Top 5 Tax Strategies for Wealthy Canadians

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I hope you're having a great day and I hope it gets better as we explore a few strategies that we regularly review and implement with clients.

Because here's the truth: your biggest opportunity as a Canadian investor is tax efficiency. It's not how much you earn... it's how much you keep.

Tax planning, especially tax minimization, is one of the biggest pain points for Canadians. We often meet new clients, from DIY investors to families working with :investment-only" advisors, who simply haven't been shown even the most basic strategies.

Wherever you fall on that spectrum, you'll likely pick up something valuable today.

These five strategies apply to most Canadians who have built a sizable retirement nest egg.

Strategy #1: Corporate Tax Planning - Income Splitting & Investing Retained Earnings

This applies to incorporated business owners and professionals , but even if this isn't you, the remaining strategies will be.

Income Splitting & TOSI

If you operate through a corporation, you need to be mindful of the Tax on Split Income (TOSI) rules. In simple terms, TOSI aligns corporate income splitting rules with similar rules that apply to non-corporate individuals.

If family members work in the business, you may consider paying a spouse or adult children reasonable salaries or dividends. This can shift income into lower tax brackets and reduce your household tax bill, provided proper documentation and timing are in place.

After age 65, TOSI no longer applies, which becomes incredibly valuable when coordination corporate and personal retirement income sources.

Investing Retained Earnings.

If you've accumulated excess cash inside your corporation, consider moving these funds into a holding company. This protects against operating liability and helps preserve access to the Lifetime Capital Gains Exemption if you sell your business.

Inside the holdco, key considerations include:

• Passive income earned in a corporation is taxed at the highest marginal rate (often 50%+).

• Foreign dividends face withholding taxes and can worsen the tax impact.

• Passive income above $50,000 reduces your operating company's $500,000 small business limit.

To address this, consider Canadian-domiciled corporate-class funds or low-cost, growth-focused investments that provide tax-efficient capital gains instead of fully taxable income.

Don't Forget Your Capital Dividend Account (CDA)

When a capital gain is realized inside the corporation portion is credited to the CDA, which allows for tax-free payouts to shareholders. However, this notional account erodes with inflation, so timing matters.

Work with your accountant to monitor your CDA balance and draw on it strategically, especially if your TFSAs are not yet maximized.

Corporate tax planning is complex. In our practice, we collaborate with each client's accountant to ensure every decision is aligned and optimized.

Strategy #2: Maximize Your TFSA Like the Wealthy Do

The TFSA is one of the most powerful, and most underutilized, wealth building tools available.

For High-net-worth Canadians, the TFSA is rarely used for income or large purchases. Instead, it's often a long-term, tax-free compounding machine.

Consider this simple example:

• $200,000 starting balance (combined for a couple)

• $14,000 in combined annual contributions

• Over 20 years at 3% --> ~ $775,000

• Over 20 years at 7% --> ~ $1.23 M

Nearly double, and 100% tax free to you, your spouse at first passing, and your children at second passing.

Strategy #3: Draw Down Your RRSP Earlier - Not Later

Your RRSP/RRIF drawdown plan - or decumulation strategy - is one of the single biggest levers to reduce your lifetime tax bill.

Before age 71 (the RRIF conversion deadline), most Canadians experience what we call the tax valley, low-income years perfect for strategic withdrawals.

A smart decumulation plan can:

• Reduce lifetime taxes

• Smooth income

• Protect government benefits

• Prevent the "RRSP tax bomb" at final passing

This requires balancing timing, tax brackets, income sources, pensions, inheritances and more. Deferral alone is rarely the best strategy.

Strategy #4: Structure Your Portfolio for Tax- Efficient Income

Not all investment income is taxed the same:

• Interest --> taxed at your highest marginal rate

• Eligible dividends --> more favorable

• Capital Gains --> only 50% taxable

In your non-registered accounts, emphasize tax-preferred capital gains and Canadian dividends.

In registered accounts like RRSP's/RRIF's, interest-bearing investments make more sense.

Tax efficiency isn't only about what you invest in, but where, how, and when you draw from it.

Strategy #5: Smart Gifting, Legacy Planning, and Keeping CRA Out of Your Estate

Estate planning is tax planning. A few ways to keep more wealth in your family:

Gifting During Your Lifetime

If you're in a position of abundance, gifting now may reduce future probate, shrink your taxable estate, and give your beneficiaries help when they need it most.

Trusts and Inter-Family Loans

These allow for control, protection, and tax shifting when structured correctly.

Insurance to Offset Future Tax

While often oversold, insurance can be valuable in the right corporate or personal scenarios.

Donating Investments In-Kind

This eliminates the capital gain tax and provides a tax credit on the full market value.

Finally, ensure everything is tied together with proper documentation, wills, POAs, shareholder agreements, and more.

Final Thoughts

Whether you're an incorporated entrepreneur, a high-income earner, or nearing retirement with significant savings, these tax strategies could put substantial dollars back into your pocket.

And if you have multiple accounts, pensions, corporations and complexities, and build a team.

A CFP, an accountant, and a lawyer working together can be worth their weight in gold.

Action Items from this Episode

• If you have a corporation, ask your accountant for your CDA balance and discuss whether it's time to draw from it.

• Review the taxation of your non-registered and corporate investment.

• If you learned something today, share this episode with someone else.

For links, tools and additional resources, visit retiringcanada.ca

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And remember when it comes to your retirement, don't take chances.

Make a plan so YOU can retire with confidence.

All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.