This is good information, I incorporated earlier this year and pay myself dividends. I'll only draw about $35-40K in dividends per year, the rest will stay in the corp as a form of retirement plan. You should have mentioned that you can make a spouse a shareholder and also pay them dividends, which is another potential tax saving strategy depending on their income situation.
@samira2324 Yes, you can pay yourself dividends and salary. Note that the first $40,000 of dividends are tax-free if you have no other source of income. There are benefits to receiving a small salary and the remainder in dividends. For example, salary increases your RRSP room, increases your pensionable earnings, and allows for deductions such as child care expenses and automobile costs, which dividends do not. Allan
This is glorious, I have been researching "passive business opportunities" for a while now, and I think this has helped. Ever heard of - Qonmily Passive Formality - (search on google ) ? Ive heard some amazing things about it and my neighbour got amazing results with it.
Approximately 20% to 29% based on a salary range of $75K to $150K. You should choose either dividends OR salary, not both - unless you have a special circumstance.
The dividend amount paid to myself is AFTER tax profit in corporation, roughly 15% in 2021, correct? So that means afterall, its tax 15% already. If looking at the whole picture, if your personal tax rate is lower than 15%, it is better to pay salary, assuming no other fee or hassle for payrol.
I am wondering about the dividend being tax free with NO other income. What if you pay yourself a salary with a bonus at years end, should I take the bonus in dividend instead? What is the taxation rate for dividends if you have a income in the 75 to 150 range?
If you receive the first $40k of dividends tax free as an employee of your corporation you are essential savings the 15% at the personal level on that amount. However since that 40k came off of the after-tax profits of the corporation you are still paying 15% on it at the corporate level. Where are the savings?
I have a friend who told me that I can pay myself as a subcontractor,; paying myself as much as iIwant and that iIcan do the taxes separately my income. I am gonna start slowly for my business and paying myself salary doesn't fit me because of cpp. But then paying myself dividends. I would have to wait until the end of the year to pay myself. What can I do in this situation? Thanks for the video you provided!
This is great - does the same still hold true... This is what we were told years ago, just want to check if it is still true?? Been doing this for years and no one has ever explained it so well... Thank you!!
Hi Allan, does the 40k tax free dividend paid to yourself still apply in 2020? Also nowadays, the bank will ask for 2 year financial statement to approve you for a loan. That wasnt the case back in 2010?
It's interesting that in Canada you seem to have a choice between the two options. In the U.S., corporations are expected to pay salaries. The view is that no one will work for free and they should be paid a wage.
Hi Mr. Allan I am wondering if you can help me out to calculate GST/QST in Quick method for province of Quebec. I live in Montreal. I will highly appreciate if you please demonstrate those calculation for a small company GST/QST. I watched your other video which was amazing. Thanks
Hello, Do banks accept dividends as proof of income? Also what is the tax free dividend amount for 2016? Thank you for your time, your videos are a great resource!
The tax free dividend amount in the province of Ontario is approximately $35,000, in respect of ineligible dividends paid by a CCPC to an individual shareholder resident in Ontario.
Hi Allan. Thank you for the informative videos. I am starting a restaurant in Calgary. Do you know any accountants out here that you would recommend? Or any advice for me in finding a reliable one? Thanks!
ok one last question. my old man owns a construction corp and i talked to his account about dividends and she said its not worth it for him to pay himself in dividends, why would she say something like that? she also said its for corps wtih higher incomes and the dividend pay out would have to be one lump sum.
Very informative video. I have registered my corporation federally in Canada. I was wondering if you can provide information about the next steps after registering a federal corporation in Canada. How to get a CRA number for HST? How to add Trade names/Operating naames/s (Doing Business As -DBAs) to the newly created corporation? Is there Tradename protection?. Do I need to do a NUANS search before selecting a Trade name in Ontario? Should the Tradenames be registered with a separate Business Number? and how can I pay myself in my newly created corporation? Thank you.
I am the 100% shareholder of a CCPC in Ontario. In 2021, I withdrew money from the CCPC several times to meet my expenses (total $60000/-). Can I declare this $60000/- as dividend? If so, what are the procedures? If not, how to treat this im my Personal Tax Return in 2022?
your video for salary VS dividend is just great and I am wondering if you do have a video for subcontractors VS employees as a tax implications for both. thanks
Hi Allan, First of all, thank you for your posts and videos. I love the content. You make it easy for beginners to understand the concepts. I have a question about EI premiums - If I incorporate and pay myself a salary (I am the only employee), am I exempt from EI premiums as employee and employer both? TIA!
Hello Allan, I am one of the director of corporation. Our company is a plant nursery growing ornamental shrubs. I am dealing with the sale part and working on the basis of 20% commission. Can I start my another sole proprietor company because I am also working as trader for selling other people plants on the basis of commission . Another question can I write chequer for myself for the commission earning from sale of ornamental shrubs from incorporated company.
Hi Harpreet, it sounds like you have two sources of income (a) Income from commissions from sales you make on behalf of a corporation for which you are a company director and (b) Income from commissions from sales you make independently by selling other people's plants. The income that you make from (a) should be treated as employment income, which is subject to payroll taxes and is reported on a T4 slip. The income that you make from (b) is income from self employment and should be reported on form T2125. Form T2125 should be attached to your Canadian personal tax return when you file it.
Hi Allan, thanks for this insightful video. One question though, if you just started your corp and want to pay your living expenses or dividends. Can your do a transfer from business account to personal?
Oh! I have the perfect question! What if you own a corporation and you received $250,000 in dividends But You also own "another" small sole proprietary business doing something else... like a work from home job... You tecnically could reduce the amount of taxes you owe as the individual by claiming "deductions". Correct? :)
Hi Natalia Restrepo, Please check the articles of incorporation to make sure that there are no restrictions with respect to dividend payments on the issued and outstanding shares.
Great video. Highly informative. Made me decide on dividends because I only need $30,000 to live leaving all that juicy profit safe at a corporate tax rate
Very good, clear video. Unfortunately not what I was looking for. I received for the first time T50008 slip and I do not know how to read it. I am using Turbo Tax, but find it difficult to figure out how to fill the form, in particular, if there is no number on the Turbo's Tax form. Can anybody help to find the explanation to this form and what is what.
Hi Svetlana, Report the gross proceeds from the sale as per form T5008 on Schedule 3 of your tax return. You also need to report the cost amount of the shares sold on Schedule 3 to calculate the capital gain or loss.
Hi Allan, as an owner-manager the 40k in dividends aren't exactly tax free if I look at my corporation and myself as one unit for tax purposes. Paying myself a 40k dividend means I've already been taxed roughly 15% on the pre-tax amount of the dividend (assuming im a CCPC using the SBD). The tax man still gets his share of the pie. Paying myself a 40K salary means i get to expense it, but would have to pay 9.9% in CPP, roughly 3% EI, but only taxed 15% of 30k (due to basic credit). Am i right?
Allan, do you have an updated video with respect to new corporate tax (2018) rules for small business? Last year I split my income via dividends with my wife. Can't do it this year. Big tax grab. Help. Any tax planning suggestions?
I will be conducting a webinar in February about the new 2019 corporate tax rules. Please reach out to my colleague Tyrell for details about the webinar: tyrell@madanca.com
Hi Allan, I think whether you take dividends or salary, taxes to be paid remains almost the same. Isn't it? Because you will pay corp on higher amount when taking dividend. Can you pls clarify the first $35,000 no tax with dividends?
Hi Manish, because of the personal tax credit and dividend tax credit, the first $35,000 of dividends are tax-free, providing that you have no other source of personal income. Also, CPP premiums are not payable when a dividend is paid, whereas CPP premiums are payable when a salary is paid.
I have an personal account with PC Financial and I've opened up an RRSP account with them. If I were to pay myself dividends, I can simply make contributions towards my RRSP account. Is there an issue with this? Also, I can see how borrowing might become a bit more cumbersome without a salary, but can't I use my tax files as proof of earnings?
Dividends should be paid to your personal account. You can then transfer them to a RRSP account if you wish to do so. Yes, you can use your Notice of Assessment to prove your income.
Wow, I wish we would have found you several years ago, we are being totally ruined by CRA & unjustly so & can't seem to find help, we fear we may loose everything
Your youtube shows are great ! & I'm sure help out thousands of people, it is very kind/giving of you to do so, I actually couldn't believe what I was hearing, how often does someone offer free financial advice.
I have to say reading through your responses, you seem to be a very caring accountant with the best interests of your viewers at heart, way to go! Your videos are very informative, with clear language!
HI Allan I wasn't aware about the possibility of paying myself dividends but I withdraw money from my corporation by paying directly to my private credit card. I didn't issue a cheque to myself. Can I still treat my withdrawals as dividends? I could pay myself a cash dividends and instead of withdrawing and then paying for my credit card, I just did it right away. Please advise. Thanks in advance!
Hi There... I have a small Inc. in Ontario, I am the 100% Owner. I am finishing the T2 return, I have some questions about the Dividends. I have paid myself dividends & file the T5, boxes fulfilled 10, 11 and 12 respectively. If I own the 100%, then the part 4 of T2SCH3 does not apply on the payment of the dividends to me. correct? Which Part of the T2SCH3 should I complete or fill? from T5, which values should I use to fill T2SCH3? In T2 Return, Which part and which boxes Should I complete? Thanks in Advance for your Help
Hi Allan, you mentioned that the first 40K of dividends is tax free. If your dividend payout is i.e. 75K, how does the 40K tax free play into this? Do you pay tax on the entire 75K or less 40K?
Hi D Grech, The way the $40,000 tax free dividend works is as follows: The income is taxed at 22% bracket The recipient is at least eligible for the $11038 basic personal tax credit. In addition the dividend recipient gets the 13.5% credit which totally eliminates that taxes. When $75,000 is paid in dividends the working remains the same. The only difference is that the income is taxed at the 26% bracket which outruns the tax credits. The total estimated taxes that will be payable at $75000 dividend will be $8465. Allan Madan Team
Allan Madan What about the corporation itself, which has to pay a 1/3 tax on its dividend payouts? Effectively, this causes the tax rate to increase dramatically.
Hi R.C.Welding Inc, please check your company's articles of incorporation to see if there are any clauses that restrict dividend payments in respect of authorized share classes.
+antonin654 Dividends paid are a distribution of the corporation's profit to its shareholders, and are not an expense. The corporation pays corporate taxes on its profits, not on dividends paid.
Thanks Allan, That means just part 3 of the sch3 ? part 4 do I have to fill it? what about line 460?.. but if you can guide me on howe to fullfill schedule for dividends paid to a shareholder. i will appreciate your help.
Unfortunately, our website was down for the day. We apologize for any inconvenience. The website is up and running, so you should be able to access it. If you have any questions, please do not hesitate to ask. (madanca.com/)
Thank you for your feedback. You can certainly meet with me in my office at 145 Traders Blvd, Unit 20 in Mississauga. Occasionally, I host online webinars about various tax topics.
Great video as always. Just a couple questions below: 1. Do you mean that every shareholder can take 35K in dividend tax free or just one shareholder? What if there are for e.g., 10 shareholders, can they each take 35K tax free? 2. You mentioned in a more recent video that there are changes to the tax law for Dividends in 2018 in that a passive shareholder will be taxed at the highest (income tax rate) correct? What if family members (are shareholders) and are actually working in the corporation and receiving a dividend, aren't they considered active and not passive and therefore taxed at the lower dividend tax rate? thanks
Hi Mithu, each shareholder can take $35,000 of dividends tax free from a Canadian controlled private corporation, so long as they do not have any other source of personal income. For 10 shareholders, $350,000 of dividends can be received tax free. The Liberal Government introduced new rules that prevent income splitting with family members through dividends from a Canadian corporation. Generally speaking, each family member receiving dividends must be working in the business and the dividends received have to be reasonable based on the work they performed.
Taxes are not allocated to pay infrastructure, taxes are interest charges paid to criminal bankers for not lending any amount, The Bank of Canada has the right and obligation to finance all level of government expenses interest- free and taxes would be a fraction of existing rates. In fact, because the so-called government has unconstitutionally borrowed from private banks at interest paying income taxes is actually harmful to the economy. beat them at their own game look up taxusave Taxes would be a lawful condition that all level of government borrow from the Bank of Canada interest tree and the taxes are allocated to reduce the debt. and no taxation for wars of aggression and no interest charges on all private and business loans. Banks have never been in the lending business.
So, with bitcoin hitting the $56,000 mark, the question on everyone’s mind is: What’s next? What does the future hold in terms of price, regulation and adoption of this “digital gold?” I actually wasn’t left out I started investing with Luís when it was $30,000 and today I I’m benefiting from it. Sir luiz platform actually make you earn 10x the amount you invest in crypto..
Allen could you update this video for 2020??🙏
This is good information, I incorporated earlier this year and pay myself dividends. I'll only draw about $35-40K in dividends per year, the rest will stay in the corp as a form of retirement plan.
You should have mentioned that you can make a spouse a shareholder and also pay them dividends, which is another potential tax saving strategy depending on their income situation.
@samira2324 Yes, you can pay yourself dividends and salary. Note that the first $40,000 of dividends are tax-free if you have no other source of income. There are benefits to receiving a small salary and the remainder in dividends. For example, salary increases your RRSP room, increases your pensionable earnings, and allows for deductions such as child care expenses and automobile costs, which dividends do not.
Allan
Hi 40k is tax fee with no other income u say.
If I pay myself 40k as salary from my contract pay will I still use dividends as tax free upto 40k
Thanks for posting these out Allan. Very Valuable education to all that's saving and growing their finances.
This is glorious, I have been researching "passive business opportunities" for a while now, and I think this has helped. Ever heard of - Qonmily Passive Formality - (search on google ) ? Ive heard some amazing things about it and my neighbour got amazing results with it.
Approximately 20% to 29% based on a salary range of $75K to $150K. You should choose either dividends OR salary, not both - unless you have a special circumstance.
Thank you, Allan, for your videos. Love them all.
+Dana Cris I'm glad you find them helpful!
@Neri Matrixx Yes, they can, so long as the company has sufficient retained earnings.
The dividend amount paid to myself is AFTER tax profit in corporation, roughly 15% in 2021, correct? So that means afterall, its tax 15% already.
If looking at the whole picture, if your personal tax rate is lower than 15%, it is better to pay salary, assuming no other fee or hassle for payrol.
I was pleased to find a book for Canadians at your link. Thanks a lot!
Hi darkflamestudios,
Glad you like our eBook! There are many more to come.
I am wondering about the dividend being tax free with NO other income. What if you pay yourself a salary with a bonus at years end, should I take the bonus in dividend instead? What is the taxation rate for dividends if you have a income in the 75 to 150 range?
Hi
Thanks for this video,
Can I pay Myself Salary and have my share of dividends as well?
If you receive the first $40k of dividends tax free as an employee of your corporation you are essential savings the 15% at the personal level on that amount. However since that 40k came off of the after-tax profits of the corporation you are still paying 15% on it at the corporate level. Where are the savings?
I have a friend who told me that I can pay myself as a subcontractor,; paying myself as much as iIwant and that iIcan do the taxes separately my income. I am gonna start slowly for my business and paying myself salary doesn't fit me because of cpp. But then paying myself dividends. I would have to wait until the end of the year to pay myself. What can I do in this situation?
Thanks for the video you provided!
This is great - does the same still hold true... This is what we were told years ago, just want to check if it is still true?? Been doing this for years and no one has ever explained it so well... Thank you!!
Hi Allan, does the 40k tax free dividend paid to yourself still apply in 2020? Also nowadays, the bank will ask for 2 year financial statement to approve you for a loan. That wasnt the case back in 2010?
It's interesting that in Canada you seem to have a choice between the two options. In the U.S., corporations are expected to pay salaries. The view is that no one will work for free and they should be paid a wage.
Hi Mr. Allan I am wondering if you can help me out to calculate GST/QST in Quick method for province of Quebec. I live in Montreal. I will highly appreciate if you please demonstrate those calculation for a small company GST/QST. I watched your other video which was amazing. Thanks
I mean corp tax on higher amt when taking divi
Can I apply for "Canada Emergency Business Account -loan $40 000" if I have T5? (I have corporate business)
what about doing both -- a dividend up to $40K and the balance in salary with CPP deductions?
I really love to watch your videos. These are very useful, simple and easy to understand. Thank you for sharing great knowledge
Hi Ghulam, thank you for your feedback. I appreciate it.
I would like to know how I get paid to cover my living expenses while I start and grow a corporation to profitability
+ottawadigs Consider taking a small salary from your corporation to cover your living expenses.
Hi Allan, how do you prepare T4 when client decided to treat all personal withdrawing as management bonus?
Hello,
Do banks accept dividends as proof of income?
Also what is the tax free dividend amount for 2016?
Thank you for your time, your videos are a great resource!
The tax free dividend amount in the province of Ontario is approximately $35,000, in respect of ineligible dividends paid by a CCPC to an individual shareholder resident in Ontario.
@@AllanMadanCA Does this mean that if I pay myself a dividend of 35,000 for the year and no salary, I am paying 0$ in tax?
@@Daarrenn Yes, that is correct.
@@AllanMadanCA does the $35K tax free dividend draw still apply if you have another source of income (day job),
been looking for this for days
Hi Allan. Thank you for the informative videos. I am starting a restaurant in Calgary. Do you know any accountants out here that you would recommend? Or any advice for me in finding a reliable one? Thanks!
ok one last question. my old man owns a construction corp and i talked to his account about dividends and she said its not worth it for him to pay himself in dividends, why would she say something like that? she also said its for corps wtih higher incomes and the dividend pay out would have to be one lump sum.
Very informative video. I have registered my corporation federally in Canada. I was wondering if you can provide information about the next steps after registering a federal corporation in Canada. How to get a CRA number for HST? How to add Trade names/Operating naames/s (Doing Business As -DBAs) to the newly created corporation? Is there Tradename protection?. Do I need to do a NUANS search before selecting a Trade name in Ontario? Should the Tradenames be registered with a separate Business Number? and how can I pay myself in my newly created corporation? Thank you.
I am the 100% shareholder of a CCPC in Ontario. In 2021, I withdrew money from the CCPC several times to meet my expenses (total $60000/-). Can I declare this $60000/- as dividend? If so, what are the procedures? If not, how to treat this im my Personal Tax Return in 2022?
I believe a corporation can do both salary and dividends. Is a there a percentage to it. Also what could be the benefits.
Thank you so much , very well explained. Subscribed
Thank you for this video! Exactly the questions I needed answered!
your video for salary VS dividend is just great and I am wondering if you do have a video for subcontractors VS employees as a tax implications for both. thanks
+Gehan Khella This video should help. madanca.com/blog/how-to-become-an-independent-contractor-and-not-an-employee/
Hi Allan,
First of all, thank you for your posts and videos. I love the content. You make it easy for beginners to understand the concepts.
I have a question about EI premiums -
If I incorporate and pay myself a salary (I am the only employee), am I exempt from EI premiums as employee and employer both?
TIA!
yes, you have no EI premiums
Question: can a Canadian Corporation pay its owner less than the minimum wage ? is there a minimum amount when running the payroll ?
Hello Allan, I am one of the director of corporation. Our company is a plant nursery growing ornamental shrubs. I am dealing with the sale part and working on the basis of 20% commission. Can I start my another sole proprietor company because I am also working as trader for selling other people plants on the basis of commission . Another question can I write chequer for myself for the commission earning from sale of ornamental shrubs from incorporated company.
Hi Harpreet, it sounds like you have two sources of income (a) Income from commissions from sales you make on behalf of a corporation for which you are a company director and (b) Income from commissions from sales you make independently by selling other people's plants.
The income that you make from (a) should be treated as employment income, which is subject to payroll taxes and is reported on a T4 slip. The income that you make from (b) is income from self employment and should be reported on form T2125. Form T2125 should be attached to your Canadian personal tax return when you file it.
Hi Allan, thanks for this insightful video. One question though, if you just started your corp and want to pay your living expenses or dividends. Can your do a transfer from business account to personal?
Thank you so much for your videos ! We love you !
Oh! I have the perfect question! What if you own a corporation and you received $250,000 in dividends But You also own "another" small sole proprietary business doing something else... like a work from home job... You tecnically could reduce the amount of taxes you owe as the individual by claiming "deductions". Correct? :)
one more question. im thinking of going for an associate degree in accounting so with that would i be able to get a position in an accounting firm?
Are Dividends an expense to Incorporation ? If not is there any special tax rate ?
Thank you, Allan. Appreciate your reply!
You're welcome
Is it necessary to have a licensed CPA for a corporation year end etc or can a qualified accountant do it?
if you own a corp and pay yourself with dividends, do you get one lump sum a year or can you pay yourself on a monthly or bi-monthly bases?
Think he said whenever you cut yourself a check and if you're eligible.
How do you know if your corporation is eligible to pay dividends?
Hi Natalia Restrepo,
Please check the articles of incorporation to make sure that there are no restrictions with respect to dividend payments on the issued and outstanding shares.
Hi is there a max CPP at 60, 65 or 70 or is it based on contributions?
How need to report paid dividends ? T5 is it correct?
Great video. Highly informative. Made me decide on dividends because I only need $30,000 to live leaving all that juicy profit safe at a corporate tax rate
Great, thank you!
Allan Madan ha! shoutout from the channel owner. Never had that before!
well explained, thank you very much Allan!
Very good, clear video. Unfortunately not what I was looking for. I received for the first time T50008 slip and I do not know how to read it. I am using Turbo Tax, but find it difficult to figure out how to fill the form, in particular, if there is no number on the Turbo's Tax form. Can anybody help to find the explanation to this form and what is what.
Hi Svetlana,
Report the gross proceeds from the sale as per form T5008 on Schedule 3 of your tax return. You also need to report the cost amount of the shares sold on Schedule 3 to calculate the capital gain or loss.
Thanks, did somehow :) Hope, it was right!
small business corporations under $500k / yr cant pay out eligible dividends so they are in fact taxed
Hi Allan, as an owner-manager the 40k in dividends aren't exactly tax free if I look at my corporation and myself as one unit for tax purposes. Paying myself a 40k dividend means I've already been taxed roughly 15% on the pre-tax amount of the dividend (assuming im a CCPC using the SBD). The tax man still gets his share of the pie. Paying myself a 40K salary means i get to expense it, but would have to pay 9.9% in CPP, roughly 3% EI, but only taxed 15% of 30k (due to basic credit). Am i right?
Hi, If I took out dividend from my Company will that reduce the amount of tax that I have to pay since my Company is profitable. Thks
Is it true you need multiple full time employees to pay yourself a salary? What if I am the only shareholder for my corp?
Hello, I am just wondering if you would happen to know what class a skid steer would be under?
CCA Class 8
Allan, do you have an updated video with respect to new corporate tax (2018) rules for small business? Last year I split my income via dividends with my wife. Can't do it this year. Big tax grab. Help. Any tax planning suggestions?
I will be conducting a webinar in February about the new 2019 corporate tax rules. Please reach out to my colleague Tyrell for details about the webinar: tyrell@madanca.com
Great video. So the first $40,000 in dividends aren't subject to income tax? Is this still turn in 2019? I'm thinking from Incorporating in 2020.
Make sure your eligible to take them first.
Hi!
The amount has been reduced to $35,000 of tax-free dividends for Ontario residents owning a Canadian controlled private corporation.
Allan Madan any idea what would be the threshold for BC? Thanks
Great information Allan. Thank you.
how do you avoid tax on $40K of dividents?
Thank you Madan
i have own company, i am getting T4A, What is the disadvantage for this?
So if a person relys on pension plan only (900 / month) at best, u will basicly be homeless and starving at 65 yrs old
Hi Allan,
I think whether you take dividends or salary, taxes to be paid remains almost the same. Isn't it? Because you will pay corp on higher amount when taking dividend. Can you pls clarify the first $35,000 no tax with dividends?
Hi Manish, because of the personal tax credit and dividend tax credit, the first $35,000 of dividends are tax-free, providing that you have no other source of personal income. Also, CPP premiums are not payable when a dividend is paid, whereas CPP premiums are payable when a salary is paid.
I have an personal account with PC Financial and I've opened up an RRSP account with them. If I were to pay myself dividends, I can simply make contributions towards my RRSP account. Is there an issue with this? Also, I can see how borrowing might become a bit more cumbersome without a salary, but can't I use my tax files as proof of earnings?
Dividends should be paid to your personal account. You can then transfer them to a RRSP account if you wish to do so. Yes, you can use your Notice of Assessment to prove your income.
Wow, I wish we would have found you several years ago, we are being totally ruined by CRA & unjustly so & can't seem to find help, we fear we may loose everything
I hope that you don't lose everything. Please email details of your situation to me amadan@madanca.com
Your youtube shows are great ! & I'm sure help out thousands of people, it is very kind/giving of you to do so, I actually couldn't believe what I was hearing, how often does someone offer free financial advice.
I sent you an email with some details, its from pfortunateson@jcis.ca
I received your email, thank you. I have responded to your question.
I have to say reading through your responses, you seem to be a very caring accountant with the best interests of your viewers at heart, way to go! Your videos are very informative, with clear language!
What happens after $40,000 ?
Very insightful! Thanks Alan!
Thank you, Sid!
Awesome stuff! I am going to go check out your website. Do you do remote work ? or work in BC ?
Thank you very much for this reply
HI Allan
I wasn't aware about the possibility of paying myself dividends but I withdraw money from my corporation by paying directly to my private credit card. I didn't issue a cheque to myself. Can I still treat my withdrawals as dividends?
I could pay myself a cash dividends and instead of withdrawing and then paying for my credit card, I just did it right away.
Please advise.
Thanks in advance!
Hi There...
I have a small Inc. in Ontario, I am the 100% Owner. I am finishing the T2 return, I have some questions about the Dividends. I have paid myself dividends & file the T5, boxes fulfilled 10, 11 and 12 respectively.
If I own the 100%, then the part 4 of T2SCH3 does not apply on the payment of the dividends to me. correct?
Which Part of the T2SCH3 should I complete or fill?
from T5, which values should I use to fill T2SCH3?
In T2 Return, Which part and which boxes Should I complete?
Thanks in Advance for your Help
Hi Rafael, report the actual amount of dividends paid to you from the corporation on box 450 of Schedule 3.
hi Allan! thanks for answer! so in T2 cannot be deducted?
Thanks for your great clips
If I have a salary of 50000 would the 20000 dividends still be tax free
Thanks in advance
Hi Abe,
No, the dividends will not be tax free in your case, since you already have a salary of $50,000.
excellent video thanks
Hi Allan, you mentioned that the first 40K of dividends is tax free. If your dividend payout is i.e. 75K, how does the 40K tax free play into this? Do you pay tax on the entire 75K or less 40K?
Hi D Grech,
The way the $40,000 tax free dividend works is as follows:
The income is taxed at 22% bracket
The recipient is at least eligible for the $11038 basic personal tax credit.
In addition the dividend recipient gets the 13.5% credit which totally eliminates that taxes.
When $75,000 is paid in dividends the working remains the same. The only difference is that the income is taxed at the 26% bracket which outruns the tax credits.
The total estimated taxes that will be payable at $75000 dividend will be $8465.
Allan Madan Team
Allan Madan Also, Please note that the 2014 tax free dividend amount is $35,000.
Allan Madan What about the corporation itself, which has to pay a 1/3 tax on its dividend payouts? Effectively, this causes the tax rate to increase dramatically.
Thanks you brother!
Are you still allowed to pay yourself up to $40,000 in dividends with paying no income tax from your corporation?
How do I know if I can pay myself a dividend under my Corporation?
Hi R.C.Welding Inc, please check your company's articles of incorporation to see if there are any clauses that restrict dividend payments in respect of authorized share classes.
Dividend is not a company expense ==> the company still pays taxes on that dividend.
+antonin654 Dividends paid are a distribution of the corporation's profit to its shareholders, and are not an expense. The corporation pays corporate taxes on its profits, not on dividends paid.
So if one doesn’t contribute to the CPP and ones company goes belly up, what then ?
If you don't contribute to the CPP ever, then you will not be entitled to receive CPP benefits upon retirement. So invest your savings wisely.
Great video
Thanks!
You just fired away this rsp term and didn't say what it means
Couldn't you have one company pay you a salary, and another pay you through dividends? Provided both companies are profitable. Thanks
Yes, that is possible too.
Allan, How have I to fill t2sch3? can you guide me please?
I can guide you once I know the particulars of your situation. Did your corporation receive or pay a dividend? Please provide further details.
Hi Allan, Yes... my Corp pay a divindend to one(unique) shareholder.
Report the dividend paid to an individual on line 450 of Schedule 3 of the T2 return.
Thanks Allan, That means just part 3 of the sch3 ? part 4 do I have to fill it? what about line 460?.. but if you can guide me on howe to fullfill schedule for dividends paid to a shareholder. i will appreciate your help.
Basic tiny salary and dividends it is!
very useful thanks ...
Can you pay yourself through a salary and dividends both at the same time with one company only?
Hi Joachamp, yes you can.
Allan Madan thanks for replying
You're welcome.
Madanca. I clicked on your website at the bottom of your video, but it did not work !
Unfortunately, our website was down for the day. We apologize for any inconvenience. The website is up and running, so you should be able to access it. If you have any questions, please do not hesitate to ask. (madanca.com/)
Thank-you
Very useful
Dividends are tax free for the first $40k? Whaaaat?
Thanks Allan! :D
Hi Fahim, thank you for your positive feedback.
Allan Madan : i would love to have an opportunity to meet you in person. Please do let us followers know of you attend any seminers or events. :)
Thank you for your feedback. You can certainly meet with me in my office at 145 Traders Blvd, Unit 20 in Mississauga. Occasionally, I host online webinars about various tax topics.
Allan what would be the best time to give you a visit? Would it be possible for you to shoot me a quick email or message?
Please contact Althea by email, althea@madanca.com She can arrange a meeting for you and I.
Great video as always. Just a couple questions below:
1. Do you mean that every shareholder can take 35K in dividend tax free or just one shareholder? What if there are for e.g., 10 shareholders, can they each take 35K tax free?
2. You mentioned in a more recent video that there are changes to the tax law for Dividends in 2018 in that a passive shareholder will be taxed at the highest (income tax rate) correct? What if family members (are shareholders) and are actually working in the corporation and receiving a dividend, aren't they considered active and not passive and therefore taxed at the lower dividend tax rate?
thanks
Hi Mithu, each shareholder can take $35,000 of dividends tax free from a Canadian controlled private corporation, so long as they do not have any other source of personal income. For 10 shareholders, $350,000 of dividends can be received tax free.
The Liberal Government introduced new rules that prevent income splitting with family members through dividends from a Canadian corporation. Generally speaking, each family member receiving dividends must be working in the business and the dividends received have to be reasonable based on the work they performed.
Taxes are not allocated to pay infrastructure, taxes are interest charges paid to criminal bankers for not lending any amount, The Bank of Canada has the right and obligation to finance all level of government expenses interest- free and taxes would be a fraction of existing rates. In fact, because the so-called government has unconstitutionally borrowed from private banks at interest paying income taxes is actually harmful to the economy. beat them at their own game look up taxusave
Taxes would be a lawful condition that all level of government borrow from the Bank of Canada interest tree and the taxes are allocated to reduce the debt. and no taxation for wars of aggression and no interest charges on all private and business loans. Banks have never been in the lending business.
The accountant... Look out!
you need to become my accountant
This video is outdated, check out his recent video.. ua-cam.com/video/EbQ7cgmu2w4/v-deo.html
Niceeeee
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Great explanation, Allan! Thank you.