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Mortgage Broker News | 03 Jan 2013, 12:00 AM Agree 0
Going forward, it may be hard to ignore the ugly truth staring your BFS clients in the fact: Is it time to declare your full income?
  • Chris Richards - Mortgage Intelligence | 08 Jan 2013, 09:40 AM Agree 0
    “Advise your clients against starting a dividend income program this year,” he says. “It may be a good tax strategy, but not a good mortgage strategy.”

    Did I miss something - why advise **against** dividends?? Whether T5 or T4 income, it all goes to line 150. The important thing is to manage line 150.

    Another important point for BFS is the concept of tax bracket layering. An individual should always declare enough income to use up his/her non refundable tax credits and then the lowest tax bracket level, then the next. Use or loose! Just because your company declares a dividend for personal tax purposes doesn't mean it has to pay it.

    Likewise, RRSPs can be used to reduce tax burden rather than maximizing business expenses. Works especially well if BFS can utilize the First Time Buyer program.

    Finally, knowing how to apply vendor-financing strategies for BFS buyers can often allow them time to get their income in order.
  • John | 12 Jan 2013, 12:43 AM Agree 0
    The true jist of this rule change is to maximize government revenue. They - governments around the world - have long wanted to tap into the 'grey' income of BFS. Supportive of the small business owner since they are the true job creators, governments cannot be seen as taxing small business owners more. This is the back door method to getting more taxes from them - force them to declare more income so they can get something else they want more.

    The biggest concern when dealing with BFS is the impact of delaying their purchase as we all know business cycles can change in a heartbeat. They may be able to qualify today for the mortgage but not next year. A longer term perspective is required when working with BFS clients, and regretfully not everyone in our industry has the patience to wait.
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