May 182014

I recently read an article written by the affable David Carrigg, a prolific Canadian columnist 🙂 The article is about how a public insurance company (ICBC) made a botch of things and overcharged its customers by $39 million! Furthermore ICBC not only overcharged some of its clients, but it also undercharged other customers to the tune of $71 million total. Many B.C. residents became upset. When a Crown corporation mismanages money tax payers may be on the hook. And governments will often feel the pressure to raise taxes on the public to maintain fiscal order.

During this past year the Feds raised EI premiums. Quebec raised personal income taxes. B.C. increased its health care (MSP) premiums. Manitoba raised its provincial sales tax from 7% to 8%. And many Canadian cities like Toronto, Edmonton, and Vancouver (where I live) have raised local taxes 🙁 According to the Fraser Institute, a public policy think thank, the average family earned $97,254 in 2013 and paid $42,400 in total taxes. In other words, 44% of what the average Canadian family makes is spent on various taxes. 14-05-tax-dollar-goes-Summary

Many people go out of their way to find discounts on stuff they want to buy. They shop wholesale to save on bulk items. They feel disappointed when they miss a sale on their favourite toothpaste. Yet they don’t even think twice about paying the full retail price for their taxes 😐 They can try to outperform the stock markets. They can cut coupons everyday. They can even work extra long hours for overtime pay. But they could probably save more money than all those strategies combined by simply lowering their total tax rate by ten percentage points or so.

This is why I operate my rental farm as a business instead of a personal property, invest inside tax sheltered accounts, and have debts with deductible interest so the more taxes I pay, the more I get back. It’s all for the purpose of saving taxes. Each year I calculate how much tax I pay as a percentage of my total income. I track this ratio and try to reduce it every year 🙂 Like any other personal finance metric, once we start to track something regularly it will start to become something real to us that we can monitor, so that we can then set appropriate goals for it. But if we don’t track it, then we won’t know where to start or how low we should aim for. Last year my total taxes (income tax, sales tax, payroll tax, property tax, etc) represented about 30% of my total income. So I’m fourteen percentage points lower than average, but I think I can do better 😀 Who says doing taxes can’t be fun? 😉

Random Useless Fact: 



Mar 032014

I hope the Canada Revenue Agency doesn’t come after me for writing this post 😛 If too many people read this article then our government will never have a balanced budget lol. Since it’s that time of year again the topic I’d like to discuss today is income tax, and how rich people are able to dramatically reduce their taxable incomes because they understand that tax brackets are a moving target, and we all have the ability to manipulate our income tax rates as we see fit 😎

Let’s look at an example below. The following chart shows the income tax rates for B.C. Canada. There are only 6 cells we need to be aware of for the purpose of this article, which I’ve highlighted in yellow.


Let’s say a hypothetical person named Tyler works full time at a retail bank branch and makes $43K a year there. Tyler also bartends a few nights a week. He has a small rental property, and some dividend paying stocks in a margin account. And finally Tyler has a small pasture of alfalfa in the boonies that he operates as a small business and is generating revenue via renting it to cattle ranchers.

Here’s a summary of all his annual incomes.

  • Bank employment T4: $43K
  • Bartending T4: $10K
  • Rental unit: $12K
  • Dividends T5: $5K
  • Small business income: $10K

Total income = $80K

At first glance it appears Tyler is in the $75,213 to $86,354 income range, which should put him in the 32.50% marginal tax bracket according to the tax chart above. But not so fast. Sometimes we need to take a closer look at a situation before we can make an educated assessment.


The more money we make the higher percentage of our incomes should go to the government right? But if that was true, why do some people who earn six-figures have lower tax rates than most middle class people? The answer is because those particular high-income earners are masters at manipulating their tax brackets! #likeaboss

Tyler believes he can use the same tools as the rich and reduce his taxable income in the eyes of the government. Let’s see how he does this.

Bartending $10K: Tyler contributes $10K to his RRSP to buy new investments. Since contributions are deducted from earned income this action essentially nullifies any income tax he owes from bartending 😉

-Rental unit $12K: Tyler’s insurance, mortgage interest, property taxes, and other expenses for the property work out to $12K a year which he can deduct from his rental income and break even. Who knew rental units that are cash flow negative have positive tax benefits? 😉

-Dividends $5K: Since most of Tyler’s dividend income comes from Eligible Dividends, he can claim the federal dividend tax credit. His final tax payable on his dividend income is only a small amount, which is easily neutralized by Tyler’s investment expense tax credit, since he bought some of his stocks on margin.

-Alfalfa business $10K: Tyler was smart enough to run his alfalfa pasture as a small business because businesses pay expenses first, and then pay taxes on any profit left over. After deducting all his expenses, like home office usage, traveling costs, and even interest charges on a business loan, his company will end the year with only a small profit, which will have an insignificant impact when added to his personal income 😉

So by using some clever financial maneuvers 4 out of his 5 income streams are no longer tax liabilities. Tyler is able to effectively lower his $80K of total income to just $43K of taxable income  which is a huge win because only taxable income is used to calculate how much taxes we actually pay, not gross income.

This effectively drops his marginal rate by TWO entire tax brackets from 32.50% to just 22.70%! #winning

So how much savings does a lower tax bracket translate to? Well by using a tax calculator we discover that at $43K of taxable income, Tyler only pays $6,600 in income tax. Which translates into a ridiculously low AVERAGE income tax rate of just 8.25% on the $80,000 gross he makes. Now compare that to Tyler’s boss, a senior manager who works in the same office as Tyler. He also makes $80,000 a year. But since his only income comes from his salary, his taxable income is the entire $80,000 amount, which means his marginal tax bracket STAYS at 32.50% and he has to pay about $17,700 in income tax before RRSP contributions/deductions. Wowzers 😯 #bigdifference!

Both Tyler and his boss are making the exact same upper-middle class income, yet look at the difference between the the 2 green numbers above 😕

Now that’s some SERIOUS tax savings!

really_surprised_shock lower income tax bracket

Doesn’t seem fair does it 😕 In fact some of you readers may be inclined to accuse Tyler of not paying his fair share of taxes 😡 But unfortunately life isn’t always fair 😐 This is the reality of our tax system. This is how some people can earn over $100K, and still only pay an AVERAGE tax rate of 10% or less.

So we can either adapt to make the tax system work FOR us like Tyler is doing, or we can accept the status quo like Tyler’s boss and complain about how life is unfair, taxes are too high, can’t seem to catch a break, blah blah blah 😛

Two roads diverged in a wood, and I— I took the one less traveled by, And that has made all the difference.” ~Robert Frost

The good news is we can all be like Tyler and take the less traveled path. Every single one of us has the power to choose how much taxes we pay to some extent 😀 The first step is to understand the difference between taxable income and gross income. The next step is to apply that knowledge.

Using tax deferred vehicles, leveraging to buy real estate, owning investments that pay eligible dividends, using effective tax credits, sheltering viable income generating operations in a small business, and diversifying our income streams in general, are all topics I’ve covered on this blog. These are just some of the many ways we can tip the tax scale in our favor (^_-) #SorryCRA

Random Useless Fact:


Be careful with super glue. If you accidentally get some on your hands you can remove it with acetone (fingernail polish remover.)

Feb 172014

Want to make thousands of dollars by making a simple phone call? It’s easy and anyone, even outside of Canada, can do it (^_-) All we have to do is throw our rich, tax-cheating friends under the bus, figuratively speaking of course 😀 Do you know any rich people who have undeclared offshore income? If so, you could rat them out to the Canada Revenue Agency and collect a reward 😉 Here are the basic conditions.

  • There will only be a reward if the tax cheat owes more than $100,000 to the federal government, not including interest or penalties.
  • If the tip pans out the reward will be 5% to 15% of the total cash collected by the CRA, depending on the quality and relevance of the whistleblower’s information.
  • The unpaid taxes must arise from accounts or assets held outside Canada.
  • To ensure no one profits from a crime they committed, people convicted of tax evasion can’t report their own case.

Pretty straight forward eh 🙂 I hear stories about rich people living in multimillion-dollar homes in West Vancouver, but still receive government assistance and tax benefits because they claim to have “low income” even though they’re operating lucrative businesses in other countries, lol. If you know anyone who owes a lot of offshore taxes to the government then feel free to claim your reward 😀 That’s at least $5,000 to $15,000 in your pocket. Who doesn’t like easy money right? 🙂 Tipsters can call the CRA’s new offshore hotline at 613-960-4265 or toll-free at 1-855-345-9042. All calls are confidential.

This helps the CRA collect revenue. The whistleblower makes some easy money.  And the tax cheat can have a clear conscience. Wow, everybody wins! 😀 For years, other countries have rewarded people who snitch on tax cheats. It’s about time Canada put in place a similar program. But to be fair, tax evasion is not a huge issue here to begin with, compared to other countries around the world.

14-02-taxevade, snitch, taxes

Now if only I knew some rich acquaintances, muahaha 😈 Of course most people who are wealthy tend to stay out of the spotlight.

Random Useless Fact: When a pregnant woman suffers organ damage the fetus will send stem cells to repair the damage.

Oct 172013

Jeane Napoles is in her twenties. She is a keen investor in real estate and bought her first condo when she was 21, the same age as when I bought mine. And last year she bought herself a farm in Bayambang. She even has her own blog where she writes about her life experiences. Ms. Napoles appears to be the girl version of me 🙂 I hope we can meet each other some day and have a conversation about our investments and goals 😀


The only difference between us is she’s very open about her personal life on her blog whereas I don’t share as much on mine. Discretion is not her strongest characteristic. She seems to be your average girl who likes to hang out with friends, go clubbing, and enjoys traveling. And like other girls she sometimes has trouble deciding what to wear, especially when she’s going to the Grammy’s. Yes! She’s well connected too. Good for her 😀

Unfortunately the Bureau of Internal Revenue (BIR) which is the IRS or CRA of the Philippines is after her for tax evasion. Uh oh. If it can happen to her, maybe it can happen to me as well (>_<) The BIR commissioner wants to know where Ms. Napoles got the money from to buy her condo. I forgot to mention earlier in this article that the condo she bought is one of the highly coveted residences at the Ritz-Carlton luxury hotel, in Los Angeles, CA, where each unit is worth about $1,300,000 😯

ritz carlton residences discretion

But the story gets worse because her mother, Janet, is allegedly the woman behind a $220 million dollar government scandal. The public funds she was entrusted with was meant for an assistance program that funds public roads, and benefit low income families. But instead all that money that the Filipino citizens worked hard for went into personal bank accounts, real estate, her daughter’s spending sprees, and more. A little discretion could have done her well. But now Janet faces the possibility of going to jail.

Meanwhile the BIR has hit young Jeane with a tax bill of $750,000 inclusive of surcharges and fees for taxable years 2011 and 2012. Great googalee moogalee! 😯 First she finds out her mother might be incarcerated, and now she’s served with this gigantic tax bill. Those greedy government bureaucrats eh 😛 Why can’t they just leave the hardworking citizens alone? What kind of draconian world do we live in when the tax authorities can become suspicious of an unobjectionable girl like Ms. Napoles just because she has a Porsche Cayenne, a Porsche Boxter, fancy jewelry, real estate properties, expensive watches, clothing, and shoes. I mean can’t the poor girl just catch a break 😛

Tip of the day: Use discretion online and in public.

Don’t reveal your financial situation on the internet, especially if you or your family is involved with tax payer’s money. But if you are going to flaunt your lavish lifestyle for other people to see, create an online pseudonym and post anonymously.

Random Useless Fact: How to make your cat look expensive

tumblr_normal_cat_punch_expensive_cat discretion

Aug 152013

Earlier this year in April I started a swing trade which included some Suncor stocks. I mentioned how it was an undervalued company and how the stock will likely make a comeback 🙂 So I bought 100 shares at $28 each. Well I just heard on the news that Warren Buffett also bought some Suncor shares for his holding company Berkshire Hathaway 🙂 Hey, maybe… just MAYBE.. he reads my blog and that’s what gave him the idea to invest in Suncor as well (^_-) Hi Warren 🙂 I’m a big fan!

Buffett had picked up 17,800,000 shares of Suncor 😯 When the oracle of Omaha is confident enough to put over $500 million into a company, you know it’s a good investment 😎 Right now Suncor is the only Canadian holding inside Birkshire. Yay, go oil sands!  Represent Canada! I”m not sure what price Buffett paid for his SU shares, but I managed to get mine around when the stock bottomed, so this could mean I’m a better investor than Warren Buffett 😆 Or I just got lucky I suppose. But now I’m faced with a dilemma. I was planning to sell my swing trade when I made $1,000 from it, which I have now. The stock climbed to $35/share today. But now that the world knows Suncor is in Berkshire Hathaway’s portfolio there may be increased global interest in this company. Selling when Warren Buffett is buying may not be smart 😕13_08_suncorchart

Eventually though I will have to sell and most likely make a nice profit from it. But one drawback of making money through any kind of investing is those darn taxes on dividends, interest, etc (>.<) Here’s a simple tip to save butt-loads on investment taxes. Before you invest, give the money to someone else in a lower tax bracket whom you trust, and invest the money under his or her name instead of yours 😀 Continue reading »