If you’re going to trigger investment losses in your corporate account this year, make sure you double-check if you have a positive CDA balance first.
Don’t deny yourself tax-free money
You’ll often hear about tax loss harvesting around this time of year. The process of triggering losses in your investment accounts to offset past capital gains or future capital gains.
However, if you’re triggering losses in a corporate account, you might be denying yourself the opportunity to withdraw money from your corporation tax-free.
Capital dividend account
Many of you have heard me talk about the capital dividend account – also known as CDA, in the past. For an in-depth overview, check out my past video. To summarize, if your corporation has a positive CDA balance, you’re able to withdraw this amount tax-free.
However, if you trigger a loss inside your corporation, your CDA will decrease, thus reducing and possibly eliminating what you can withdraw tax-free.
Double-check your CDA balance
So what’s the lesson? – prior to triggering losses in your corporate account, double-check to see if your CDA has a positive balance. If it does, first pay out your tax-free capital dividend and then proceed with triggering your loss.
It’s important for you to know this as many investment advisors aren’t aware of this and will blindly trigger losses, thus affecting how much you can withdraw from your corporation tax-free this year.