Today, I’m thrilled to dive into a topic that’s near and dear to my heart – the magic of dividends and how dividends affect financing for your ventures. Picture this – you’ve got dividends rolling in from your real estate company or your investments in public securities. But what do they mean for your tax return? Well, here’s the scoop: those dividends aren’t just pocket change; they could be your golden ticket to significant tax credits. But, even more so, I’ve seen firsthand the magic that dividends can unlock when it comes to securing financing. In the video below, I’ll be shedding light on how dividends mean better financing.
Video Transcript: How the magic of dividends affect financing for the better
Let’s talk about the dividend tax credit and the dividend gross ups.
So in preparing your personal tax returns, you may have dividends received from your company or perhaps some public securities for example.
What do those look like on the tax return?
Dividends lead to tax credit
Well, if we have $100,000 of dividends, if we have ineligible dividends, which are typically generated where the profits from your company from a taxable income perspective are less than $500,000 or from rental properties, for example, in the company, we’re going to have a gross up of 15%. So that $100,000 will show up as $115,000 and that’s what we’re taxed on.
And at first that seems why would I ever want that? Well, we want that because of the dividend tax credit, which is going to significantly reduce our taxes.
Dividends affect financing
There’s another key benefit if you’re looking for financing. And not necessarily just now, but over the next two or three years, often financial institutions will look at your line 150 income or what used to be called line 150. Now 15,000. But they’re going to look at a two or three-year time period and if we’re paying ourselves in dividends, we’re going to have the grossed up amount, the inflated number to qualify for financing.
So, all things being equal, we’re going to look better to the financial institution. If we have eligible dividends, it’s grossed up to 38%, so now we’re showing $138,000. Again, a big boost.
There are consequences. There’s pros and cons, but one more reason to talk to your advisor over the summer and the fall to see what next year’s tax returns are going to look like and ensure this year we’ve claimed the right amounts.
I’m George Dube, saving the world from tax one bow tie at a time®.
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Resources
For additional resources related to the tax savings, see:
- Real estate investors: Tax planning, wealth building
- Medical professionals: Tax and wealth solutions
More questions?
Still have questions? I want to help you Do wonderful things®, so please contact me today.
Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.
