One Rarely Used Tax Strategy That Saved A Business Owner $2,600 this year
Can you believe that business owners overpay their taxes by over $3,000, on average, every year in Canada? Are you 100% sure that you are using ALL the legal tax strategies that are available to you as a business owner? If you place all your faith only in your accountant to guide you, you may be getting short changed.
Back in November of 2015 I was introduced to a business owner, let's call him Bill, who sold a cottage in January of 2014 that he had been renting out. After taxes he had $287,500 in proceeds to invest. His accountant told him to buy bank shares and his investment advisor agreed. After doing this, Bill earned about a 4% dividend on the shares or about $11,500 which created a tax bill of $4,050. Both failed to tell Bill a little known way that would have reduced this tax by $2600.
Here's the "secret"
His spouse does not work and receives very little taxable income. Bill could have lent the money to her. She would then invest the money in her name and pay no income tax since she does not not have any other taxable income. He would have had to lend the money to his spouse and she would have had to pay him 1% interest which would generate $2,875 of taxable income for Bill. His tax bill would have been about $1,440 instead of $4,050.
2 pairs of eyes are better than one
You would think the accountant would have picked up this strategy but this was not the case for Bill. Over the years, I have found that many tax planning strategies are missed, especially when the only person that knows your personal and business affairs intimately is your accountant. Getting your Financial Planner to meet with you and your accountant twice a year will increase your chances of finding more tax reduction strategies. Your Financial Planner should be the quarterback of your relationships with the other professionals you work with but this is rarely done these days.
If you are interested in finding out about more tax planning strategies that are frequently missed let me know at firstname.lastname@example.org or get in touch with me on LinkedIn.
You can also get a free consumer awareness guide that I was asked to write called The 6 questions business owners must ask a financial planner before hiring one. This guide will give you all you need to know, in very simple terms, about how to interview a Financial Planner and can also be used to make sure you are working with a Planner that is qualified to advise business owners.
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