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Taxes (pg. 7)
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| Crazy Serb |
| quote: | Originally posted by MarkT
who cares if income is tax free??? That's 100% irrelevant. ALL that matters is your ratio of income to expenses when you retired (or anytime, for that matter).
you could have 3k/month from RRSPs, after tax, but if my rental properties or business income gross me 6k month after expenses at even at a 45% tax rate, and with zero RRSPs, who's financially better off? me! :)
What RRSPs offer is secure, consistent income upon retirement, but not necessarily the highest income ;)
I'll spare everyone the details of my landlord's situation...suffice to say, he and his wife have 8 properties and have to do virtually nothing day to day to generate that income, PLUS they still work (in their 50's, I suspect). They will retire quite comfortably and probably have RRSPs for the tax break, not with the intention of ever needing them to live. |
exactly my point as well... I know a few people (that I actually did some work for as well, and one of them being sort of my mentor right now) that own 5-10 properties, rent them all out, earn a few hundred bucks from each one of those properties which amounts to a few thousand each month. The difference between their $4-5 thousand a month and your $4-5 thousand a month is that they don't pay ANY taxes on it until the next year (whenever they fill out their tax return), and they can write off anything they feel like from that income so that in the end they earn only a few hundred each month, which amounts to some $20,000 a year, which is hardly even taxed anyway. Now, you can call it fraud... I call it the wealth of information (or lack of information in everyone else's case)... meaning, when you claim your taxes as a business (rental & buying houses?) there are so many things you can write off as business expenses (that you actually spend money on as well) that it's just ridiculous... and legal as well. It's just a matter of keeping track of everything, bookkeeping, etc.
And yeah, Real Estate does generate a higher % on your investment (if you know how to work that as well) than RRSPs... plus you don't have to spend your whole life working 40+ hours a week. It's either playing it hard or playing it smart... getting taxed on whatever you earn before you even touch your money, or paying the gov't when you feel like it and whatever you feel like paying. |
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| Crazy Serb |
| quote: | Originally posted by JRinger
actually no - having a fully employer-paid pension plan is the best way (from a cost-to-you standpoint)....RRSPs would closely follow that |
oh man... :rolleyes:
| quote: | Originally posted by Skipper
You save a TON of money contributing during your high tax bracket years and withdrawing during your low tax bracket years.
And guess what - you don't withdraw all at the same time once you retire. You take it out as you would receive a normal income, so yes, you get taxed. BUT YOU'RE NOT WORKING.
You don't get taxed twice on that savings. Only once, and it's in your retirement years - when your tax bracket is the lowest.
When you're serving me margaritas at my local country club when I'm 70, I will point, and laugh.
Have fun slaving away until you die.
(PS - rental income is NOT tax free.) |
Yeah, the only flaw with that plan of yours is that you'll have to wait until the age of 65 to retire... until then you'll be serving me margaritas, cuz I'll probably be retired by the age of 40.
Take that! |
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| rabbitjoker |
| quote: | Originally posted by Crazy Serb
when you claim your taxes as a business (rental & buying houses?) there are so many things you can write off as business expenses (that you actually spend money on as well) that it's just ridiculous... and legal as well. |
If the expense isn't directly related to the income it brings in - then it is tax fraud.
A person cannot directly draw funds/benifts from their business without paying INCOME TAX on those funds/benifits. You see both the corporation and person must file income tax. Although the business may pay no tax due to being an a profit neutral or loss situation - the individual ALWAYS must pay income taxes.
So your friends who are taking in $4k per month - but only having it appear as if it is $200 (after expenses) ARE committing tax fraud - and I hope they get caught.
Having dinner at Denny's has nothing to do with renting a house. Buying a suit at Brooks Brothers has nothing to do with renting a house, nor does driving a S500. PERSONAL LIVING EXPENSES HAVE NOTHING TO DO WITH RENTING HOUSES (THEIR BUSINESS) - and if they're claming those types of expenses (which they must - it is impossible to live off of $200 / month) then they are commiting tax fraud. |
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| MarkT |
| quote: | Originally posted by Skipper
You're forgetting about the time value of money. |
are you refering to interest accumulation on the RRSP? That might be true, but only until the point of retirement though because you'll then likely be drawing out more $$$ per year from the RRSP than it will be earning in interest, right?
The other benefit to the rental property scenario (unless you live in the middle of nowhere) is that the properties themselves are appreciating assets ;) |
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| Skipper |
| quote: | Originally posted by MarkT
are you refering to interest accumulation on the RRSP? That might be true, but only until the point of retirement though because you'll then likely be drawing out more $$$ per year from the RRSP than it will be earning in interest, right?
The other benefit to the rental property scenario (unless you live in the middle of nowhere) is that the properties themselves are appreciating assets ;) |
In an ideal market, yes, they appreciate. But as RJ mentioned, if you sell those properties, you are taxed on capital gains...and taxed hard.
Of course RRSP savings only accumulates interest until the time you withdraw it, but think about it - that's like 30 years of interest accumulation. That's FREE money to withdraw at a later date. If you choose not to save, and work instead, you will not receive the benefit of 30 years of interest income. |
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| k0nk |
| quote: | | this sucks! i cant get my rent reciepts from my old landlord! and i paid a HELLA lot of money in rent last year |
What can you use rent receipts for? I think I'm gonna have to have an accountant do my taxes this year... too many changes from the last 4 years
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| rabbitjoker |
| quote: | Originally posted by Skipper
you are taxed on capital gains...and taxed hard. |
Capital gains are taxed at 50% of your marginal tax rate I believe.
So if you pay 30% tax on your income, you'd pay 15% tax on your capital gains.
Capital gains are preferred over income due to their lower tax burden.
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But your point is all the same: RSPs grow tax free until you start to withdraw from them - and 99% of the time your tax bracket is lower in retirement - thus not only do you get the initial tax break now - but you also get it later. |
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| Crazy Serb |
| quote: | Originally posted by rabbitjoker
If the expense isn't directly related to the income it brings in - then it is tax fraud.
A person cannot directly draw funds/benifts from their business without paying INCOME TAX on those funds/benifits. You see both the corporation and person must file income tax. Although the business may pay no tax due to being an a profit neutral or loss situation - the individual ALWAYS must pay income taxes.
So your friends who are taking in $4k per month - but only having it appear as if it is $200 (after expenses) ARE committing tax fraud - and I hope they get caught.
Having dinner at Denny's has nothing to do with renting a house. Buying a suit at Brooks Brothers has nothing to do with renting a house, nor does driving a S500. PERSONAL LIVING EXPENSES HAVE NOTHING TO DO WITH RENTING HOUSES (THEIR BUSINESS) - and if they're claming those types of expenses (which they must - it is impossible to live off of $200 / month) then they are commiting tax fraud. |
Again, it's all about how you see those expenses... you obviously cannot write off buying a suit as a business expense (even tho the guy that's doing my taxes is fighting with the tax department over that issue, since he bought a couple of suits just for his business meetings, but for now let's consider the fact that you cannot write that off). They don't end up with $200 income per month, more like a thousand or two, so by the end of the year they don't get taxed on their $20-25,000 income because it's so low.
And just for your information (I guess you never had a pleasure of filling a tax return as a business), here are some of the things you can write off: inventory loss or damage, inventory purchases, labour, subcontracting, temporary help, courier expenses, delivery expenses, credit card interest, educational expenses (related to business), equipment leases, health club fees, membership fees, legal expenses, accounting fees, bookkeeping, life insurance, maintenance contracts, maintenance fees, management fees, meals and entertainment, office equipment repairs, office rent, office repairs, office utilities, office communications, office internet service provider (now if your office is in your home as well, whoo-hoo), postage, communications, cell phone charges, paging service charges, business trips, conventions, meeting expenses, laundry, office supplies, small tools and equipment, advertising.
And then just for your Rental Property expenses you can write off some of these on top of the above ones: mortgage interest, mortgage payments, utilities, property taxes, maintenance and repairs, land transfer taxes... should I go on?
Again, you can call it a fraud, but it's completely legal to write off these expenses and businesses all over the city are doing it while you're paying 50% in taxes, dude. |
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| richard raiban |
| note to self.....invest in rrsp's!!! |
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| Crazy Serb |
| quote: | Originally posted by richard raiban
note to self.....invest in rrsp's!!! |
Bwhahahaa!!! Rich, stick to DJing... :D |
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| tw1tch |
| quote: | Originally posted by rabbitjoker
But your point is all the same: RSPs grow tax free until you start to withdraw from them - and 99% of the time your tax bracket is lower in retirement - thus not only do you get the initial tax break now - but you also get it later. |
If I withdraw a $100,000/year from my RRSP when I retire, it's $100,000 income for that year, taxed no differently then someone EARNING $100,000 today. I fail to see these huge tax benefits. Unless of course the plan is to leave as cheap as possible throughout retirement. |
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| Slag |
| quote: | Originally posted by tw1tch
If I withdraw a $100,000/year from my RRSP when I retire, it's $100,000 income for that year, taxed no differently then someone EARNING $100,000 today. I fail to see these huge tax benefits. Unless of course the plan is to leave as cheap as possible throughout retirement. |
Why would you need to take out 100 grand a year? |
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