We received a ton of requests after Monday night’s show (Today’s Entrepreneur, Mondays at 7pm on CJAD), for a written version of Nick Moraitis’s Tax Tricks or Treats.
Listen to the segment here, or read on for a summarized version.
Public Security Donations
You can donate any publicly traded stock directly to a charity. Doing so means you don’t have to pay any capital gains tax, and you still get your donation receipt. Read more on that here.
Liquidating RRSPs Tax Free
If you are close to retirement, be wary of those promoting any deal where you can liquidate your RRSPs in such a way that it becomes tax free. The Canadian Revenue Agency is cracking down on this, and you will be asked to pay the taxes, often with interest incurred. If it’s too good to be true, it likely is. Always double check with a tax specialist.
Loans to dependants
Interests rates are very low, and are currently at about 1% until December (or even January). This is important because if you are in a high tax bracket, but your spouse or children are not, you can lend them money to invest. They in turn take your loan, and perhaps earn 5% on their investment. They pay you back with the 1% interest, and are then taxed at a much lower rate on the remaining 4% of their earnings then you would have been. It is important to note however, that the loan’s interest rate must be abided by. As well, the loan must be in writing, and the money lent must be invested.
The above trick should never be used if you are the owner of a company and want to take out a shareholder loan to, for example, buy a house. The government is very strict about this, and shareholder loans must be paid back in approximately 2 years or you will be taxed on the entire loan. You can read more about Loans to Shareholder here.