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Investment in property - misconception 1 Posted on Oct 03, 2019

Often I hear clients get advised to purchase an investment property through a corporation, thinking that corporate tax rate is lower than personal. This is misleading. Assuming your corporation doesn't have 5 full time employees, the investment income will be considered passive and will be taxed at over 50% (!) in the corporation. Call me for an advice before you rush to incorporate your investment in property. 

Here is a short summary of the calculation:

Federal starting rate + 38%
Less provincial abatement -10%
Additional refundable tax levied on CCPC + 10.7%
Average provincial tax on investment income + 12%
EFFECTIVE TAX RATE IS 50.7%