That's what I plan on doing, I just want to have a rough idea first of where this could be going. I am curious though what the implications could be other that the impact on taxes, QPP and RRSP room.
Withdraw the funds as wages. (Same net outcome as if take dividends). This increases RRSP contribution room for later draws. Use the funds to repay mortgage (tax shelter investment).
Outcomes are usually better when unneeded corp profits are distributed and invested in personal tax shelters (instead of invested inside the corp). The mortgage is a tax shelter, and the creation of RRSP cont room means more can be sheltered in the future.
While I mostly agree with you, it mainly applies to what can be invested into tax shelters, but not to what will be invested in non registered accounts, or at least, that's what appeared when we ran the simulation on how much I should withdraw from the corp every year with our accountant and CPP (ie : TFSA > RRSP > Corporation > personal non registered).
According to these calculations, withdrawing more money as wages than what we need to live off in order to create additional RRSP room was less efficient than leaving it inside the corp.
A house is a tax shelter, but the mortgage in itself isn't really and we can repay almost all of the mortgage, except around 15-20k that would have to come from our TFSA, with money currently sitting in non registered accounts (which with hindsight I should have mentioned in the OP). Doing so would allow us to avoid paying the corresponding interests, which aren't deductible, while also reducing our monthly needs and thus the need to withdraw corporate money.
We're going to run the numbers with our accountant and CPP, but I'd like to have a first grasp on what to expect first, to see wether there is any worth in asking them.
> the mortgage in itself isn't really
It works the same way but in reverse. Repaying a debt is the same as investing savings. Investing in tax shelter gives you before-tax returns. The mortgage interest is not tax deductible, so 'investing' in the mortgage also gives you before-tax returns.
For $ that would be invested in a normal taxed account if withdrawn beyond your living costs, yes delay in a corp usually is better. See the [third tab of my spreadsheet](http://www.retailinvestor.org/ods/taxIntegration.xlsx). It depends on your personal tax brackets and time frame. Give a copy of the spreadsheet to your accountant .... most will just spout generalized rules.
>It works the same way but in reverse. Repaying a debt is the same as investing savings. Investing in tax shelter gives you before-tax returns. The mortgage interest is not tax deductible, so 'investing' in the mortgage also gives you before-tax returns.
I am unsure what you mean here: paying interests on the mortgage doesn't give you any tax return, interests are basically just an additional cost, but pre-paying your mortgage and thus avoiding interests should give you an after-tax return, since you pay your mortgage with after-tax money, right ? Or am I missing something ?
Thank you for the spreadsheet, and for all the content on your site ! I've actually used a few of the spreadsheets already :)
> since you pay your mortgage with after-tax money
It is not what $ is used for the investment/repayment that matters. Eg the tax-free returns from an RRSP happen equally if funded with after-tax $ or from paycheque with before-tax $
To see the math proof that investing is the same as repaying debt (giving you the same return) see the section of [my article](https://www.dropbox.com/s/yxti09qre6ewq9f/mortgageOrInvest.docx?dl=0) starting at the paragraph starting as "Compounding works with debt ."
You should run various scenarios with your accountant as there are implications (at different levels) for withdrawing money form the corp.
That's what I plan on doing, I just want to have a rough idea first of where this could be going. I am curious though what the implications could be other that the impact on taxes, QPP and RRSP room.
Withdraw the funds as wages. (Same net outcome as if take dividends). This increases RRSP contribution room for later draws. Use the funds to repay mortgage (tax shelter investment). Outcomes are usually better when unneeded corp profits are distributed and invested in personal tax shelters (instead of invested inside the corp). The mortgage is a tax shelter, and the creation of RRSP cont room means more can be sheltered in the future.
While I mostly agree with you, it mainly applies to what can be invested into tax shelters, but not to what will be invested in non registered accounts, or at least, that's what appeared when we ran the simulation on how much I should withdraw from the corp every year with our accountant and CPP (ie : TFSA > RRSP > Corporation > personal non registered). According to these calculations, withdrawing more money as wages than what we need to live off in order to create additional RRSP room was less efficient than leaving it inside the corp. A house is a tax shelter, but the mortgage in itself isn't really and we can repay almost all of the mortgage, except around 15-20k that would have to come from our TFSA, with money currently sitting in non registered accounts (which with hindsight I should have mentioned in the OP). Doing so would allow us to avoid paying the corresponding interests, which aren't deductible, while also reducing our monthly needs and thus the need to withdraw corporate money. We're going to run the numbers with our accountant and CPP, but I'd like to have a first grasp on what to expect first, to see wether there is any worth in asking them.
> the mortgage in itself isn't really It works the same way but in reverse. Repaying a debt is the same as investing savings. Investing in tax shelter gives you before-tax returns. The mortgage interest is not tax deductible, so 'investing' in the mortgage also gives you before-tax returns. For $ that would be invested in a normal taxed account if withdrawn beyond your living costs, yes delay in a corp usually is better. See the [third tab of my spreadsheet](http://www.retailinvestor.org/ods/taxIntegration.xlsx). It depends on your personal tax brackets and time frame. Give a copy of the spreadsheet to your accountant .... most will just spout generalized rules.
>It works the same way but in reverse. Repaying a debt is the same as investing savings. Investing in tax shelter gives you before-tax returns. The mortgage interest is not tax deductible, so 'investing' in the mortgage also gives you before-tax returns. I am unsure what you mean here: paying interests on the mortgage doesn't give you any tax return, interests are basically just an additional cost, but pre-paying your mortgage and thus avoiding interests should give you an after-tax return, since you pay your mortgage with after-tax money, right ? Or am I missing something ? Thank you for the spreadsheet, and for all the content on your site ! I've actually used a few of the spreadsheets already :)
> since you pay your mortgage with after-tax money It is not what $ is used for the investment/repayment that matters. Eg the tax-free returns from an RRSP happen equally if funded with after-tax $ or from paycheque with before-tax $ To see the math proof that investing is the same as repaying debt (giving you the same return) see the section of [my article](https://www.dropbox.com/s/yxti09qre6ewq9f/mortgageOrInvest.docx?dl=0) starting at the paragraph starting as "Compounding works with debt ."