit through real estate, I try to remember that I also walked away with more than I did the year before.