Keep more of your hard-earned dollars in your pocket

The Canadian tax system is based on a graduated tax brackets. Taxpayers pay at different tax rates depending on their own annual income. More income for an individual means they pay at higher marginal tax rates, and vice versa.

This opens a window of opportunity to save taxes by shifting investible capital from a higher earning family member to a lower earning family member. A family with two minor kids can take advantage of this strategy by providing a prescribed rate loan to a family trust @ 1% interest rate*.

As an example, a loan of $500,000, earning 7% interest before tax, given to a family trust with two minor beneficiaries can save as much as $10,000 in taxes annually.

* 1% interest rate was changed to 4% in the first quarter of 2023.