Tag: thomas c chan

5 Strategies To Grow Wealth with 0% TAX in Canada

Jason 0 Comments March 31, 2024 Retire Wealthy

happy New Year last kickoff this year with lots of great content in today's video I'm gonna show you five perfectly legit ways to grow well with zero percent tax in Canada so make sure you stick around [Music] hey welcome back my name is Thomas C Chen we have the most five star Google reviews and Life Insurance Vancouver and retirement planning so starting this year if you want to know more about tax free wealth for your retirement and to protect you and your family using solutions that Canadian Banks don't want you to know about make sure you hit the Subscribe button below and enjoy what I have for you that's always a say it's not how much you make is how much that you can keep this is especially true when we invest in Canada because CLA will always come in and ask for the share when you make a profit on the investment and let me show you two scenarios in the first scenario Henry will put ten thousand dollars a year for the next 15 years with a 10 rail return per year then after 15 years it will have around 350 000 safe and on the other hand where we have Tom doing the exact same saving but this time every year when you make a profit CLA will tax you at 30 percent so instead of getting a thousand dollar profit in the first year you only get seven hundred dollars as profits and you will get only 270 000 after 15 years that means eighty thousand dollars goes to the cra's pockets so I want to share five strategies and tools that can help you grow your saving with zero percent tax so you don't have to be Tom in my second scenario the first strategy is really simple and straightforward and you've probably heard of it before is to max out your tax-free savings account or known as tfsa the tax free saving account was first offered in 2009 as a way for Canadians adults to send money aside tax free within a tax free saving you can invest in stock market or you can put a sign in the savings account depending on your goal and risk tolerance and those savings can grow tax-free throughout your lifetime this means all interests dividends and capital gain earned in your tax re-saving are tax-free when withdrawn and because you earn 100 of the profit that will make the compounding growth very powerful for example if we save six thousand dollars a year for the next 30 Years with a 10 rail return per year then you will have 1.08 million dollars saved and because tax free saving is not a taxable income so you do not need to pay any taxes and also it won't affect your retirement benefit such as the OA security maximizing your tax free savings potential is the easiest way to ensure your money is always working for you and the great thing is if you forgot to contribute last year the room can be carried forward the best way is by enabling an automatic deposit into your account like putting a 500 a month automatically so you just set it and forget it and remember the earlier you contribute the more time your investment have to grow the two downsides that I found about tax receiving is one that you have a limit each year to how much you can contribute to your tax receiving and important that you stay within your contribution room otherwise you'll be taxed on that excess amount and this can be varied depending on how many years you stay in Canada and if you don't know what your limit is log into your CRA account online to check it the other slight disadvantage is because tax free saving is too flexible so sometimes when you need the money to go for a trip or needed to pay down the credit card bill it will be always the first pocket to reach in according to the CRA statistics the average saving inside of the tax receiving is around twenty thousand dollars that's only a quarter of the max saving that you can put in alright let's move on to the next strategy which is to utilize your principal residence we all know that real estate is a very crucial part in our asset portfolio the return is quite stable and promising and the long one it brings inflation you can rent it out to collect additional income or you can flip it for the appreciation when you sell your home there's a good chance you'll get more than what you pay for it therefore taxes in real estate is one of the most profitable Avenue for CRA if your investment property is worth more when you bought in the government requires you to pay the capital gain tax on the increase in value your principal residence however is a special exception according to the income tax act you can designate one property as your principal residence in any given year your principal residence has to be something you can actually live in not a shared storage container or vehicle it can be however a cottage a House Condo apartment in a duplex or building a trailer a mobile home or even a houseboat therefore say you bought a house with five hundred thousand dollars and after 30 years when you decide to sell to downsize it it grew to 1.5 million normally that one million dollar profit needs to be taxed but because it's your principal residence it's completely tax-free and now you can use it for retirement the first tax-free strategy is to use eligible dividend income from the blue chip stock portfolio first let's understand what is dividend first thing of dividend is a bonus given out by big companies every quarter or every year when you buy a certain stock say Royal Bank you become the shareholder of rollback so when Royal Bank makes money they will pay you a bonus now Raul bank is paying 1.32 every three months per unit you have say you have a thousand shares then you get paid 50 to 80 dollars per year and investors like dividend because even when the stock price goes down they still pay the similar dividend return alright back to the topic since dividend is extra profit isn't it taxable then yes Dividends are count as investment income and a January tax accordingly depending on your tax bracket however when we look closer there's one instance when we don't have to pay tax even when we have dividend income that's right it's possible for Canadians to receive around fifty thousand dollars dividend income and no need to pay any tax right now I'm using British Columbia as an example as you can see here if your sole income is dividend income pretty much you don't have to pay any tax up to 53 000.

I'm not going to talk too much detail once eligible or non-eligible just think of dividend paid by big blue ship companies at eligible dividend therefore they are eligible for extra tax credit again you need to fulfill two criterias to max out this strategy one is dividend income must be your sole income meaning no work income no other investment income no money in your rrsp the other one depending on what profits you're in as you can see if you live in BC or Ontario then you don't have to pay any investment tax but when you live in Nova Scotia or like Quebec then you have to pay 10 tax on the same fifty thousand dollar dividend income so make sure you talk to your accountant for that hey sorry for the interruption but I got a special announcement for you I will be hosting a live webinar next month where I'm gonna talk about stack efficient strategy what can we do during this market downturn and how to boost your wealth this year so many goodies here that you don't want to miss it there should be a link below where you can check out the details and I only offer it to the first hundred people so first come first serve base make sure to check it out alright back to the video but what if I Max on my tax free saving I don't plan to sell my principal residence and I have other income so rely only on dividend income doesn't work for me well not to worry because the next strategy is to use a life insurance policy but wait a second is it life insurance a monthly expenses that gives you beneficiary and lumps of payment after you die that's right however on top of that when we structure properly life insurance can provide tax shelter growth and a tax-free income as well this usually involved with a permanent life insurance plan with Savings in debt like a universal life insurance or a whole life insurance now after you see a decent size of saving in there you can choose to take it out which might trick attacks or you can choose to grow against it and unlike a bank loan or credit card which requires credit or income check borrowing money from your life insurance policy is a contractual guarantee meaning they have to lend it to you and you do not need to explain what you'll be using the money for the money can be used for anything from bills to vacations to fund your kids college or a financial emergency and since this is a loan which is not considered as taxable income there is no tax involved sure because it's a loan there's interest involved but the best part is you can control when you pay back the loan all the interest payment so in theory you can delay everything until the day that you die and upon death any outstanding loan balance including any accumulated interest is deducted from the death benefits with the remaining balance payout tax-free to your beneficiary so therefore the entire process is 100 tax-free this is very common to people who is a business owner or Canadians who max out that tax free saving and have multiple real estate they can enjoy the tax Charter growth access the saving when there's emergency or during the Market's downtime and provide enough Reserve to pay for the final tax bill should one pass away if you're a small business owner this one is for you when you've created a very successful practice client and staff will no longer be the top concern but now taxes and secession are the top priority what happens when you sell your business to someone else just like any other asset CLA will come in and tax you at the profit say John runs a chiropractic business and now he wants to let it go and sell it to someone else and based on the fair market value his business is now worth a million dollar because it starts off with nothing so as capital gain will be the full 1 million dollar and half of that which is 500 000 will be taxed and therefore he needs to pay around 250 000 for a sale however there's something called the lifetime capital gain exception or lcge which allows Canadians Incorporated small business owners to claim a deduction when selling the shares of the corporation that can effectively eliminate the taxes realized on the sale of the business as mentioned previously capital gains can include profits from the sale of a property but it can also include business shares stocks and mutual funds lcge allows you to keep the profit from qualifying sales up to nine hundred and thirteen thousand dollars in 2022 but for easy math I would say it's just close to one million dollars that means John doesn't have to pay any capital gain tax when it sells its practice so that he can use that extra money for retirement future investment or to create an Estates for inheritable purpose to qualify only an an official their relatives or partnership must own the business share for at least 24 months before claiming the lcge this requirement stops investors from buying and reselling small business share only for tax purpose furthermore a company must be owning at least 50 percent of its asset in active business Corporation inside Canada at the time of sale in addition all individuals who apply for an lcge must be residents of Canada for the entire tax year in which they claim the exemption so again talk to accountant for further details alright those are the five strategies I have for you but wait I want to throw in one more as bonus and is to invest in Blue Chip stocks for the long term as we know if we invest in a non-recious account like not in the rrsp OR tax receiving then we have to pay capital gain tax a profit but that's a capital loss as well and capital loss can be used to offset the capital gain tax liability by selling securities in a non-registered account at a loss if Capital laws exceed capital gains the lesser of three thousand dollars of the excess loss or the net capital loss can be deducted from the other income so let's say you earn a thousand dollar profit from selling stock a but lost a thousand dollars when you sell a different stock then your profits is effectively zero the profit and loss cancel each other out in that instance you won't have to pay any capital gain tax this is really useful especially 2022 is a bad year for stock market and 2023 could be the same so with this strategy you can rebalance your portfolio and still able to achieve its tax-free status if this sounds complicated work with a tax planner and investment advisor can help determine when and how to sell Securities to minimize gain and maximize the losses right now hey I hope I've given you some ideas on how you can reduce your taxes let me know which strategy you have implemented in the comment below and which one are new for you like I said before 2023 can be a charging year as well but I truly think there are lots of good opportunities to grow up to as long as the right planning so if your depth about your saving plans have a chat with my team and I and I wish you a fantastic 2023 and until next time

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