Are you a property flipper in Canada? If so, incorporating, may be the answer to flipping properties & saving taxes at the same time. Watch the video below, or read the transcript for a two minute overview of this topic.
Video Transcript
How does incorporating help someone that is flipping properties?
I’m George Dube, saving the world from tax, one bow tie at a time.
So that property flipping process, from a tax perspective, is going to be considered active business income in the vast majority of cases. Active income is taxed differently than inactive or passive income from a tax perspective.
So, on the active side, depending on the particular province or territory we’re talking about, that first, roughly speaking, half million dollars of profits per year might be, there’s if, ands, or buts here, but it might be taxed at, roughly speaking, 10% or a little bit above.
Contrasting that with what I would otherwise pay on the personal side, again, depending on the province or territory, of 50-ish% and in many provinces or territories, a little bit above.
Worst case is I’m above that half-million-dollar threshold, and now that active rate climbs, again, roughly speaking, to 26 1/2%. Again, roughly, that’s about half of the tax I might otherwise pay.
From any provinces and territories, there’s kind of a third in-between bracket based on how much investment passive income that has earned. But even with that, it was clearly in between my two thresholds, there are tax savings available.
Thanks for watching, and again, it’s summary in nature. There’s a lot more to it that will also be dependent on your particular situation.
Have more questions? Please subscribe, follow, and even share. I want all of us to have the tax information we need to do wonderful things.
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Resources
For additional resources related to flipping properties & saving taxes, see:
- Should I incorporate my real estate business? 5 factors
- When and how should you incorporate a real estate business
Back to: Buying real estate in a corporation: Ultimate guide for Canadian real estate investors
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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.
