How to not pay property tax in canada
5 Ways to Pay NO Taxes with Real Estate Investing in Canada. Save Millions Legally $$$
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the fact that you found this video can
make you millions in real estate as it's
not what you make it's what you get to
keep this is why it's so important to
understand the various tax strategies
that are available to us as canadians
because if we're paying less tax or in
some cases no tax on the money that we
earn we can achieve our financial goals
just that much faster stick around to
the end of this video where i'll share
my favorite hack for paying as little
tax as possible hey what's up it's daryn
voros here my mission is to help a
thousand people create over a million
dollars in net worth with real estate
investing subscribe not to miss what's
coming benjamin franklin said in this
world nothing is certain except death
and taxes but strategic tax planning is
what differentiates a successful real
estate investor from you know
the not so successful ones so now i want
to make you money with five ways to pay
no taxes number five the principal
residence exemption simply stated the
tax law in canada says that if you
inhabit a property as your primary
residence if and when you sell that
property you are exempt from paying tax
on any increase in value this can be
very valuable in conjunction with
strategies like house hacking or even
buying and selling properties to save
significant amounts of tax having said
that if you're using a strategy like
house hacking where you are converting
one of the units to a basement suite and
potentially renting that out to someone
else you will be required to pay capital
gains on the portion of the property
that is being used as a rental similarly
when flipping properties if the
government sees a repeated pattern that
you're moving into a property improving
it selling it and claiming as your
principal residence they may clamp down
on this and rule that you are in fact
running a flipping business and not
utilizing this tax savings as it was
meant to be utilized so be aware of
these two items and as always when it
comes to tax matters make sure you
consult a qualified professional to give
you tax advice and don't simply rely on
a video you watched on youtube number
four setting up a corporation to hold
your real estate if you're not familiar
with how taxes work individuals are
taxed different than corporations apple
avoided 40 billion dollars in taxes
how's that for a headline it triggers
the public and makes you wonder how can
a company valued at 2.2 trillion dollars
pay very little tax it's not because
they're doing things illegally in most
cases it's just that there are many more
options to utilize within a corporation
versus your personal name with personal
taxes you get your deductions taken off
before you take home your money with
corporations you get to take home your
money first and pay tax on what's left
over after applying all of your expenses
against that income for instance if you
were to earn thirty thousand dollars in
additional income on a rental property
and you hold that property in your
personal name you would be required to
add the thirty thousand dollars to your
income and pay tax on that money you can
have write-offs against that thirty
thousand dollars of additional income
but you'll have to prove those
write-offs are related to that property
in a corporate setting let's say you
earned that same 30 000 in revenue the
way that corporate taxes work you write
off all of your expenses against the
income first and then whatever is left
over at the end you pay tax on this
sounds like it's the same as earning
money in your personal name but there
are many more ways to write off income
in a corporate setting for instance you
could have an employee in your
corporation that employee could be you
you can also take a dividend payment
which has other tax benefits as well in
most cases corporations pay little to no
tax because of the flexibility of
options available that are not usable on
the personal side the downside to
corporations is that they cost money to
set up and you will have to file a
corporate tax return each year which
costs more than a personal tax return
but in most cases the benefits still
outweigh the drawbacks number three
using a bear trust a bearer trust
agreement simply states that the
property or the income you're receiving
is being held for someone else or
something else like a corporation let me
give you an example of how this can work
i can hold a property in my personal
name with a bear trust agreement in
place that my lawyer draws up the bear
trust states to the tax man or woman
that the property is being held in trust
by me but is actually owned by my
corporation an even better example of
this is a strategy i've used in the past
called flip to jv this strategy allows
you to make quick cash through the
benefits of flipping but when you sell
your portion to your partner you drop a
bear trust agreement that states that
even though you no longer are on the
title or hold the mortgage you still own
a portion of the property and you
haven't liquidated your interest
therefore you are not required to pay
tax on the increase in value yet for a
full explanation of this strategy check
out this video where i explain the
step-by-step process of the flip to jv
strategy right after this video number
two the tax-free savings account the
government of canada didn't do us any
favors when they created this product
and called it a tax-free savings account
this should have been called a tax-free
investment account because that's
exactly what it is you can use this
account to invest in real estate through
private mortgage lending or reits which
are real estate investment trusts or you
can even invest in the stock market in
companies that are heavily focused on
real estate the problem is most
investors are not even aware of the
ability to use their tax-free savings
account sorry investment account within
real estate because most of the major
financial institutions in canada don't
offer what's called a self-directed tfsa
account so you'll need to search out and
find a financial institution that allows
you to use your tfsa in a self-directed
manner within real estate there are
three that i know of olympia trust
canadian western trust and computer
share the long and short of it though is
that if you earn money inside of your
tfsa you do not pay tax on that money
which is why it's called a tax free
savings account i love providing free
value but there's so much more to learn
that i can't fit into these videos so if
you're looking to up your real estate
knowledge i'm running a series of
trainings starting in september of 2021
for more information on the various
offerings and pricing check out my
website at darrenvaros.com now my number
one my favorite way to avoid paying tax
on real estate income is what's called a
cash out refinance if you have a
mortgage on a property as you make
mortgage payments the principal amount
on the mortgage goes down over time in
theory the property value generally
increases over time through market
appreciation or simply through inflation
as a property value grows and your
mortgage shrinks you create equity in
your property you can access that equity
through a cash out refinance this is a
new mortgage put on the property for a
higher amount than your initial mortgage
so if you can qualify the bank will give
you a new higher mortgage and you pay
out your lower mortgage and if there's
money left over you get to keep that now
i know what you're thinking i'm making
money so i should have to pay tax on
that money well that's not the case the
reason why you don't have to pay tax on
that money is because it's considered
debt and not income because you're
increasing your mortgage amount you're
increasing your debt and even though you
are walking away with cash in your
pocket there's no tax to be paid on that
money that is considered to be
associated with debt cue the happy dance
now my favorite hack when it comes to
tax strategies is to combine as many of
these strategies in a single transaction
as possible you could use house hacking
to acquire the property as your
principal residence have a bear trust
agreement to your corporation and also
use a cash out refinance strategy to
pull equity whenever it's available
again check with your tax professionals
to make sure that everything you do is
legal and above board with the canada
revenue agency if you have questions
about tax strategies or any other real
estate related questions feel free to
drop them in the comments section below
and i'll do my best to answer them even
though i am not a licensed accountant to
continue your education check back here
every tuesday when i release a new video
for additional tips and tricks in
relation to real estate investing you
can also follow me on facebook and
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for watching and i'll see you soon
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