Today we’re looking at a strategy that can earn you $146,000 tax-free in retirement.
Reduce your income to zero
In our scenario, we have a 65-year-old, who has a spouse, and both are receiving O.A.S.
You would be receiving $642 per month. If your income is $0 for the year, disregarding the O.A.S, you will also receive a Guaranteed Income Supplement (G.I.S) payment which in this scenario is $577 per month. That is a total of $1219 per month tax-free.
Now that’s just for you. Your spouse would receive the same amount if their income is also zero dollars.
Over 12 months, that would equal $29,272 per year tax-free.
This strategy works well between the ages of 65 to 70, which would equal a total of $146,361 tax-free income.
Using the farmland
You’re probably looking at this and saying, “well that’s great colin I can bring in $146,000 tax-free income over the next five years but I need more than $29,000 per year to live off.
No problem! This is where your farmland comes in.
Let’s say you have some farmland worth $500,000. What you can do is move this farmland into your corporation. In return, you will receive a shareholders loan of $500,000.
This allows you to withdraw $500,000 from your corporation tax-free.
If this strategy is implemented from age 65 to age 70, you can withdraw $100,000 from your corporation tax-free, every single year to supplement your 29 000 of G.I.S and O.A.S that you’re receiving.
Using your capital gains exemption
You might be looking at this and saying, “well what about moving land from here to there, isn’t there a taxable event?”
No problem!
You can use your capital gains exemption to shelter that tax.
Worried about AMT & CPP?
“What about AMT Colin? You’ve talked in the past whenever we trigger a capital gain, and we use a capital gain exemption there might be some AMT”
No problem.
Move the farmland when you’re 60 years old, you have five years to recoup that amt once you’re 65 and you start withdrawing the money tax-free from your corporation.
“What about CPP in this scenario?”
You’d want to wait to take your CPP until age 70.
Get yourself a tax plan
There are a lot of different moving parts here, but the point of this example is that there are ways to generate some tax-free income.
You just need to think about it and go over a plan. If you want me to look at your situation, let me know. We can review your current farm situation and we can build you the tax plan you’ve always wanted but never received. If you have any questions, please reach out.
